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1. Why does the non-cash write-off related to asset impairments appear as a positive adjustment in cash flow from operating activities in 2016? 2. Assuming that Accounts payable relate solely to inventory purchases, how much do you estimate that Scholastic Corp. paid for its inventory purchases during 2016? 3. How much do you estimate that Scholastic Corp. received from customers in 2016? 4. Scholastic Corp.s royalty expense for the year 2016 was $92 million. How much do you estimate that Scholastic Corp. paid in royalties during the year? 5. If the depreciation and amortization add-back for 2016 was $40.3 instead of $39.3, what would have been Scholastic Corp.'s cash flow from operating activities that year? Scholastic Corporation Consolidated Statements of Operation (Amourts in millions, except per share data) For fiscal years ended May 31, 2016 2014 1,672.8 $ 1,635.8 $ 1,561.5 2015 $ 762.3 816.6 11.9 14.4 1,605.2 758.5 819.0 9.6 15.8 1,602.9 725.0 787.6 10.5 28.0 1,551.1 67.6 1.1 32.9 0.3 (3.8) 0.5 (2.2) 2.2 Revenues Operating costs and expenses: Cost of goods sold Selling, general and administrative expenses Severance Asset impairments Total operating costs and expenses Operating income Interest income Interest expense Gain (loss) on investments and other Earnings (loss) from continuing operations before income taxes Provision (benefit) for income taxes Earnings (loss) from continuing operations Earnings (loss) from discontinued operations, net of tax Net income (loss) Basic and diluted earnings (loss) per share of Class A and Common Stock Basic: Earnings (loss) from continuing operations Earnings (loss) from discontinued operations Net income (loss) Diluted: Earnings (loss) from continuing operations Earnings (loss) from discontinued operations Net income (loss) Dividends declared per common share 10.4 0.6 (7.5) (5.8) (2.3) (15.6) 13.3 68.7 24.7 29.9 14.4 15.5 279.1 44.0 (3.5) 40.5 31.1 $ 294.6 $ 44.4 A 0.42 1.29 $ (0.11) $ 1.18 $ 0.47 8.53 $ $ $ 0.97 1.39 $ 9.00 $ 1.26 $ $ $ $ $ 0.46 8.34 0.41 0.95 FA (0.10) $ 1.16 $ 0.600 $ $ $ $ 8.80 0.600 1.36 $ 0.575 Scholastic Corporation Consolidated Statements of Cash Flow (Amounts in millions) Years ended May 31 2015 2014 2016 40.5 44.4 294.6 $ 279.1 15.5 (3.5) 44.0 31.1 13.3 Cash flows - operating activities: Net income (loss) Earings (loss) from discontinued operations, net of tax Eamings (loss) from continuing operations Adjustments to reconcile eamings (loss) from continuing operations to net cash provided by (used in) operating activities of continuing operations: Amortization of prepublication and production costs Depreciation and amortization Amortization of pension and post-retirement actuarial gains and losses Deferred income taxes 26.4 30.4 32.9 39.3 48.3 61.6 4.4 6.9 5.6 18.8 8.9 9.7 (3.5) 8.8 (2.0) 8.4 (3.5) (2.6) 28.0 14.4 15.8 (2.2) (0.6) 5.8 12.2 (35.4) 4.4 24.4 Stock-based compensation Income from equity investments Non cash write offrelated to asset impaiments Unrealized (gain) loss on investments Changes in assets and liabilities, net of amounts acquired: Accounts receivable Inventories Prepaid expenses Deferred promotion costs Royalty advances Accounts payable Other accrued expenses Accrued income taxes Accrued royalties Deferred revenue Pension and post-retirement obligations Other noncurrent liabilities Other, net Total adjustments Net cash provided by (used in) operating activities of continuing operations Net cash provided by (used in) operating activities of discontinued operations Net cash provided by (used in) operating activities (6.4) (15.8) (33.3) (1.1) (5.0) (12.7) 2.8 (155.2) 5.2 (11.7) 0.0 (0.3) (2.6) 12.1 (0.2) (1.1) (9.7) 7.3 5.3 1.4 0.5 2.2 1.7 (24.6) (3.1) 2.2 (2.2) 2.5 (1.1) (2.1) 0.4 (16.2) (29.4) (4.4) 91.9 1.7 92.8 108.3 105.2 (112.0) (68.0) (10.9) (78.9) 58.6 51.6 166.9 156.8 1. Why does the non-cash write-off related to asset impairments appear as a positive adjustment in cash flow from operating activities in 2016? 2. Assuming that Accounts payable relate solely to inventory purchases, how much do you estimate that Scholastic Corp. paid for its inventory purchases during 2016? 3. How much do you estimate that Scholastic Corp. received from customers in 2016? 4. Scholastic Corp.s royalty expense for the year 2016 was $92 million. How much do you estimate that Scholastic Corp. paid in royalties during the year? 5. If the depreciation and amortization add-back for 2016 was $40.3 instead of $39.3, what would have been Scholastic Corp.'s cash flow from operating activities that year? Scholastic Corporation Consolidated Statements of Operation (Amourts in millions, except per share data) For fiscal years ended May 31, 2016 2014 1,672.8 $ 1,635.8 $ 1,561.5 2015 $ 762.3 816.6 11.9 14.4 1,605.2 758.5 819.0 9.6 15.8 1,602.9 725.0 787.6 10.5 28.0 1,551.1 67.6 1.1 32.9 0.3 (3.8) 0.5 (2.2) 2.2 Revenues Operating costs and expenses: Cost of goods sold Selling, general and administrative expenses Severance Asset impairments Total operating costs and expenses Operating income Interest income Interest expense Gain (loss) on investments and other Earnings (loss) from continuing operations before income taxes Provision (benefit) for income taxes Earnings (loss) from continuing operations Earnings (loss) from discontinued operations, net of tax Net income (loss) Basic and diluted earnings (loss) per share of Class A and Common Stock Basic: Earnings (loss) from continuing operations Earnings (loss) from discontinued operations Net income (loss) Diluted: Earnings (loss) from continuing operations Earnings (loss) from discontinued operations Net income (loss) Dividends declared per common share 10.4 0.6 (7.5) (5.8) (2.3) (15.6) 13.3 68.7 24.7 29.9 14.4 15.5 279.1 44.0 (3.5) 40.5 31.1 $ 294.6 $ 44.4 A 0.42 1.29 $ (0.11) $ 1.18 $ 0.47 8.53 $ $ $ 0.97 1.39 $ 9.00 $ 1.26 $ $ $ $ $ 0.46 8.34 0.41 0.95 FA (0.10) $ 1.16 $ 0.600 $ $ $ $ 8.80 0.600 1.36 $ 0.575 Scholastic Corporation Consolidated Statements of Cash Flow (Amounts in millions) Years ended May 31 2015 2014 2016 40.5 44.4 294.6 $ 279.1 15.5 (3.5) 44.0 31.1 13.3 Cash flows - operating activities: Net income (loss) Earings (loss) from discontinued operations, net of tax Eamings (loss) from continuing operations Adjustments to reconcile eamings (loss) from continuing operations to net cash provided by (used in) operating activities of continuing operations: Amortization of prepublication and production costs Depreciation and amortization Amortization of pension and post-retirement actuarial gains and losses Deferred income taxes 26.4 30.4 32.9 39.3 48.3 61.6 4.4 6.9 5.6 18.8 8.9 9.7 (3.5) 8.8 (2.0) 8.4 (3.5) (2.6) 28.0 14.4 15.8 (2.2) (0.6) 5.8 12.2 (35.4) 4.4 24.4 Stock-based compensation Income from equity investments Non cash write offrelated to asset impaiments Unrealized (gain) loss on investments Changes in assets and liabilities, net of amounts acquired: Accounts receivable Inventories Prepaid expenses Deferred promotion costs Royalty advances Accounts payable Other accrued expenses Accrued income taxes Accrued royalties Deferred revenue Pension and post-retirement obligations Other noncurrent liabilities Other, net Total adjustments Net cash provided by (used in) operating activities of continuing operations Net cash provided by (used in) operating activities of discontinued operations Net cash provided by (used in) operating activities (6.4) (15.8) (33.3) (1.1) (5.0) (12.7) 2.8 (155.2) 5.2 (11.7) 0.0 (0.3) (2.6) 12.1 (0.2) (1.1) (9.7) 7.3 5.3 1.4 0.5 2.2 1.7 (24.6) (3.1) 2.2 (2.2) 2.5 (1.1) (2.1) 0.4 (16.2) (29.4) (4.4) 91.9 1.7 92.8 108.3 105.2 (112.0) (68.0) (10.9) (78.9) 58.6 51.6 166.9 156.8