UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS
PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 1999
Commission file number 0-19860
SCHOLASTIC CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
SCHOLASTIC CORPORATION
IRS Employer Identification Number 13-3385513
555 BROADWAY
NEW YORK, NEW YORK 10012
(212) 343-6100
SCHOLASTIC CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
TABLE OF CONTENTS
PAGE NUMBER
Report of Independent Auditors 1
Statements of net assets available for benefits 2
Statement of changes in net assets available for benefits 3
Notes to financial statements 4-8
Schedule of nonexempt transactions 9
Schedule of assets held for investment purposes at end of year 10
Signatures 11
Exhibits 12
Consent of Independent Auditors 13
REPORT OF INDEPENDENT AUDITORS
TO THE RETIREMENT PLAN COMMITTEE OF THE BOARD OF DIRECTORS OF SCHOLASTIC
CORPORATION
We have audited the accompanying statements of net assets available for benefits
of the Scholastic Corporation 401(k) Savings and Retirement Plan as of December
31, 1999 and 1998, and the related statement of changes in net assets for the
year ended December 31, 1999. These financial statements are the responsibility
of the Plan's Retirement Plan Committee. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1999 and 1998, and the changes in its net assets available for
benefits for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of nonexempt
transactions and the schedule of assets held for investment purposes at end of
year as of December 31, 1999 are presented for purposes of additional analysis
and are not a required part of the financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
Retirement Plan Committee. These supplemental schedules have been subjected to
the auditing procedures applied in our audits of the financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
/s/ Ernst & Young LLP
New York, New York
June 5, 2000
SCHOLASTIC CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS)
DECEMBER 31,
1999 1998
---- ----
INVESTMENTS, AT FAIR VALUE
The George Putnam Fund of Boston $ 20,338 $ 23,449
Putnam Investors Fund 18,608 13,510
Fidelity Spartan U.S. Equity Index Fund 15,323 12,349
Scholastic Corporation Common Stock 9,079 7,381
Fidelity Retirement Money Market Fund 8,190 7,337
Putnam New Opportunities Fund 7,728 2,950
The Putnam Fund for Growth & Income 3,824 2,410
Putnam Income Fund 1,875 2,039
Putnam OTC & Emerging Growth Fund 5,834 1,402
Putnam Asset Allocation Fund - Growth Portfolio 1,898 1,090
Putnam International Growth Fund 2,888 1,037
Putnam Asset Allocation Fund - Balanced Portfolio 1,525 747
Putnam Asset Allocation Fund - Conservative Portfolio 938 407
---------- ---------
TOTAL INVESTMENTS 98,048 76,108
---------- ---------
RECEIVABLES
Loans receivable from participants 2,510 1,884
Participants contribution receivable 103 220
Employer contribution receivable 29 81
---------- ---------
TOTAL RECEIVABLES 2,642 2,185
---------- ---------
CASH 8 --
---------- ---------
NET ASSETS AVAILABLE FOR BENEFITS $ 100,698 $ 78,293
========== =========
SEE ACCOMPANYING NOTES
2
SCHOLASTIC CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
Interest and dividend income $ 4,881
---------
Contributions
Employer 3,181
Participants 8,206
Rollovers 1,061
---------
Total contributions 12,448
---------
TOTAL ADDITIONS 17,329
Distributions to participants (6,225)
Net realized and unrealized appreciation in fair value
of investments 11,301
---------
NET INCREASE 22,405
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 78,293
---------
End of year $ 100,698
=========
SEE ACCOMPANYING NOTES
3
SCHOLASTIC CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. DESCRIPTION OF THE PLAN
GENERAL
The Scholastic Corporation 401(k) Savings and Retirement Plan, amended and
restated effective January 1, 1998 and subsequently amended effective January 1,
1999 (the "Plan"), formerly the Scholastic Inc. 401(k) Savings and Retirement
Plan, is a defined contribution plan sponsored by Scholastic Corporation (the
"Company"). The Plan is administered by the Retirement Plan Committee of the
Board of Directors of the Company which has delegated certain responsibility and
authority to the Company's Administrative Committee which is composed of members
of senior management of the Company (the "Retirement Plan Committee", and to the
extent delegated to the Administrative Committee, collectively the "Committee").
Putnam Fiduciary Trust Company serves as Trustee for the Plan (the "Trustee").
In addition, Putnam Fiduciary Trust Company and/or its related companies
(collectively, "Putnam") also provide administrative and recordkeeping services
on behalf of the Plan (the "Record Keeper"). Investment products offered to
participants under the Plan, other than the Company's Common Stock ("Company
Stock") are provided by Putnam and Fidelity Investments Institutional Services
Company.
This description of the Plan provides only general information and is presented
to assist in understanding the Plan's financial statements. Participants should
refer to the Plan Document for a more complete description of the Plan's
provisions.
PLAN AMENDMENTS
As mentioned above, the plan document was amended and restated effective January
1, 1998 and subsequently amended effective January 1, 1999. Significant changes
to the Plan effective January 1, 1998 include: (I) daily valuations instead of
monthly valuation of participant account, participant enrollment, contribution
rate changes and participant directed transfer of assets among investment funds;
(II) modification of the Plan's transfer election rule to permit transfers in
multiples of 1% rather than in multiples of 10%; and (III) using forfeitures
generated from non-vested terminated participant accounts to reduce the
Company's matching contribution rather than allocating such amounts to active
participant accounts. The amendment effective January 1, 1999 amended the plan
eligibility requirements to be as of the date of hire rather than after the
completion of six months service. Additionally, the plan was amended to reflect
Scholastic Corporation as the defined "Company" under the Plan with all of the
powers, authority and responsibility of the Company as outlined under the Plan.
ELIGIBILITY
Employees eligible to enroll in the Plan include all employees of the Company
and its domestic subsidiaries (other than "leased" employees) who have attained
the age of 18 ("Eligible Employees"). Eligible Employees may enroll into the
Plan on any business day after they become eligible to participate in the Plan.
4
PARTICIPANT CONTRIBUTIONS
As approved by the Committee and subject to the provisions of the Internal
Revenue Code, as amended (the "Code"), Eligible Employees may contribute during
the Plan Year at the participant's election into any of the Plan's fund options,
in pre-tax and/or after-tax compensation dollars; provided, that the sum of
pre-tax and after-tax contributions during any Plan Year does not exceed the
following limitations:
PRE-TAX COMPENSATION CONTRIBUTIONS: Pre-tax compensation contributions are
limited to $10,000 for the Plan year ended December 31, 1999.
AFTER-TAX COMPENSATION CONTRIBUTIONS: After-tax compensation contributions are
limited to 15% of annual salary, overtime, bonuses and commissions,
("Compensation") subject to the requirements of the Code. Pursuant to the limits
set by the Company, contributions from employees having Compensation in excess
of $80,000 ("Highly Compensated Employees"), may be limited to a contribution of
6% of their Compensation.
ROLLOVER CONTRIBUTIONS: Any Eligible Employee may transfer to the Plan
contributions and such other amounts from an "eligible rollover plan" which
meets the requirements of the Code at the time of the transfer ("Rollover
Contributions").
EMPLOYER CONTRIBUTIONS
Under the Plan, the Company contributes a percentage of participant's
Compensation, as determined by the Committee, at its sole discretion. The
Company's contributions for the benefit of the Plan participants are made in
cash in an amount equal to a percentage of the participant's pre-tax
contributions. For the Plan year ended December 31, 1999, the Company
contributed an amount equal to 100% of the first one hundred dollars of a
participant's contribution and 50% thereafter of the participant's pre-tax
compensation contributions, up to a maximum amount equal to 6% of the
participant's Compensation.
The Company, at its sole discretion, may also make discretionary contributions
for the benefit of all participants regardless of whether they elected to make
pre-tax contributions to the Plan ("Discretionary Contributions"). The amount of
such discretionary contributions is to be determined by the Board of Directors.
No discretionary contributions were made to the Plan by the Company for the year
ended December 31, 1999.
Forfeitures are used to offset the Company's matching contributions. Forfeitures
for the year ended December 31, 1999 amounted to approximately $200,000.
VESTING
Participants are immediately vested in their Compensation Contributions and
Rollover Contributions. Matching contributions made by the Company and its
domestic subsidiaries vest at the rate of 20% per year of service by a
participant. A participant becomes 100% vested after either five years of
credited service, or upon death or disability while employed, or upon reaching
age 65.
5
PARTICIPANT ACCOUNT DISTRIBUTIONS
A participant's account may be distributed in full upon cessation of employment
for any reason, including termination, death, disability or retirement. On a
daily basis, a participant, for any reason, may withdraw all or a portion of
after-tax contributions. All distributions from the Plan are in cash or, if
elected by the participant, in whole shares of Company Stock, to the extent that
the participant is invested in the Company Stock. In the event of attainment of
age 59-1/2, a participant may withdraw his entire vested balance during
employment. Benefits payable as of December 31, 1999 and 1998 were $55,000 and
$600, respectively.
In the event of a hardship, a participant may withdraw during employment such
portion of his or her account as the Committee may determine is necessary to
meet such hardship. In addition, once each Plan year, participants may request a
loan from the Plan of up to 50% of the vested value of their account not to
exceed $50,000. In no event may a participant have more than one principal
residence loan outstanding or more than two outstanding loans at anytime. All
loans must be repaid in equal installments of principal and interest through
automatic payroll deductions, or in such manner as the Committee shall
determine, over a period not to exceed five years, except for certain loans made
to purchase a participant's principal residence, which may be repaid over a
period of up to ten years pursuant to the Code. Participants may not otherwise
withdraw any portion of their account balance during employment.
PLAN EXPENSES
The Company and its domestic subsidiaries pay substantially all of the Plan
expenses.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA"). The financial statements of the Plan are prepared in
accordance with generally accepted accounting principles as well as Department
of Labor Rules and Regulations for Reporting and Disclosures under ERISA. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
The Plan's accounts are maintained on the accrual basis. Purchases and sales of
investment securities are recorded at market value on the trade date.
VALUATION OF INVESTMENTS
Investments in the Plan's funds are valued at redemption prices based on the net
asset values of the funds. Investments in the Company's Common Stock are valued
at the closing price as quoted on the NASDAQ National Market System on the
valuation date. Loans receivable from participants are valued at cost which
approximates fair value.
6
3. TAX STATUS
The Company received a favorable determination letter from the Internal Revenue
Service as of November 1, 1995 that the Plan qualifies under Section 401(a) of
the Code. Therefore, the Plan's assets are not subject to tax under Section
501(a) of the Code. The Plan is required to operate in conformity with the Code
in order to maintain its qualification. To the Company's knowledge, no course of
action or series of events have occurred or are likely to occur which would
adversely affect the qualified status of the Plan. As a result of amending and
restating the Plan, the Company is required to file for a new determination
letter on or before December 31, 2001.
4. PLAN TERMINATION
While the Plan is intended to be permanent, it may be terminated at any time by
a resolution of the Board of Directors of the Company, subject, however, to the
provisions of ERISA. Upon termination of the Plan, all necessary provisions of
the Plan shall remain in effect, no further contributions may be made to the
Plan and the account of each participant shall become fully vested and
non-forfeitable. In the event of termination, the Plan assets may continue to be
held by the plan trustee. If however, upon a determination that the continuance
of such an arrangement is not in the best interest of the Plan's participants,
the Board of Directors may terminate the arrangement, and upon such termination,
the trustee shall apply for the benefit of each participant (or beneficiary) the
full value of such participant's account.
5. NONEXEMPT TRANSACTIONS
In two instances during 1999, the Company failed to remit Participant
contributions and the related matching contributions on a timely basis. These
failures to remit funds on a timely basis constitute nonexempt prohibited
transactions under the Code. The Company has taken corrective action and funded
the participant accounts, including payment of lost earnings on these amounts
and is in the process of paying the applicable excise taxes.
7
6. INVESTMENTS
During 1999, the Plan's net realized and unrealized appreciation (depreciation)
in the fair value of investments was as follows (in thousands):
The George Putnam Fund of Boston $ (2,047)
Putnam Investors Fund 4,175
Fidelity Spartan U.S. Equity Index Fund 2,399
Scholastic Corporation Common Stock 1,364
Putnam New Opportunities Fund 2,379
The Putnam Fund for Growth & Income (386)
Putnam Income Fund (158)
Putnam OTC & Emerging Growth Fund 2,483
Putnam Asset Allocation Fund - Growth Portfolio 164
Putnam International Growth Fund 830
Putnam Asset Allocation Fund - Balanced Portfolio 98
--------
$ 11,301
========
8
EIN #13-3385513
PLAN #004
SCHOLASTIC CORPORATION 401(k) SAVINGS AND RETIREMENT PLAN
SCHEDULE G, PART III
SCHEDULE OF NONEXEMPT TRANSACTIONS
DECEMBER 31, 1999
DESCRIPTION OF TRANSACTIONS
INCLUDING MATURITY DATE, RATE
RELATIONSHIP TO PLAN, EMPLOYER OF INTEREST, COLLATERAL, PAR OR
IDENTITY OF PARTY INVOLVED OR OTHER PARTY-IN-INTEREST MATURITY VALUE
- -------------------------------------------------------------------------------------------------------------------
Scholastic Corporation Employer Contributions and loans in
the amounts of $24,923
and $3,377 for the
January 8, 1999 payroll
were deposited on
June 23, 1999. Investment
earnings of $2,822 were
allocated to the affected
participants.
Scholastic Corporation Employer Contributions of $218,152
for the bonus payroll of
August 13,1999 were
deposited on October 7,
1999. Investment
earnings of $2,556 were
allocated to the affected
participants.
9
EIN #13-3385513
PLAN #004
SCHOLASTIC CORPORATION 401(k) SAVINGS AND RETIREMENT PLAN
SCHEDULE H, LINE 4I
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
Identity of Description of Number Current
Issue Investment of Shares Value
- --------------------- ------------------------------------- --------- -------
Putnam The George Putnam Fund of Boston 1,249 $20,338
Putnam Putnam Investors Fund 972 18,608
Fidelity Fidelity Spartan U.S. Equity
Index Fund 294 15,323
Scholastic Corp.* Common Stock 146 9,079
Fidelity Fidelity Retirement Money Market Fund 8,190 8,190
Putnam Putnam New Opportunities Fund 85 7,728
Putnam The Putnam Fund for Growth and Income 204 3,824
Putnam Putnam Income Fund 295 1,875
Putnam Putnam OTC and
Emerging Growth Fund 158 5,834
Putnam Putnam Asset Allocation
Fund - Growth Portfolio 125 1,898
Putnam Putnam International Growth Fund 97 2,888
Putnam Putnam Asset Allocation
Fund - Balanced Portfolio 118 1,525
Putnam Putnam Asset Allocation
Fund - Conservative Portfolio 89 938
Loans Receivable 6.5% - 9.5% interest rate,
from Participants repayment terms: 2 to 10 years - 2,510
Cash 8
--------
$100,566
========
*Indicates party-in-interest to the Plan.
10
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Retirement Plan Committee of the Scholastic Corporation 401(k) Savings and
Retirement Plan which administers the Plan has duly caused this annual report to
be signed on its behalf by the undersigned hereunto duly authorized.
SCHOLASTIC CORPORATION 401(k) SAVINGS
AND RETIREMENT PLAN
/s/ Kevin J. McEnery
Date: June 23, 2000 ----------------------------------------------------
Kevin J. McEnery
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND MEMBER OF THE RETIREMENT PLAN COMMITTEE AND
ADMINISTRATIVE COMMITTEE OF THE
SCHOLASTIC CORPORATION 401(K) SAVINGS AND
RETIREMENT PLAN
11
EXHIBITS
EXHIBIT NO. DOCUMENT
23 Consent of Independent Auditors
12