SCHOLASTIC CORP

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

1. BASIS OF PRESENTATION

Principles of consolidation

The accompanying condensed consolidated interim financial statements (referred to as the “Financial Statements” herein) include the accounts of Scholastic Corporation (the “Corporation”) and all wholly-owned and majority-owned subsidiaries (collectively, “Scholastic” or the “Company”). The Company reviews its relationships with other entities to identify whether it is the primary beneficiary of a variable interest entity (“VIE”). If the determination is made that the Company is the primary beneficiary, then the entity is consolidated. Intercompany transactions are eliminated in consolidation.

The Company’s fiscal year is not a calendar year. Accordingly, references in this document to fiscal 2025 relate to the twelve-month period ending May 31, 2025.

Noncontrolling Interest

On June 1, 2023, the Company acquired the remaining shares of Make Believe Ideas Limited ("MBI"), a UK-based children's book publishing company, which represented a 5.0% noncontrolling interest, increasing the Company's total ownership from 95.0% to 100%.

Prior to June 1, 2023, the founder and chief executive officer of MBI retained a 5.0% noncontrolling ownership interest in MBI. The Company fully consolidated MBI as of the acquisition date and the 5.0% noncontrolling interest was classified within stockholder's equity.

Interim Financial Statements

The accompanying Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024. The Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal, recurring adjustments, necessary for the fair presentation of the Financial Statements for the periods presented.

Seasonality

The Company’s Children’s Book Publishing and Distribution school-based book club and book fair channels and most of its Education Solutions businesses operate on a school-year basis; therefore, the Company’s business is highly seasonal. As a result, the Company’s revenues in the first and third quarters of the fiscal year generally are lower than its revenues in the other two fiscal quarters. Typically, school-based channels and magazine revenues are minimal in the first quarter of the fiscal year as schools are not in session. Education channel revenues are generally higher in the fourth quarter. Trade channel and Entertainment segment revenues can vary throughout the year due to the timing of published titles' release dates and program production deliveries and the start dates of distribution license agreements.

Use of estimates

The preparation of these Financial Statements involves the use of estimates and assumptions by management, which affects the amounts reported in the Financial Statements and accompanying notes. The Company bases its estimates on historical experience, current business factors, and various other assumptions believed to be reasonable under the circumstances, all of which are necessary, in order to form a basis for determining the carrying values of certain assets and liabilities. Actual results may differ from those estimates and assumptions. On an on-going basis, the Company evaluates the adequacy of its reserves and the estimates used in these calculations, including, but not limited to:

•Accounts receivable allowance for credit losses

•Pension and postretirement benefit plans

•Uncertain tax positions

•The timing and amount of future income taxes and related deductions

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

•Inventory reserves

•Cost of goods sold from book fair operations during interim periods based on estimated gross profit rates

•Sales tax contingencies

•Royalty advance reserves and royalty expense accruals

•Expected economic useful life of film and television program assets

•Impairment testing for goodwill, other intangibles and other long-lived assets and investments

•Assets and liabilities acquired in business combinations

•Variable consideration related to anticipated returns

•Allocation of transaction price to contractual performance obligations

Summary of Significant Accounting Policies

In Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024 the Company included a description of its significant accounting policies. Except as set forth below, as of the date of this Quarterly Report on Form 10-Q there have been no material changes to the significant accounting policies described in the Company’s Annual Report for the fiscal year ended May 31, 2024

The below significant accounting policies relate to the Company's entertainment business, which includes the operations of 9 Story Media Group Inc. ("9 Story") and Scholastic Entertainment Inc. ("SEI"). Refer to Note 7, "Acquisitions" for further details regarding the acquisition of 9 Story.

Revenue recognition

The Company’s revenue recognition policies for its entertainment business include the following:

Film and TV production - Revenue is deferred during production and recognized when the film or episodes have been delivered and are available for showing or exploitation.

Production services - Revenue is recognized using the percentage-of-completion method based on the proportion of costs incurred in the current period to total expected costs.

Licensing - Revenue from the sale or granting of broadcast license rights to third parties is recognized when the licensed content is available to the customer and the customer has the contractual right to broadcast or stream the content.

Royalty income - Revenue from sales and usage-based royalties related to licenses is generally recognized when the subsequent sale or usage occurs.

Investment in film and television programs

Investments in film and television programs are stated at the lower of cost or net realizable value. Investment in film and television programs includes all direct production and financing costs incurred during production and minimum guarantee payments made to acquire distribution rights. Interest costs are capitalized to the cost of the film or television program until substantially all of the activities required for delivery are complete. Investments in film and television programs are amortized using the declining-balance method with rates ranging from 50% to 90% at the time of initial episodic delivery and at rates ranging from 10% to 25% annually thereafter. The determination of the rates is based on the expected economic useful life of the film or television program and includes factors such as rights retained by the Company, the availability of rights to renew licenses for episodic television programs in various territories, and the availability of secondary market revenue. The Company regularly reviews the recoverability of these capitalized costs based on expected future cash flows.

Government financing and assistance

The Company has access to government programs and tax credits that are designed to assist film, television and digital media production and distribution. Amounts received and amounts receivable which relate to the Company's film and television program assets are recorded as a reduction in the production costs of the related asset.

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

New Accounting Pronouncements

In November 2024, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses." This ASU improves financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This ASU is effective for the Company's fiscal year 2028, and interim periods starting in fiscal year 2029. Early adoption is permitted. The amendments in this ASU are to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740)." The amendments in this update enhance the transparency and decision usefulness of income tax disclosures to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. The amendments in this ASU require more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU is effective for the Company's fiscal year 2026. Early adoption is permitted. The amendments are to be applied prospectively, but may be applied retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.” This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for the Company's fiscal year 2025, and interim periods starting in fiscal year 2026. Early adoption is permitted. The amendments in this ASU are to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for more information on current applicable authoritative guidance and its impact on the Company's financial statements.

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

2. REVENUES

Disaggregated Revenue Data

The following table presents the Company’s segment revenues disaggregated by region and domestic channel:

(1) The newly formed Entertainment segment includes the operations of SEI, which were included in the Children’s Book Publishing and Distribution segment in prior periods, and 9 Story. The financial results for SEI for the three and six months ended November 30, 2023 have been reclassified to Entertainment to reflect this change.

(2) Primarily includes foreign rights and certain product sales in the UK.

(3) Primarily includes production, distribution and licensing revenues in Canada, Ireland and Indonesia.

(4) Includes Canada, UK, Australia and New Zealand.

(5) Primarily includes markets in Asia.

(6) Overhead includes rental income related to leased space in the Company's headquarters.

Estimated Returns

A liability for expected returns of $34.8, $33.1, and $37.7 is recorded within Other accrued expenses as of November 30, 2024, May 31, 2024, and November 30, 2023, respectively. In addition, a return asset of $4.0, $4.2, and $5.4 is recorded within Prepaid expenses and other current assets as of November 30, 2024, May 31, 2024, and November 30, 2023, respectively, for the recoverable cost of product estimated to be returned by customers.

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

Contract Liabilities

The following table presents further detail regarding the Company's contract liabilities as of the dates indicated:

(1) Primarily includes contract liabilities related to contracts with school districts and professional services.

(2) Primarily includes contract liabilities related to various international products and services.

The Company's contract liabilities consist of advance billings and payments received from customers in excess of revenue recognized and revenue allocated to outstanding book fairs incentive credits. Contract liabilities of $225.0, $161.1 and $225.0 as of November 30, 2024, May 31, 2024 and November 30, 2023, respectively, are recorded within Deferred revenue on the Company's Condensed Consolidated Balance Sheets and are classified as short term, as substantially all of the associated performance obligations are expected to be satisfied, and related revenue recognized, within one year. The remaining $5.9, $6.5 and $9.5 of contract liabilities as of November 30, 2024, May 31, 2024 and November 30, 2023, respectively, are recorded within Other noncurrent liabilities on the Company's Condensed Consolidated Balance Sheet as the associated performance obligations are expected to be satisfied, and related revenue recognized, in excess of one year. The Company recognized revenue which was included in the opening Deferred revenue balance in the amount of $41.9 and $71.1 for the three and six months ended November 30, 2024, respectively, and $48.4 and $80.7 for the three and six months ended November 30, 2023, respectively.

Allowance for Credit Losses

The Company recognizes an allowance for credit losses on customer receivables that are expected to be incurred over the lifetime of the receivable. Reserves for estimated credit losses are established at the time of sale and are based on relevant information about past events, current conditions, and supportable forecasts impacting its ultimate collectability, including specific reserves on a customer-by-customer basis, creditworthiness of the Company’s customers and prior collection experience. The Company reviews new information as it becomes available and makes adjustments to the reserves accordingly. At the time the Company determines that a receivable balance, or any portion thereof, is deemed to be permanently uncollectible, the balance is then written off.

The following table presents the change in the allowance for credit losses, which is included in Accounts Receivable, net on the Condensed Consolidated Balance Sheets:

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

3. SEGMENT INFORMATION

The Company categorizes its businesses into four reportable segments: Children’s Book Publishing and Distribution, Education Solutions, Entertainmentand International.

•Children’s Book Publishing and Distribution operates as an integrated business which includes the publication and distribution of children’s books, ebooks, media and interactive products primarily in the United States through its school reading events business, which includes the book clubs and book fairs channels, and through the trade channel. This segment is comprised oftwo operating segments.

•Education Solutions includes the publication and distribution to schools and libraries of children’s books, classroom magazines, print and digital supplemental and core classroom materials and related support services, and print and online reference and non-fiction products for grades pre-kindergarten to 12 in the United States. This segment is comprised ofone operating segment.

•Entertainment includes the development, production, distribution and licensing of children and family film and television content. This segment is comprised ofone operating segment.

•International includes the publication and distribution of products and services outside the United States by the Company’s international operations and its export businesses. This segment is comprised ofthree operating segments.

The following table sets forth the Company's revenue and operating income (loss) by segment for the periods indicated:

(1) The newly formed Entertainment segment includes the operations of SEI, which were included in the Children’s Book Publishing and Distribution segment in prior periods, and 9 Story. The financial results for SEI for the three and six months ended November 30, 2023 have been reclassified to Entertainment to reflect this change.

(2) Overhead includes all domestic corporate amounts not allocated to segments, including expenses and costs related to the management of corporate assets and rental income related to leased space in the Company's headquarters.

4. DEBT

The following table summarizes the carrying value of the Company's debt, excluding film related obligations, as of the dates indicated:

The following table sets forth the maturities of the carrying values of the Company's debt obligations, excluding film related obligations, as of November 30, 2024 for the twelve month periods ended November 30:

US Revolving Credit Agreement

On November 26, 2024, Scholastic Corporation and its principal operating subsidiary, Scholastic Inc., entered into a Third Amendment to Amended and Restated Credit Agreement (the “Amendment”) with a syndicate of banks and Bank of America, N.A., as administrative agent, and Truist Bank and Wells Fargo Bank, National Association, as co-syndication agents (as amended by the Third Amendment, the “Credit Agreement”). The arrangement was accounted for as a debt modification. The revised terms of the amended Credit Agreement include the following:

•an increase in borrowing limits to $400.0 from $300.0, as amended on October 27, 2021;

•an increase in the interest pricing margins for SOFR loans to a range of 1.625% to 1.875% from a range of 1.35% to 1.75% and for Base Rate loans to a range of 0.625% to 0.875% from a range of 0.35% to 0.75%;

•the elimination of the credit spread adjustment of 0.10% applicable to Term SOFR loans; and

•the extension of the maturity date to November 26, 2029.

The Credit Agreement provides for a $400.0 unsecured revolving credit facility and allows the Company to borrow, repay or prepay and reborrow at any time prior to the November 26, 2029 maturity date. The Credit Agreement also provides an unlimited basket for permitted payments of dividends and other distributions in respect of capital stock so long as the Corporation’s pro forma Consolidated Net Leverage Ratio, as defined, is not in excess of 2.75:1.

Under the Credit Agreement, interest on (i) Base Rate Advances (as defined in the Credit Agreement) is due and payable in arrears quarterly on the last day of each February, May, August and November, and (ii) Term SOFR Advances (as defined in the Credit Agreement) is due and payable in arrears on the last day of the interest period (defined as the period commencing on the date of the advance and ending on the last day of the period selected by the Borrowers at the time each advance is made). The interest pricing under the Credit Agreement is dependent upon the Company’s election of a rate that is either:

•a Base Rate Advance equal to the higher of (i) the prime rate, (ii) the prevailing Federal Funds rate plus 0.50% or (iii) the Term SOFR Rate plus 1.00% plus, in each case, an applicable margin ranging from 0.625% to 0.875%, as determined by the Company’s prevailing Consolidated Net Leverage Ratio (as defined in the Credit Agreement);

• or -

•a Term SOFR Advance equal to the Term SOFR rate plus an applicable margin ranging from 1.625% to 1.875%, as determined by the Company’s prevailing Consolidated Net Leverage Ratio.

As of November 30, 2024, the applicable margin on Base Rate Advances was 0.625% and the applicable margin on SOFR Advances was 1.625%.

The Credit Agreement provides for payment of a commitment fee in respect of the aggregate unused amount of revolving credit commitments ranging from 0.20% to 0.30% per annum based upon the Corporation’s then prevailing Consolidated Net Leverage Ratio. As of November 30, 2024, the commitment fee rate was 0.20%.

A portion of the revolving credit facility, up to a maximum of $50.0, is available for the issuance of letters of credit. In addition, a portion of the revolving credit facility, up to a maximum of $15.0, is available for swingline loans. The Credit Agreement has an accordion feature which permits the Company, provided certain conditions are satisfied, to increase the facility by up to an additional $150.0.

As of November 30, 2024, the Company had outstanding borrowings of $250.0 under the Credit Agreement at a weighted average interest rate of 6.8%. While this obligation is not due until the November 26, 2029 maturity date, the Company may, from time to time, make payments to reduce this obligation when cash from operations becomes available for this purpose. No borrowings were outstanding under the Credit Agreement as of November 30, 2023.

The Credit Agreement contains certain financial covenants related to leverage and interest coverage ratios (as defined in the Credit Agreement), limitations on the amount of dividends and other distributions, and other limitations on fundamental changes to the Company or its business. The Company was in compliance with required covenants for all periods presented.

At November 30, 2024, the Company had open standby letters of credit totaling $4.0 issued under certain credit lines, including $0.4 under the Credit Agreement and $3.6 under the domestic credit lines discussed below.

Unsecured Lines of Credit

As of November 30, 2024, the Company’s domestic credit lines available under unsecured money market bid rate credit lines totaled $10.0. There wereno outstanding borrowings under these credit lines as of November 30, 2024, May 31, 2024 and November 30, 2023. As of November 30, 2024, availability under these unsecured money market bid rate credit lines totaled $6.4, excluding commitments of $3.6. All loans made under these credit lines are at the sole discretion of the lender and at an interest rate and term agreed to at the time each loan is made, but not to exceed 365 days. These credit lines may be renewed, if requested by the Company, at the option of the lender.

As of November 30, 2024, the Company had various local currency international credit lines totaling $16.9 underwritten by banks primarily in the United States and the United Kingdom. Outstanding borrowings under these facilities were $6.2 at November 30, 2024 at a weighted average interest rate of 4.2%, compared to outstanding borrowings of $6.0 at May 31, 2024 at a weighted average interest rate of 4.5%, and $6.3 at November 30, 2023 at a weighted average interest rate of 3.9%. As of November 30, 2024, the amounts available under these facilities totaled $10.7. These credit lines are typically available for overdraft borrowings or loans up to 364 days and may be renewed, if requested by the Company, at the sole option of the lender.

Film Related Obligations

The Company's entertainment business enters into credit facilities with third-party banks to obtain interim financing for certain productions. The interim production credit facilities are secured by an assignment and direction of specific production financing including tax credits and license contract receivables and have varying maturity dates between December 31, 2024 and June 30, 2028. Interest is charged at rates ranging from the bank prime rate plus 0.75% for Canadian dollar loans, SOFR plus 3.0% or U.S. Base Rate plus 0.75% for U.S. dollar loans and Euribor plus 2.0% for Euro loans.

As of November 30, 2024, outstanding borrowings under these facilities were $21.6 at a weighted average interest rate of 6.9%, of which $8.3 were classified as current obligations.

5. COMMITMENTS AND CONTINGENCIES

Legal Matters

Various claims and lawsuits arising in the normal course of business are pending against the Company. The Company accrues a liability for such matters when it is probable that a liability has occurred and the amount of such liability can be reasonably estimated. When only a range can be estimated, the most probable amount in the range is accrued unless no amount within the range is a better estimate than any other amount, in which case the minimum amount in the range is accrued. Legal costs associated with litigation are expensed in the period in which they are incurred. The Company does not expect, in the case of those various claims and lawsuits arising in the normal course of business where a loss is considered probable or reasonably possible, that the reasonably possible losses from such claims and lawsuits (either individually or in the aggregate) would have a material adverse effect on the Company’s consolidated financial position or results of operations.

The Company expects to receive additional recoveries from its insurance programs related to an intellectual property legal settlement accrued during fiscal 2021, however, it is premature to determine with any level of probability or accuracy the amount of those recoveries at this time.

6. EARNINGS (LOSS) PER SHARE

The following table summarizes the reconciliation of the numerators and denominators for the basic and diluted earnings (loss) per share computation for the periods indicated:

• The Company experienced a net loss for the six months ended November 30, 2024 and therefore did not report any dilutive share impact. The following potential common shares were excluded from the loss per diluted share computation: outstanding options and restricted stock units of 2.8 million and 0.4 million, respectively.

The following table sets forth options outstanding pursuant to stock-based compensation plans as of the dates indicated:

As of November 30, 2024, $76.6 remained available for future purchases of common shares under the repurchase authorization of the Board of Directors (the "Board") in effect on that date. See Note 12, "Treasury Stock", for a more complete description of the Company’s share buy-back program.

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

7. ACQUISITIONS

9 Story Acquisition

On June 20, 2024, the Company completed the acquisition of 100% of the economic interests in the form of non-voting shares and 25% of the voting shares of 9 Story Media Group Inc. ("9 Story"), a leading independent creator, producer and distributor of premium children’s content based in Toronto, Canada, with studios or offices in New York, United States, Dublin, Ireland and Bali, Indonesia. The aggregate purchase price was $193.7, subject to further adjustment based on the final determination of purchase price adjustments, and was funded through borrowings under the U.S. credit agreement incurred during the first quarter of fiscal 2025. The acquisition of 9 Story further enhances the Company's development, production and licensing interests, expanding opportunities to leverage its brand and best-selling publishing and global children's franchises across print, screen and merchandising.

Pursuant to ASC Topic 810, Consolidation, 9 Story was determined to be a variable interest entity (VIE) and the Company was determined to be its primary beneficiary and therefore obtained a controlling financial interest over 9 Story. Accordingly, 9 Story has been consolidated into the Company's financial results.

9 Story met the definition of a business pursuant to ASC 805, Business Combinations, and the acquisition was accounted for as a business combination under the acquisition method of accounting. The Company estimated the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on currently available information. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. Refer to Note 8, Goodwill and Other Intangibles, for details regarding measurement period adjustments recorded during the six months ended November 30, 2024. The following table summarizes the preliminary purchase price allocation of fair values of the assets acquired and liabilities assumed at the date of acquisition, inclusive of measurement period adjustments:

(1) Includes a preliminary step-up adjustment of $1.8.

(2) Includes $31.9 of receivables related to government tax incentives.

The intangible assets acquired include intellectual property ("IP") related to 9 Story's existing and recognized program titles, customer contracts/relationships related to licensing, distribution and service arrangements, the trade names associated with 9 Story and Brown Bag Films, its animation studio, and internally developed

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

software. The intellectual property and customer contracts/relationships were valued using the multi-period excess earnings valuation method and are being amortized over 10 years, with the exception of contracts/relationships for service arrangements which are being amortized over 5 years. The trade names were valued using the relief-from-royalty valuation method and are being amortized over 10 years. The internally developed software was valued using the replacement cost method and is being amortized over 3 years. The Company classified these fair value measurements as Level 3 due to the significant unobservable inputs used in the analyses, such as internally-developed discounted cash flow forecasts. The difference between the purchase price over the net identifiable tangible and intangible assets acquired was allocated to goodwill, which is not deductible for tax purposes. The goodwill balance is primarily attributable to the expected synergies from the business combination and acquired workforce. The goodwill and intangible assets acquired were allocated to the Entertainment segment.

The financial results of 9 Story, since the date of acquisition, were included in the Company's Condensed Consolidated Financial Statements as of November 30, 2024. 9 Story contributed total revenue of $31.9 and net loss of $4.2 from the date of acquisition on June 20, 2024 through November 30, 2024. The operations of 9 Story are reported in the Entertainment segment.

The following table summarizes the unaudited pro-forma consolidated results of operations for the three and six months ended November 30, 2024 and 2023 as if the acquisition had occurred on June 1, 2023, the beginning of fiscal 2024:

The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and 9 Story and are not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of fiscal 2024 and are not indicative of the future operating results of the combined entities. The financial information for 9 Story prior to the acquisition includes certain adjustments to 9 Story's historical consolidated financial statements to align with U.S. GAAP and the Company's accounting policies. The pro-forma consolidated results of operations also include the effects of purchase accounting adjustments, including amortization charges related to the finite-lived intangible assets acquired, fair value adjustments relating to leases and fixed assets, and the related tax effects assuming that the business combination occurred on June 1, 2023.

The Company incurred acquisition‑related costs of $0.4 and $2.1 for the three and six months ended November 30, 2024, respectively, which were included in Selling, general and administrative costs in the Condensed Consolidated Statement of Operations.

Purchase of Noncontrolling Interest

On June 1, 2023, the Company acquired the remaining shares of Make Believe Ideas Limited, a UK-based children's book publishing company, for $2.1, increasing the Company's total ownership from 95.0% to 100%. The acquisition was accounted for as an equity transaction as there was no change in control. The carrying value of the noncontrolling interest at the acquisition date was $1.6. The difference between the fair value of consideration paid and the carrying value was recognized as an adjustment to Additional paid-in capital of $0.5.

8. GOODWILL AND OTHER INTANGIBLES

The Company assesses goodwill and other intangible assets with indefinite lives for impairment annually or more frequently if indicators arise. The Company monitors impairment indicators in light of changes in market conditions, near and long-term demand for the Company’s products and other relevant factors.

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

The following table summarizes the activity in Goodwill for the periods indicated:

(1)Measurement period adjustments for the 9 Story acquisition reflect an increase to goodwill of $0.9 resulting from a net decrease in the estimated fair value of the net assets acquired. The decrease in the estimated fair value of the net assets acquired consisted of an increase to deferred tax liabilities of $1.4, an increase to operating lease right-of-use assets of $0.3, a decrease to lease liabilities of $0.1, and a decrease to the purchase price as a result of a working capital adjustment of $0.1.

In fiscal 2025, the Company completed the 9 Story acquisition which resulted in the recognition of $71.0 of Goodwill, net of measurement period adjustments, included in the Entertainment segment. Refer to Note 7, "Acquisitions", for further details regarding the acquisition.

There wereno impairment charges related to Goodwill in any of the periods presented.

The following table summarizes the activity in Other intangible assets for the periods indicated:

In fiscal 2025, the Company completed the 9 Story acquisition which resulted in the recognition of $85.3 of amortizable intangible assets. Refer to Note 7, "Acquisitions", for further details regarding the acquisition.

In fiscal 2024, the Company acquired certain amortizable intangible assets related to educational programs for $5.8 and certain amortizable intangible assets of a U.S.- based children's book publishing business for $0.2. These intangible assets are amortized over the estimated useful life of 8 years and 5 years, respectively.

In fiscal 2023, the Company acquired Learning Ovations, Inc., a U.S.-based education technology business, which resulted in the recognition of $4.1 of amortizable intangible assets. During fiscal 2024, the Company assessed the recoverability of these assets as impacted by the shift to the science of reading based approach to literacy instruction within the education market. An asset impairment of $3.1 was recognized in the fourth quarter of fiscal 2024.

Other intangible assets with indefinite lives consist principally of trademark and trade name rights. Other intangible assets with definite lives consist principally of customer lists, customer contracts/relationships, intellectual property, trade names and internally developed software. Intangible assets with definite lives are amortized over their estimated useful lives. The weighted-average remaining useful lives of all amortizable intangible assets is approximately 8.8 years.

There wereno impairment charges related to Other intangible assets in the six months ended November 30, 2024 and November 30, 2023.

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

9. INVESTMENTS

Investments are included in Other assets and deferred charges on the Condensed Consolidated Balance Sheets. The following table summarizes the Company’s investments as of the dates indicated:

The Company’s 26.2% equity interest in a children’s book publishing business located in the UK is accounted for using the equity method of accounting. Equity method income from this investment is reported in the International segment.

The Company has a 4.6% ownership interest in a financing and production company that makes film, television, and digital programming designed for the youth market. This equity investment does not have a readily determinable fair value and the Company has elected to apply the measurement alternative and report the investment at cost, less impairment on the Company's Condensed Consolidated Balance Sheets. There have beenno impairments or adjustments to the carrying value of the investment. This investment is included in the Entertainment segment.

The Company acquired investments of $0.9 as part of the 9 Story acquisition which are included in the Entertainment segment. Included in these acquired investments, the Company acquired a 50% ownership interest in certain animated television production companies. These joint venture investments are accounted for using the equity method of accounting. The Company also acquired a 12% ownership interest in a children's book publishing business located in the UK. This investment is accounted for at cost, less impairment on the Company's Condensed Consolidated Balance Sheets. There have beenno impairments or adjustments to the carrying value of the investment.

Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled $0.6 and $0.8 for the three and six months ended November 30, 2024, respectively, and $0.1 and $0.3 for the three and six months ended November 30, 2023, respectively.

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

10. EMPLOYEE BENEFIT PLANS

The following table sets forth the components of net periodic benefit cost for the periods indicated under the Company’s defined benefit pension plan of Scholastic Ltd., an indirect subsidiary of Scholastic Corporation located in the United Kingdom (the “UK Pension Plan”), and the postretirement benefits plan, consisting of certain healthcare and life insurance benefits provided by the Company to its eligible retired United States-based employees (the “US Postretirement Benefits”), for the periods indicated:

Actuarial gains and losses are amortized using a corridor approach. The gain or loss corridor is equal to 10% of the greater of the projected benefit obligation and the market-related value of assets. Gains and losses in excess of the corridor are amortized over the future working lifetime.

The Company’s funding practice with respect to the UK Pension Plan is to contribute on an annual basis at least the minimum amounts required by applicable law. For the six months ended November 30, 2024, the Company contributed $0.7 to the UK Pension Plan. The Company expects, based on actuarial calculations, to contribute cash of approximately $1.3 to the UK Pension Plan for the fiscal year ending May 31, 2025.

11. STOCK-BASED COMPENSATION

The following table summarizes stock-based compensation expense included in Selling, general and administrative expenses for the periods indicated:

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

During the second quarter of fiscal 2025, the Company granted performance-based restricted stock units to certain officers and senior management. Compensation expense is recognized over the requisite service period based on expected attainment of pre-established performance goals.

The following table sets forth Common Stock issued pursuant to stock-based compensation plans for the periods indicated:

12. TREASURY STOCK

The Board has authorized the Company to repurchase Common Stock, from time to time as conditions allow, on the open market or through privately negotiated transactions.

The table below represents the Board authorization at the dates indicated:

Remaining Board authorization at November 30, 2024 represents the amount remaining under the Board authorization for Common share repurchases announced on December 13, 2023 and the additional $54.6 Board authorization for Common share repurchases announced on March 20, 2024, which is available for further repurchases, from time to time as conditions allow, on the open market or through privately negotiated transactions.

Repurchases of the Company's Common Stock were $5.0 and $10.0 during the three and six months ended November 30, 2024, respectively. The Company's repurchase program may be suspended at any time without prior notice.

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables summarize the activity in Accumulated other comprehensive income (loss), net of tax, by component, for the periods indicated:

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

The following table presents the impact on earnings of reclassifications out of Accumulated other comprehensive income (loss) for the periods indicated:

14. FAIR VALUE MEASUREMENTS

The Company determines the appropriate level in the fair value hierarchy for each fair value measurement of assets and liabilities carried at fair value on a recurring basis in the Company’s financial statements. The fair value hierarchy prioritizes the inputs, which refer to assumptions that market participants would use in pricing an asset or liability, based upon the highest and best use, into three levels as follows:

•Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

•Level 2 Observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data.

•Level 3 Unobservable inputs in which there is little or no market data available, which are significant to the fair value measurement and require the Company to develop its own assumptions.

The Company’s financial assets and liabilities measured at fair value consisted of cash and cash equivalents, debt and foreign currency forward contracts. Cash and cash equivalents are comprised of bank deposits and short-term investments, such as money market funds, the fair value of which is based on quoted market prices, a Level 1 fair value measure. The Company employs Level 2 fair value measurements for the disclosure of the fair value of its various lines of credit and long term debt. The fair value of the Company's debt, including film related obligations, approximates the carrying value for all periods presented. The fair values of foreign currency forward contracts, used by the Company to manage the impact of foreign exchange rate changes, are based on quotations from financial institutions, a Level 2 fair value measure.

Non-financial assets for which the Company employs fair value measures on a non-recurring basis include:

•Long-lived assets, including held for sale

•Operating lease right-of-use (ROU) assets

•Investments

•Assets and liabilities acquired in a business combination

•Impairment assessment of goodwill and other intangible assets

Level 2 and Level 3 inputs are employed by the Company in the fair value measurement of these assets. For the fair value measurements employed by the Company for certain property, plant and equipment, investments, prepublication assets and investment in film and television programs, the Company assessed future expected cash flows attributable to these assets. See Note 9, "Investments", for a more detailed description of the fair value measurements employed. See Note 7, "Acquisitions", for a more detailed description of the assets acquired and fair value measurements employed related to the 9 Story acquisition.

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

15. INCOME TAXES AND OTHER TAXES

Income Taxes

In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon currently known facts and circumstances and applies that rate to its year-to-date earnings or losses. The Company’s effective tax rate is based on expected income and statutory tax rates and takes into consideration permanent differences between financial statement and tax return income applicable to the Company in the various jurisdictions in which the Company operates. The effect of discrete items, such as changes in estimates, changes in rates or tax status, and unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the result of new judicial interpretations or regulatory or tax law changes.

The Company's interim effective tax rate, inclusive of discrete items, for the three and six month periods ended November 30, 2024 was 30.3% and 37.2%, respectively, compared to 24.2% and 22.9%, respectively, for the prior fiscal year period. The interim effective tax rate for the six months ended November 30, 2024 varies from the statutory rate primarily due to expected state and local income tax and non-deductible compensation for covered executive employees.

The Company, including its domestic subsidiaries, files a consolidated U.S. income tax return, and also files tax returns in various states and other local jurisdictions. Also, certain subsidiaries of the Company file income tax returns in foreign jurisdictions. The Company is routinely audited by various tax authorities. The fiscal 2021 through 2024 tax years remain subject to audit.

The Organization for Economic Cooperation and Development (“OECD”) has implemented the global minimum tax rate of at least 15% for large multinational companies as of 2024 (“Pillar Two”). Under Pillar Two, a top-up tax will be required of such companies for any jurisdiction which has enacted Pillar Two if their effective tax rate falls below the 15% global minimum rate. Additionally, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Under the safe harbor, companies would be excluded from Pillar Two requirements provided certain criteria are met. The enactment of Pillar Two legislation does not have a material effect on the Company’s financial position. The Company will continue to monitor and reflect the impact of such legislative changes in future periods, as appropriate.

Non-income Taxes

The Company is subject to tax examinations for sales-based taxes. A number of these examinations are ongoing and, in certain cases, have resulted in assessments from taxing authorities. The Company assesses sales tax contingencies for each jurisdiction in which it operates, considering all relevant facts including statutes, regulations, case law and experience. Where a sales tax liability with respect to a jurisdiction is probable and can be reliably estimated for such jurisdiction, the Company has made accruals for these matters which are reflected in the Company’s Condensed Consolidated Financial Statements. These amounts are included in Selling, general and administrative expenses. Future developments relating to the foregoing could result in adjustments being made to these accruals.

16. DERIVATIVES AND HEDGING

The Company enters into foreign currency derivative contracts to economically hedge the exposure to foreign currency fluctuations associated with the forecasted purchase of inventory, the foreign exchange risk associated with certain receivables denominated in foreign currencies and certain future commitments for foreign expenditures. These derivative contracts are economic hedges and are not designated as cash flow hedges.

The Company marks-to-market these instruments and records the changes in the fair value of these items in Selling, general and administrative expenses and recognizes the unrealized gain or loss in Other current assets or Other current liabilities. The notional values of the contracts were $22.8 as of November 30, 2024 and November 30, 2023. A net unrealized gain of $0.6 and $0.3 was recognized for the six months ended November 30, 2024 and November 30, 2023, respectively.

SCHOLASTIC CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED(Dollar amounts in millions, except per share data)

17. OTHER ACCRUED EXPENSES

Other accrued expenses consisted of the following as of the dates indicated:

18. SUBSEQUENT EVENTS

On December 11, 2024, the Board declared a quarterly cash dividend of $0.20 per share on the Company’s Class A and Common Stock for the third quarter of fiscal 2025. The dividend is payable on March 14, 2025 to shareholders of record as of the close of business on January 31, 2025.