Fiscal 2008 Year-End Earnings Presentation July 24, 2008

Transcription

1 Fiscal 2008 Year-End Earnings Presentation July 24, 2008

2 Forward-Looking Statements This presentation contains certain forward-looking statements, which are subject to various risks and uncertainties, including the conditions of the children s book and educational materials markets and acceptance of the Company s products in those markets 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. 2

3 Dick Robinson Chief Executive Officer, President and Chairman 3

4 Fiscal 2008 Overview Successful publication of Harry Potter and the Deathly Hallows Successful cost reductions and cost mitigation Exiting unprofitable continuities businesses Investments in future growth opportunities Record free cash flow of $188 million Strong balance sheet and $220M in stock repurchases 4

5 Outlook for Growth 1. Leveraging scale and unique distribution channels 2. Strategically raising prices 3. Building on strong online base 4. Creating quality children s content and franchises 5. Building on lead in educational technology 6. Meeting need for English-language books and learning worldwide 5

6 Growing Online Parents & Kids Parents get access to all offers, recommended titles and individual suggestions for their child Valuable product information and related titles help parents match kids with the right book 6

7 Growing Online Teachers State-of-the-art e-commerce platform helps teachers more easily manage their orders Teachers engage and help parents with recommendations and classroom wish-lists 7

8 Building Children s s Publishing Franchises 8

9 Leveraging Franchises Across Media 9

10 Driving Growth in Educational Technology 10

11 Maureen O ConnellO Executive Vice President, Chief Administrative Officer and Chief Financial Officer 11

12 Key Financial Results $M (except per share) Revenue Total operating costs and expenses Operating income (loss) from continuing operations Other income (expense) Interest expense, net Provision (benefit) for income taxes Profit from continuing operations Loss from discontinued operations, net of tax 1 Net income (loss) Earnings per diluted share from continuing operations Loss per diluted share from discontinued operations 1 Net income (loss) per diluted share FY08 $2, , (133.0) ($22.4) 2.82 (3.39) (0.57) FY07 $1, , (12.2) $ (0.29) In the full year ended May 31, 2008, the Company recorded a non-cash write down of certain assets of $102.5 million ($2.62 per share) following the Company's decision to sell its direct-to-home continuities business and to shut down its school continuities business 12

13 Balance Sheet and Cash Flow $M Continuing Operations Cash & cash equivalents Accounts receivable, net Inventories Accounts payable Accrued royalties Lines of credit, short-term debt and current portion of long-term debt Long-term debt, excluding current portion Total debt Total capital lease obligations Net debt 1 Discontinued Operations Total assets of discontinued operations Total liabilities of discontinued operations Total stockholders equity 2 Free cash flow 3 May 31, 2008 $ $187.7 May 31, 2007 $ ,129.0 $ Net debt is defined by the Company as lines of credit and short-term debt plus long-term-debt, net of cash and cash equivalents. 2 The Company is currently evaluating the carrying value of certain assets of our discontinued operations. Based upon this evaluation, the net assets of discontinued operations and retained earnings may change for the current period or for historical periods. 3 Free cash flow is defined by the Company as net cash provided by operating activities (which includes royalty advances), reduced by spending on property, plant and equipment; and pre-publication and production costs. 13

14 FY09 Segment Outlook Modest revenue growth and improved profitability in Children s Book Publishing & Distribution (ex Harry Potter) Modest growth in educational technology and improved profitability in Educational Publishing Steady profit and revenue in International Higher profit and revenue due to retail sales of interactive products in Media, Licensing & Advertising Modestly higher Overhead costs due to higher medical and stock-based compensation 14

15 FY09 Outlook for Continuing Operations Revenue Earnings Capital Expenditures Prepublication and Production Spending Free Cash Flow $2.0 to $2.1 billion $1.75 to $2.10 per diluted share $65 to $75 million $80 to $90 million $90 to $100 million 15

16 Fiscal 2008 Year-End Earnings Presentation July 24, 2008