Scholastic Corp (SCHL) 2007 Q1 法說會逐字稿

Good morning.

My name is Jackie and I will be your conference operator today.

At this time, I would like to welcome everyone to the Scholastic first-quarter 2007 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks there will be a question-and-answer period. (OPERATOR INSTRUCTIONS).

It is now my pleasure to turn the floor over to Jeffrey Matthews, Vice President of Investor Relations.

Sir, you may begin your conference.

Good morning.

Before we begin I would like to point out that slides for this presentation are available for simultaneous viewing by going to our website, Scholastic.com, clicking on Investor Relations, and following the links on that page.

I would also like to note that this presentation contains certain forward-looking statements which are subject to various risks and uncertainties including the condition of the children's book and educational materials market and acceptance of the Company's products in this market, and other risks and factors identified from time to time in the Company's filings with the Securities and Exchange Commission.

Actual results could differ materially from those currently anticipated.

Now I would like to introduce Dick Robinson, the Chairman, CEO, and president of Scholastic, to begin our presentation.

Thank you, Jeff.

Welcome to Scholastic's earnings call and presentation for the first quarter fiscal of 2007.

I'm joined today by Chief Financial Officer, Mary Winston, who will speak after me, and at the end of our presentation we'll both be available for questions, as will members of our executive team.

In the first-quarter, Scholastic executed on its plan and made solid progress toward achieving its goals for fiscal 2007.

Scholastic Education in its most important quarter of the year continued to experience strong growth in educational technology sales.

And Children's Books, non-Harry Potter trade sales were up;

Clubs and Fairs implemented their plans for the new school year; and Continuity sales gained significantly though increases in bad debt reduced profitability somewhat.

We also continued to move forward on our overhead cost reduction plan which we announced last spring and are on a target to reach our savings goals for the year.

In the first-quarter, Scholastic Education operating profit and margins rose significantly as we experienced continued strong demand from schools for research based proven technology that raises student achievement.

Building on momentum from last year's release of READ 180 Enterprise Edition and enhanced service and technical support capabilities, READ 180 sales grew over 10%, exceeding $50 million in the quarter.

With proven results validated and documented in the over 100 districts, READ 180 continues to be the market leader in reading intervention.

As we have described, we believe that a partnership model has been important to Scholastic Education's growth because it ensures our program's effectiveness.

As we provide outstanding service and support, we have also been able to share the cost of this service with the schools.

We also had strong sales at Scholastic Reading Inventory, a research-based computer adapted reading assessment program for grades K-12 that measures student level of reading comprehension.

Following its launch last spring, Read About, a technology-based reading coach for grades three to six that combines adapted technology with engaging content, also sold well.

As you can see, while READ 180 remains Scholastic Education's flagship technology product, we continue to expand our portfolio of research-based reading and math solutions.

In other areas of the segment, results also improved in the professional books and Library Publishing businesses from actions to streamline costs.

Children's books had a strong quarter in a number of areas.

As anticipated, however, results were lower than last year when we had record-setting sales in Harry Potter and the Half-Blood Prince.

In trade, sales of non-Harry Potter titles were up driven by strong new releases including the eighth title in Dav Pilkey's Captain Underpants series, which debuted at number two on the USA Today bestseller list and drove the series to number one on the New York Times children's series bestseller list.

Trade also has a very exciting upcoming fall front list including Maurice Sendak's first pop-up book, Mommy, which is being released next week.

In Continuities, we were encouraged by strong revenue growth for a third consecutive quarter sustained by products like Scholastic Phonics and Veggie Tales, as well as increased customer acquisition through the web.

Consistent with our growth during the period, bad debt rose as a result of new customer acquisition.

In both School Book Clubs and Fairs which had minimal revenues during the summer holidays, we were putting our programs in place for the school year.

As earlier announced, Clubs implemented a streamlined promotion strategy eliminating the Troll and Trumpet Clubs and exclusively focusing on the Scholastic branded Clubs as well as on the increased number of targeted special offers.

We also took steps to reduce costs and improve fulfillment efficiencies.

Meanwhile Fairs standardized process across the network to improve Fair quality and operating efficiencies during the school year.

Early results from Clubs and Fairs indicate that we are on plan for these businesses and with solid Q1 results in education in trade, we are also on plan to meet our fiscal 2007 goals.

In Clubs, teacher sponsors are reacting positively to the simplified offers and Fair bookings are in line with expectations.

As previously noted, we are growing Continuities revenues.

We continue to expect improved profits for the full year and are managing our customer acquisition strategy carefully to achieve this goal.

It is also early in the year for many of the international businesses, but in this segment we continue to expect modest revenue growth and improved results.

Additionally, as Mary will describe, we are on track to meet our overhead cost reduction goals for the year.

Finally I will mention this month's launch of Qubo, a groundbreaking television network for children that champions literacy and positive values through entertainment.

This is a venture with NBC Universal and ION Media Networks, among other partners.

Building on the strategy and mission of Scholastic media provides a great opportunity to build exposure for Scholastic and distribution for our content and franchises on TV and other digital non-print media.

We don't expect a significant impact on this year's results, but we were encouraged by early response from parents to the values driven programming for younger children.

Qubo airs on NBC Saturday morning, Telemundo on Sundays and on ION stations during the week.

Mary Winston will now discuss last quarter's results in more detail and our outlook for the rest of the year.

Thanks, Dick.

Good morning.

As Dick has said, last quarter's results were solid.

We typically report a loss in the first quarter because most schools are not in session and our Club and Fair businesses are not operating.

Last year's first quarter loss was unusually low due to the benefit of approximately $185 million in Harry Potter sales associated with the release of Harry Potter and the Half-Blood Prince.

By comparison, in this year's first quarter, Scholastic had net Harry Potter sales of approximately $5 million, which by any standard is remarkable for a children's series.

Excluding Harry Potter sales, the Company's revenues rose approximately 5% in the quarter.

Cost of goods sold declined in absolute dollars and as a percent of revenue versus last year which reflected costs associated with the Harry Potter release.

Selling, general, and administrative expenses declined in absolute dollars, reflecting cost reductions in overhead and Clubs as well as lower Harry Potter selling expense.

This was partially offset by increased promotion costs in Continuities and severance associated with cost savings actions.

Severance for the quarter was $0.08 per diluted share, compared to $0.05 in the prior year period.

Bad debt rose primarily as a result of higher bad debt in Continuities, Dick discussed.

Net interest expense fell, reflecting the Company's lower net debt compared to a year ago.

Scholastic's effective tax rate improved slightly compared to a year ago but was in line with the prior year end.

Looking at the segment operating results, lower children's book publishing and distribution, revenues and operating profits primarily reflected the anticipated decline in Harry Potter sales, partially offset by strong non-Harry Potter trade releases and growth in Continuities.

School Book Fairs and Clubs had minimal summertime revenues as usual.

The seasonal operating loss for the segment increased primarily as a result of expected lower trade revenues and higher bad debt in Continuities, partially offset by cost reductions in the School Book Clubs.

In Educational Publishing, revenues were approximately level, reflecting a 9% rise in educational technology revenues offset by a decline in Library Publishing after last year's decision not to update certain print reference products and by lower sales in classroom libraries versus the prior year, which included a significant onetime sale.

As Dick mentioned, sales of READ 180 were up strongly with the majority coming from the new enterprise edition.

Segment operating profits were up 19% as a result of higher margin technology sales and improved results in professional books and Library Publishing.

Overall the segment's operating margins improved to 26%.

In international, the revenues were up 3% in U.S. dollars and flat in local currency and segment operating losses remained level as strong sales in Asia and Latin America offset the decline in Harry Potter export sales relative to the prior year.

Most of Scholastic's international subsidiaries typically generate low revenues and operating losses in the first quarter since their schools are not in session.

Revenues in Media, Licensing and Advertising declined 13% in the first quarter compared to the prior year period, primarily from lower production revenue compared to last year when we delivered a significant number of episodes of Maya & Miguel, Time Warp Trio, and Clifford's Puppy Days.

Operating loss also increased slightly.

Finally, corporate overhead declined 9%, reflecting a portion of our cost reduction plan partially offset by the related severance expense.

Looking at the balance sheet, cash and cash equivalents were level with the prior year.

Higher accounts receivable, accrued royalties and payables a year ago primarily reflected higher Harry Potter sales in the preceding period.

Inventory rose as we increased stocks to support new continuities products, several new front list trade titles, as well as the start of the school year in School Book Fairs and Book Clubs.

At the end of the quarter, short-term debt was up and long-term debt down, reflecting the recharacterization of debt due in January of '07.

Total debt was lower, reflecting strong cash position at the end of the last fiscal year which reduced the use of the revolving credit facility to fund the summer's typical cash need.

We also repurchased approximately $35 million worth of debt maturing in January of '07.

Overall net debt and net debt to cap were down significantly.

As we said in July, we are in a strong position to pay down or refinance next January's maturity of approximately $260 million in bonds.

We have a number of options including issuing debt, expanding our revolving credit facility, and refunding the '07 notes with the Company's liquidity.

Based on current factors, we still expect to implement a final plan which could be some combination of these options later this quarter.

Free cash used in the last quarter compared to a year ago was favorable by almost $20 million.

Net cash used by operations was level last quarter with a year ago as the anticipated higher seasonal loss was offset by net lower working capital levels compared to last year's Harry Potter launch, as we just described.

Also contributing to the favorable free cash use during the quarter was reduced CapEx from lower IT spending and the delay in some project to later in the year and lower production costs compared to the prior year, when we were producing Maya & Miguel episodes.

Pre-production costs also declined from lower spending in Library Publishing as a result of our decision not to update certain reference print sets as announced later in the year, as well as timing delays in some other programs.

Looking at our outlook for the year, we expect continued solid results in non-Harry Potter trade and education.

We're also optimistic about the actions we are taking to grow Clubs and Fairs and are continuing to execute our plan to profitably grow continuities where we expect results to improve this year.

We are also making significant progress toward reducing overhead costs.

As we discussed in July, these actions are a key element of our plan to improve companywide profitabilities.

To date we've taken actions to secure significant savings in the key areas of spending that were part of our initial focus.

As a result we're seeing lower run rates in these areas.

As we have described, the net benefit of these actions will be partially offset this year by the severance and related expenses incurred to lower these costs.

Based on these factors, we are on plan for our fiscal 2007 goals, which as we described in July include revenue of $2.1 billion to $2.2 billion; earnings per diluted share of $1.55 to $1.85; and free cash flow of $75 million to $85 million.

With that, I will turn the call back to Dick.

Thanks, Mary.

I'll now moderate a question-and-answer period.

Beth Ford, Senior VP of Operations and IT;

Deborah Forte, President of Scholastic Entertainment;

Lisa Holton, President Book Fairs and Trade;

Margery Mayer, President of Education;

Judy Newman, President of Clubs at Home; and Seth Radwell, President of e-Scholastic; and Hugh Roome, President of Scholastic International, will join us.

Ready for questions.

(OPERATOR INSTRUCTIONS) Drew Crum, Stifel Nicolaus.

My first question pertains to the severance charge.

You took $0.08 in the quarter.

I believe your guidance coming off the fourth quarter was $0.10 to $0.15.

Is that still your guidance and when might we see the remaining of that severance charge taken?

Mary, do you want to answer that one?

Yes, we are still maintaining our guidance and still expect to be in the range that we gave you earlier.

It is hard to anticipate specifically on a quarterly basis, but we do expect severance charges to be more front-end loaded during the year.

Okay, and the free cash flow, you reiterated the guidance there.

Could you talk about maybe some of the swing factors you see going forward to achieving that guidance?

Obviously the biggest component of that is our operating income which we are obviously very confident in the guidance that we have out there.

Another big component of it is our control on spending in the areas of CapEx and what not, and at this point we are certainly on plan for spending in those areas.

The key working capital component would be inventory and as we discussed, inventory is up a bit this quarter.

We're developing plans to address that and we're moving forward.

It is always up in the first quarter, but that is a critical factor of achieving our cash flow objective.

Okay, one more.

On Continuities, can you quantify what the profit or loss was in the quarter for the direct-to-home business?

And your feelings on bad debt expense going forward, it was up a little bit this quarter.

Should we see that trend continue?

In terms of the profit and loss I would say it's going to be a small loss in that business.

That will be disclosed certainly in the Q and that is issued shortly.

And in terms of the trend in bad debt, obviously we are now reaching the phase where we are growing the business and with that naturally comes some increase in bad debt.

So we're not going to project whether that is going to stabilize at this level or increase slightly as we go forward, but I think it is a natural part of this business and we're not alarmed by it.

We're sticking with our strategy.

Okay, thanks.

Stacy Fleck, Merrill Lynch.

I was wondering if there was any way to quantify how much of your cost-saving plans you achieved in the first quarter, whether on just either the overhead or also just how much of the promotional spending reductions -- I think it was about $14 million you achieved in the first quarter?

Mary, I will just say, Stacy, that we are on plan with the promotional savings in Clubs, that $14 million you referred to was in Clubs and we talked about that in the last quarter.

Mary, do you want to talk about the rest of the savings plan?

Yes.

What I will say about that is we are on track with that as well.

As we said, our goal is to achieve an annualized reduction of $40 million by fiscal '08 with two-thirds of that being realized this year and we are on track to achieve that.

We have taken a lot of actions early in the year, so we are seeing good results from that.

Then of course we have costs early in the year as well offsetting some of that.

So the most I will say at this point in terms of quantifying it is that we are on track to achieve the numbers that we have indicated.

I guess if you could then maybe discuss how promotional spending usually tracks for the Book Club business?

Is it typically more front-end loaded or -- I'm just trying to get a sense of how much of the $14 million potentially came out in the first quarter versus the quarters to come?

Virtually none of it would be in the first quarter, Stacy, because there is almost no revenue and the promotion is -- much of the new business promotion is incurred in the second quarter, which we're in right now.

So those savings should show up, some of them at least, much of them should show up in the first quarter.

Let me just add a little to that from an accounting perspective how that happens is we capitalize the promotion spending and amortize the expense consistent with the revenue when it comes in.

So that is when you'll see it married to the revenue.

Thanks for explaining that.

Then just one last question in the Book Clubs.

Did you raise prices on average across the segment?

Judy, do you want talk about that?

Yes, we did do some price raise -- increased pricing this year strategically.

We have a process that we call up/down pricing, where we look at each item and we figure out what the market can bear.

As you know, it is very early in Book Clubs.

Many teachers are just getting back, so our early results are positive but what we're seeing so far is some good response to our new program and the streamlining of the Clubs.

But yes, embedded in our new strategy is some increased pricing.

Great, thank you.

Peter Appert, Goldman Sachs.

Dick, I know obviously it's very early in the year for the Clubs and the Fairs but I was hoping you might have at least some early metrics in terms of the September results that could give us an indication of the progress you are making towards writing these businesses.

I was thinking specifically maybe the percentage increase in the Fair count, what you are doing in terms of actual number of mailings and anything else in terms of early response rates you're seeing?

Peter, I'm winning the bet because I said Peter Appert was going to ask about Club and Fair results, so I'm very pleased that you did.

I can't help myself.

We are on plan, Peter, is what we are going to say about these, both of these businesses.

I think Lisa will confirm a little bit about the Fair count increases, but we are essentially on plan in our Club and Fair business, as Judy noted.

The teachers are telling us that they like the new approach and, Lisa, what do you want to say about the Fair count?

Well, Peter, as you know, it is too early to quote absolute numbers, but I can tell you that although this quarter is small relative to the whole year, the signs that we are seeing are all positive.

Our Fair bookings are completely in line with where he wanted them to be, very, very, very early indicators on revenue per Fair are looking quite good and we are feeling good not only about the improved merchandising and some of the sales programs that we've been rolling out, but also a range of, as you know we've been working on our operational efficiencies.

You know we took some steps in terms of consolidating our customer reorder process.

That is now all in Neosho, and again, early reports the customers are very happy with that.

It is going smoothly and it is allowing the rest of our network to actually focus on selling and getting the Fairs out rather than taking the reorders.

Then finally our peak scheduling, when we're trying to schedule Fairs, moving around the schedule so that not all of them are falling in the critical period, that also [finds as that] from last year.

We are improving and we're looking for more improvement this year.

Great.

Thank you.

Mary, can you just remind me the earnings per share guidance of $1.55 to $1.85, that is inclusive of the severance charge, correct?

That's right, it is.

Okay.

Then last question maybe for Margery, how important are the new offerings in the READ 180 program suite in terms of driving the incremental revenue?

And can you give us any sense of how big you think the market opportunity might be for this product?

Peter, this is Margery.

Maybe you could help me understand exactly what you're asking me.

Are you talking about the new products that we just introduced or are you talking about READ 180, the New Edition?

Actually I guess I'm talking about everything.

I was specifically thinking about the expended -- my understanding is you expended the grade coverage.

You've got some new bells and whistles associated with the product.

Right, we brought out a new edition of READ 180 that we call Enterprise and it is really comprised of two parts.

Part one is we have enhanced technology with the program, which allows more scalability and we have a lot of districts now with literally tens of thousands of licenses of READ 180.

And more concurrency of usage, more easier aggregation of data, lower-cost of ownership for school districts.

So that is part of READ 180.

The other part of READ 180 is a new teaching system which includes a student book and a new teacher’s edition which makes it easier to teach and more engaging for students and teachers.

We have been very, very pleased with how well that has been received by our customers.

I'll just give you one example in Florida, where we have READ 180 in I think 60 of 64 counties, more than 50 of those 60 have now upgraded to our new Enterprise Edition.

So that is going extremely well.

We also have just introduced some new products that broaden our footstep in technology.

We have had a great response to our new math program, Fast Math which aligns nicely with the new standards issued by NCTM last week.

And we have a new product called Read About, which uses the READ 180's management system and has a lot of the same kind of reporting features of READ 180 but is more supplemental and specifically designed for helping what we are calling -- what we're saying about it is it helps schools jump the slump, which is the slump that kids have at third and fourth grade as they go onto more complicated text.

That is probably more than you ever wanted to know about what we were doing, Peter, but you can tell we're excited.

We can't know enough.

The product is customizable at the state level?

At this state-level, well, we could be customizable at the state level and there are states where we've done customized materials for Florida and California.

But we're not heavy-duty into customizing materials especially print materials.

We like customizing on a digital level because that helps maintain lower inventory levels and lower investment, but so far we have not encountered big issues around customization.

I will tell you one thing that we're doing though which is, what we're trying to do now and I think we're going -- having good success, you can see it on our website, is we are providing a lot of localized research on the efficacy of READ 180.

That is the most powerful customization message I think we can have.

Last thing, you have not changed the pricing model?

It is still an upfront fee, no a subscription based service, correct?

That is correct, however, we are adding more services, as Dick mentioned in his overview.

And we are having more and more school districts contract with us to come in and work with their teaching staff to assure [fluidity] of implementation.

Thank you.

(OPERATOR INSTRUCTIONS) Bill Bird, Citigroup.

I was wondering if you could give us a growth breakdown for the quarter by channel, understanding Clubs and Fairs are small this quarter?

Also was just wondering what you are expecting for corporate overhead for the full year?

Thanks.

Mary, do you want to tackle that?

In terms of the growth breakdown, Bill, what do you mean by segment or pipeline or what is your thought?

I was hoping to get maybe growth in Clubs, Fairs, Continuity and Trade, if you could put numbers to it.

As you said, Clubs and Fairs -- really there's just a little bit of business in there, so whatever you would get would not be relevant to the full year.

We will -- we have not been giving these a lot of information in these areas, but maybe you can coax Mary into sharing some of it with you.

As part of the slides we do have a breakdown of revenue for the components of the segment and really as you know that is what we disclose.

As Dick indicated, it is very, very early for Clubs and Fairs, so there are changes on the revenue line.

They're not meaningful.

They are based on very low revenue levels.

Trade of course was down because it is not a Harry Potter year and Continuities revenue was up 18%.

So it is up for the third quarter in a row and we are very pleased with that.

I might have missed in terms of slides, so was that breakdown in your slides?

Yes, it was.

It is slide nine.

Okay, because I don't have the ability to move the slides, I was wondering if you might be able to just repeat it?

Okay.

Trade revenue was down 79% as a result of the absence of Harry Potter.

Continuities revenue was up 18%.

Book Clubs was down 19% from $13 million to just under $11 million.

And Book Fairs revenue was up 8%.

Most of that would be associated with the end of last year rather than the beginning of this year.

Right.

Do you have an expectation just for corporate overhead for the year?

Is the overhead of this quarter in any way indicative of what the run rate should look like?

Well, we are continuing to implement additional actions.

We will continue to have additional costs associated with that as well.

We do expect to see corporate overhead down for the year and we expect to achieve the plans that we have indicated.

In terms of the specific 9% that we see this quarter, I don't want to say that is going to be precisely the number, but we are on track to deliver the overhead reductions we indicated.

And I was wondering if you could just elaborate on what you're assuming for the revenue impact of the streamlining efforts in Clubs for this year?

We are assuming that we will retain most of the revenue from the Troll and Trumpet, which as we indicated last year was about 10 to 15% of total revenue.

We expect revenue to be down slightly in the Club business, but profits to be up obviously.

Great and just one final question.

I was wondering -- I understand you compete in a small subsegment of education, just wondering if you could just comment on educational spending trends?

Margery would be happy to do that.

Well, because we are not in the adoption stage, we are really competing for title one dollars, states dollars, local dollars.

Overall because the economy has been pretty good and there is more revenue in a lot of the states than they expected, overall we believe the education market to be solid and good for our materials.

Great, thank you.

Steven Barlow, Prudential Equity.

Mary, I wondered if you could get into this specific cost changes in the education area in that your margins were up 430 basis points?

I would presume some of that is mix, but maybe you can talk about the margins on some of the newer products versus the margins on the products last year or what specifically made those margins go up?

As you know, education is a portfolio of a number of businesses and we talk quite a bit about education technology and READ 180 and we have talked in the past about the fact that that segment of the business is certainly the highest margin and the fastest-growing segment of the business.

So given the growth in that component of the segment, that influenced the improvement in margins.

But also within education we do have more mature businesses like our Library Publishing business, our classroom libraries businesses, and as we have taken a look at overhead spending across the company, we have looked at those businesses is well.

So those businesses have participated in those efforts.

They have streamlined their operations.

They have taken some cost reductions to improve profitability in those pieces of education, and then that's also further enhanced the margins in the segment.

Is what you were able to achieve this quarter achievable in the forward-looking quarters for the rest of the year in education?

As you know, the first quarter is our largest quarter for education.

We continue to see that degree of seasonality in the business.

We certainly have every confidence that education is going to continue to grow throughout the year.

Okay, then switching subjects, capital lease obligations were down.

Just discuss why that happened?

There is nothing significant that I can think of and that change was not large.

Maybe also -- I didn't look at the end of quarters last year.

Maybe it gradually happened last year but just year-over-year looked like kind of a decent amount of money.

Yes, I will have to go back and look at that.

There is nothing that is significant.

I think it was just kind of a continual pacing through the year last year.

Fair enough.

Thank you.

Philip Olesen, UBS.

Actually just a couple of quick questions.

First just a little bit more I guess insight in terms of some of the refinancing plan.

I guess specifically is your preferred outcome to try to refinance the entire amount of the January maturity in order to preserve kind of existing liquidity?

At this point we're looking at a number of options and we have not completely settled on a firm number, but it is unlikely that we would he refinancing the full amount.

As you know, we have been very focused on lowering the leverage in the company and lowering the debt levels.

We have had strong cash flow, so it is our intention to do some combination of using our liquidity and then refinancing a portion of the debt.

Is a fair to assume then from that comment that when you look at the free cash flow guidance for the year that the majority, bulk of it however you want to say would be used for debt reduction?

Well, debt reduction continues to be our top priority in terms of use of our free cash flow, so in the absence of any unanticipated need or use for the cash, I would say that will continue to be our priority.

Great.

Just one last question.

When you look at migrating the business online, what percent of your revenue currently comes in via online channels versus more traditional channels?

We are at about 20% of our revenue coming in through the online channel.

And any sense of what the margin enhancement is by being able to facilitate orders electronically versus through again the traditional methods?

At this point we are still investing in the e-Scholastic infrastructure that is our Internet infrastructure and we are gradually achieving some cost reductions as we switch over more to the Internet.

But the principal benefit so far is the ease of communication for our customers and of course we get more information about our customers through that channel.

And we also create relationships with them through that channel, so the main impact so far is our ability to connect better with our customers and from their point of view to simplify the ordering process.

Longer-term of course we expect to do more up selling through that channel and more fully develop our relationship online with parents and teachers, and that has been a major part of our strategy for ten years and is a big part of our strategy going forward.

Great, thanks.

Thank you.

I would like to turn the floor back over to Dick Robinson for any additional or closing remarks.

We thank you very much for your participation today.

If Peter Appert is still listening, I think Margery would be glad to cut you a good deal on READ 180, Peter.

But anyway, thank you all for your support and continued interest in Scholastic.

Thank you.

This concludes today's Scholastic conference call.

You may now disconnect.