Good day, ladies and gentlemen, and welcome to the Scholastic Second Quarter Fiscal Year 2014 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Gil Dickoff, Senior Vice President and Treasurer and Investor Relations. Please go ahead.

Thank you very much, Kate, and good morning, everyone. Before we begin, I would like to point out that the slides for this presentation are available for simultaneous viewing on our Investor Relations website at investor.scholastic.com. 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 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 SEC. Actual results could differ materially from those currently anticipated. Our comments today include references to certain non-GAAP financial measures as defined in Regulation G. The reconciliation of these non-GAAP financial measures with the relevant GAAP financial information and other information required by Regulation G is provided in the company's earnings release, which is posted on the Investor Relations website at investor.scholastic.com. Now I'd like to introduce Dick Robinson, the Chairman, CEO and President of Scholastic, to begin our presentation.

Thank you, Gil. Good morning, and thank you for joining our second quarter 2014 analyst and investor conference call. For this morning's prepared comments, I'm joined by Maureen O'Connell, CFO and CAO. Before I review our second quarter, I want to point out that we filed an 8-K this morning related to our intention to purchase our headquarters property here at 555 Broadway in New York City, which contains unique retail space as well as our offices. This purchase will give us complete ownership of our 325,000 square feet headquarters location, which includes 557 Broadway. This will increase our cash flow and will also provide us with the flexibility to further monetize this valuable space in the SoHo neighborhood. We expect to fund the $255 million purchase with cash on hand and borrowings under our committed credit facility. Maureen will talk more about this later. We had very strong second quarter results driven by profit improvement in each part of our Children's Book business and excellent sales in our Education businesses. These operating results were offset by a onetime noncash charge in the amount of $13.4 million related to goodwill from 2 acquisitions made in the Children's Book business more than 10 years ago. This charge, which has no impact on the operations of our business, almost completely offset the 19% improvement in operating profit in our Children's Book business, which was driven by higher sales in Trade and Fairs and reduced cost in Clubs. The power of Scholastic lies in our content distribution and relationship to the schools and our customers. We have 3 strong business areas which are all on track for growth. The Children's Book business, Trade, Clubs and Fairs, which comprise 50% of revenue, had a 19% rise in operating income in the quarter before the…

Thanks, Maureen. Before our operator provides queuing instructions for the Q&A session, I wanted to address a few questions that we received from investors and analysts earlier this morning. The first question that we received was what efficiency initiatives have we employed to achieve margin improvement in Children's Books that we realized this quarter? And how should we expect profitability to trend in the second half? I think I'll turn that question over to Judy Newman, Head of our Book Clubs unit.

Thank you, Gil, and good morning, everyone. So Clubs and Fairs have been working very closely together to align our front-end marketing, our product development and pricing between the 2 channels. We've been developing specific content for these channels and really targeting our promotions much more strategically. We believe that this collaborative effort in schools, where Clubs and Fairs are both very strong, is really going to help grow our share of the children's book buying market much more profitably. At the same time, as we're growing sales and focusing on customer activation, we're also looking to lower our technology spend, reduce some of our infrastructure costs, including operational efficiencies in distribution, manufacturing, customer service and supply chain. So there's many initiatives that have begun this quarter and will be continuing all year, and we expect really great, continued progress throughout the year.

Thanks very much, Judy. Second question that we received earlier has to do with our Education businesses and if we expect any cost savings related to the combination of our 2 Education businesses, and how we expect the combination to impact Ed Tech product sales in the second half. And to answer that question, I'll ask Margery Mayer, who heads up that group, to respond.

Thanks, Gil. So the combination of our 2 groups is really about growth, where we have 2 product lines we're putting together that are very much in harmony with each other. Our Classroom Books and Supplemental group has been focused more on K-5, and, of course, we have such a strong position at middle school and above. And we're also, most excitingly I think, putting together our sales forces, both of which have been incredibly effective at what they're doing. So we've essentially doubled our coverage of our solutions. In terms of savings, we're going to always be looking for greater efficiencies and we think we will find some going down the road. But as I said, this is about growth. In terms of the second half, we're staying constant with what we've said in the past.

Thanks very much, Margery. And operator, we're now ready for you to provide instructions for the Q&A session.

[Operator Instructions] Our first question comes from the line of Drew Crum with Stifel. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: So just a couple of housekeeping questions to start. The CapEx is down about $16 million through the first 6 months. I believe the guidance was $55 million to $65 million for fiscal 2014, which would imply growth year-on-year. Should we anticipate some catch-up in the second half? Was there a change to guidance there? And then the second item is just on the cost reduction restructuring of $5.5 million this quarter. Should we anticipate more restructuring or savings, cost-related savings to hit the P&L in the second half? Maureen E. O’Connell: So to the first question about CapEx, we are maintaining our range of $55 million to $65 million, it's just the timing of the spend is skewed more towards the second half. And the restructuring charge we took in the quarter of $5.5 million, a significant part of that, more than half of that, was due to our distribution operations, where we are realigned to achieve more maximum efficiencies in the Club operations. We do expect that there will be more charges going through the year as we continue to look at the Book Club and Book Fair operations together and seeing where we can leverage those 2 footprints to reduce costs. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: And moving over to the Ed Publishing business, Margery, maybe you could comment on the impact from Common Core? What you're anticipating in the second half earnings? Update or thoughts around timing of implementation?

So I think Common Core is definitely feeling the market to some degree. We have really good work going on in our Services business around Common Core. And we're also -- think, Common Core is a very important message around our products. So when we talk about Math 180, one of the pillars of our product is that we are rebuilding the foundations that kids need to be successful with Common Core. In terms of timing, we're seeing school districts all along the spectrum of implementation of Common Core, from school districts that are literally just getting started to school districts that feel like they're well along. For example, New York City, very well along; Code X, our middle school Common Core program, is in probably 2/3 or more of schools right now being used. In terms of the second half of the year, we expect to be over last year and we see good momentum in our business. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And last question, just on the Clubs business, any update on how you're thinking about revenue for the second half and just any impact that Common Core is having on that business? I think going into the year, you thought that Common Core would drive sales for Clubs. You had an easier comparison in the second quarter, and yet the business was still down. I just want to better understand how you're thinking about revenue going forward. And on a related note, any update on consolidating Clubs with the Fairs operations?

I think on revenue, Drew, we've got more new sponsors, which is great, so that's been an important win for the fall. Common Core, while I think it's increasing the amount of focus on nonfiction in the schools and the need for nonfiction, that's showing up extremely well in the sales of our Classroom Magazines and also increasing amount of nonfiction, both in Book Fairs and Book Clubs. But it's not a -- it hasn't proved to be a driving force in the kids' purchase of books, which continues to be things that they love, things that they -- the stories and so forth and so on. The combination of Clubs and Fairs, we're certainly working very hard on the back end of distribution, as Maureen said. And we're combining and unifying our marketing messages around the importance of independent reading in the Common Core period, where it's well known in schools that the children who read more fluently, more widely, are -- develop the higher-level thinking skills that they need to be successful on the Common Core test, which remains the drive of teachers. We also note that as kids spend more time on devices, the teachers are really focusing on reading and pouring it on in terms of getting kids to be excited about reading to want to read more. We believe that will show up as we get more sponsors in the second half, and that we are -- our revenues will probably remain flat or a little bit up in the second half. I'll ask Judy to add her thoughts to that comment.

Drew, I think that we're feeling very good about Clubs this year. There's been a lot of positive enthusiasm to our grade-specific catalogs and some of our products. And as Dick said, as maybe kids and parents are sort of less interested in reading in the recreational space, in schools, it's much more important than ever. So Common Core is there just shining this light on the need for kids to read books as much as they can. And Clubs and Fairs are right there positioned in schools to do that. And so we're very encouraged by this. As Dick said, the fact that we have more new sponsors coming into our mix is a great sign of support for this business. So overall, we're very positive. We're feeling really good about things. And the Clubs and Fairs working together to have that consistent message everyday that we're both in the same schools is really a powerful tool. And as both Maureen and Dick have said, we're working very hard to target our reward systems more strategically and our product and all our back end to create much more efficiency. So we're all -- we're feeling pretty good about these businesses working together in this really important time to get great books into kids' hands.

I think we also have Book Fair field reps out there, Drew, more -- well, over 100 of them, who work to improve revenue per Fair. But they're adding -- they're talking to teachers about the importance of independent reading and how to match Clubs and Fairs together and use more Clubs with the Fairs and vice versa. So that's also -- will help over a period of time. Thanks for the question.

[Operator Instructions] Our next question comes from the line of Barry Lucas with Gabelli & Company.

Dick, I've got 3 areas I'd like to touch upon and one would be on the Educational Technology side, the other in Clubs and Fairs and the other, capital allocation. So maybe you or Margery could, I don't know, size the opportunity at this point with -- either with Common Core, also Math 180? And potentially, if you can compare the launch of Math 180 to Read 180, how has the new product done relative to the other? And just some more color in that area to get a feel for how it's progressing, the tail on the business, that sort of thing.

I'll ask Margery to answer that more fully, Barry, but I think the main thing that we see overall, which is why we merged our operations in Supplementary and Educational Technology, which is more Core material, is a tremendous drive in schools to improve achievement. There's huge concern for improving achievement as the Common Core tests near. And this has made schools turn to Scholastic and other publishers, too, for a broader range of services. I know you know the story, but that -- this is the key point where we're moving away from just the instructional materials budget into the human capital budget, which is more than 100x larger than the instructional materials budget. So it's that area which promises so much growth for our education businesses working together. And together, they can talk about the combined solutions everywhere, K-5, print, digital, et cetera, Educational Technology, so that's terrific. Let me be immodest about Math 180 because since Margery and her team developed it, it would be unbecoming of her to get to say the things that I'll say. But I think this program is really a monster winner. We have an immediate response from kids and teachers about how excited they are about using Math 180. It's beautifully designed, it's very well focused, easy to use, kids are responding to it dramatically, there's lots of word-of-mouth about it. And I think, in effect, it's a more successful launch than Read 180, which took a longer time to develop, of course, in a different era, more than 15 years ago. But in any event, it's great and it's working for kids and it's going to sell. So having prefaced that comment, let me ask Margery to expand.

Yes. Barry, we're really excited about how Math 180 is going. We're in well over 100 districts already. We only brought the product out in August. And even though there's other math programs out there designed to meet the needs of the students that we're treating, they just don't do what Math 180 does, in our immodest opinion, as Dick said. We -- a couple of things that Math 180 really focuses on that's really working well, first of all, when we think about -- when we were building Math 180, we did our research on it, one of the things that kept coming back to us is how difficult it is for teachers to teach math in middle school. A lot of them are not certified math teachers. We're asking them to teach the kind of math in the Common Core that they're not used to teaching. So there's a huge amount of attention in Math 180 on how to support the teacher. Now not only is that in the program, but our acquisition of Math Solutions a few years ago really enhanced our ability to not only get it right for the teacher inside the program, but also to get it right when we're going into schools and working with teachers teaching Math 180. So every single one of our customers, more or less, is also working with our consultants to get the right kind of professional development to go with Math 180 which, as Dick said, allows us to tap into both materials budgets and in the human capital budgets. And there's just a lot of other really great things going on in Math 180. One of the ideas that people are really resonating to is the program is built around the idea of a growth mindset. And that idea is around having kids approach math, not whether they're good or bad at it, not whether they like or hate it, but the idea that if you work at it, you can get it. And we're getting a great response to that. The technology is really engaging. All the math is grounded in real life applications. These things are things that when people see it, there's like a big aha moment with it. I'm sorry, I think I went on a little bit too long. But anyway, I'm excited about it and so is our market.

Yes. On the Book Fairs and Clubs working together, I think we've probably said it all, Barry, in our earlier response. I don't think there's a lot to add there right now in terms of -- we're pretty excited about the fact that we have the sales group that's kind of -- is going out and talking about independent reading in the schools. In the era of the Common Core, we think that will have an impact because a school only can have 2 to 3 Fairs lasting 2 to 3 weeks out of 35 weeks of school operation. And in between those times, the Clubs can fill in and give kids access to low-cost, high-quality reading. And we think that can be sold through our field reps to get the principals, teachers and parents more involved. We also are working with reading club coordinators like our Book Fair volunteers who can help the teachers put in the orders and manage the programs. So I -- but I think that's about all that we can offer at this point. On the capital allocation, I think Maureen can handle that one, I'm sure. Maureen E. O’Connell: Did you have a specific question, Barry?

Yes. Actually, goes to 2. The decision on the real estate purchase versus share repurchases at this point, your stock kind of languishing where it's been, and 3 years since the Dutch Auction. So what were kind of the elements that went into the decision-making process? Maureen E. O’Connell: Well, frankly, it was to be opportunistic. We own the building at 557, we had the opportunity to buy 555 at what we believe is an attractive price, particularly considering the retail values here in SoHo and the uniqueness of this property being on Broadway and of the size that it is. So we felt it to be very opportunistic to spend $100 million in incremental debt, allowed us to control this whole facility and have control of our own destiny. And so, that's what led us to make that decision. And when we model the cash flows on this, over the next 10 years, it's a positive cash of $60 million. And that assumes that we never pay off the debt and we just pay interest through the whole period. So I think it was very attractive from a cash flow standpoint as well. And now, we have the flexibility and the options to monetize the retail or any part of this building if we want to. So it wasn't stock buyback versus retail, it was the -- or versus our building. It was in the opportunity to have such flexibility in our destiny regarding the building. As far as stock buybacks, we are continuing to be in the market. We bought over 200,000 shares this quarter. We still have $13 million under authorization from our Board of Directors, and we'll continue that program. And then, as you know, our dividends have increased over the period of time since we launched dividends, so we continue to look to return cash to our shareholders.

I'm not showing any further questions at this time. I'd like to turn the call back over to Dick Robinson for closing remarks.

Thank you, all, for your attention. We had a great quarter. We're excited about a lot of what we're doing. Please follow us, we'll be back with you in March. And we're expecting that we're going to achieve our goals for the year. Thanks so much. Happy holidays.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a good day.

Thank you very much.