Scholastic Profit Dips on Severance Costs

NEW YORK -- Book publisher Scholastic (SCHL Quote) said Thursday its fiscal second-quarter profit fell 43%, as revenue declined and the company booked severance payments and larger losses on discontinued operations.

Scholastic also lowered its fiscal 2009 adjusted earnings forecast due to further spending cuts, market conditions and year-to-date results.

Shares shed $2.14, or 13%, to $14.39 in afternoon trading. The stock has fallen 61% since peaking at a 42-week high of $37.57 in February, with shares falling off dramatically since the company's first-quarter financial report in September.

For the period ended Nov. 30, net income dropped to $43.1 million, or $1.15 per share, from $75.6 million, or $1.93 per share, in the prior-year period. Earnings from continuing operations fell to $58.4 million, or $1.55 per share, including a one-time charge of 17 cents per share for severance payments and other cost-cutting measures.

Revenue slipped 4% to $661.6 million from $687.6 million a year ago.

The "Harry Potter" books publisher said it eliminated $35 million in annual expenses, which included $25 million in salaries. The company previously announced that it planned to generate annual savings of approximately $25 million to $35 million through voluntary retirement packages offered to workers over 50 years old with 10 years of service, a hiring freeze and lower paper, printing, postage and other costs.

Other actions include renegotiating some vendor contracts, seeking out new contracts and suspending annual salary raises. The company said it is still looking at making more staff reductions and exiting unprofitable markets.