Good day, ladies and gentlemen, and welcome to the Scholastic Q1 2012 Earnings Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Jeff Mathews, VP of Corporate Strategy, Business Development and Investor Relations. Please go ahead.

Thank you, Ellie, and good morning, everyone. Before we begin, I'd like to point out that the slides for this presentation are available for simultaneous viewing on our Investor Relations website, investor.scholastic.com. I'd also like to note that 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. Our comments today also 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 company's 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.

Well, thanks, Jeff, and good morning. Thank you for joining our fiscal 2012 first quarter analyst and investor conference call. For this morning's prepared comments, I'm joined by Maureen O'Connell, CFO and CAO; other members of the executive team will also be available to answer questions later. We're pleased to have achieved a strong start to fiscal 2012, putting us on plan to meet this year's financial goals. First, continued robust sales of READ 180 Next Generation, as well as System 44 math products and services, resulted in broad growth and margin improvement in our newly defined Educational Technology and Services segment. Second, Scholastic's other Education businesses now referred to as the Classroom and Supplemental Materials Publishing segment, also saw strong growth last quarter, driven by new product launches and significant district contracts. Third, best-selling Scholastic books and e-books, including The Hunger Games trilogy, drove double-digit percentage growth in retail sales. And fourth, we continue to move forward with digital growth initiatives in the Children's Books segment. We remain on plan to roll-out our children's eReading app and ebookstore later this fiscal year, while we take steps to reduce costs in non-digital areas to help fund strategic spending on e-books and e-commerce. Last quarter's results also illustrate our progress across the company in developing new digital products and distribution to help children read and learn in new ways. I'll discuss how we expect to drive this long-term profitable growth in a moment. As I've just said, beginning this fiscal year, we are now separately reporting results for our Educational Technology and Services segment, which provides schools with reading and math curriculum solutions that combine technology, materials and services, with higher priced intervention systems, a separate sales organization and different business model, as well as higher margins and growth rates. Educational…

Thanks, Maureen. We had a strong first quarter with gains in both Education segments, as well as excellent results in Trade, as we move forward with e-books and e-commerce and prepare for a profitable year in Clubs and Fairs, as well as continued growth in international. Our decision to separate results for education, technology and services underlines our confidence in this fast-growing profitable business as a key growth driver for the company. Now I will moderate a question-and-answer period. In addition to Maureen, I'm joined by these division presidents: Shane Armstrong, Scholastic International; Deborah Forte, Scholastic Media; Margery Mayer, Scholastic Education; Judy Newman, Scholastic Book Clubs and E-Commerce; and Hugh Roome, Consumer and Professional Publishing. With that, let's open the call to questions.

[Operator Instructions] Our first question comes from Drew Crum of Stifel, Nicolaus. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: Dick, I wanted to ask you about the Trade business. Obviously, a very strong start...

Yes, by the way, Drew, I neglected to say that Ellie Berger, the President of Trade, is also here among our -- to supplement whatever questions you ask, would comment on that. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So obviously a strong start to fiscal '12 with the Trade business. You've got some movie tie-ins later in the fiscal period, and I think some easier comparison. How's the business tracking against the guidance you gave in conjunction with the fourth quarter and which I believe you said would be down modestly for the year?

Maureen, maybe you could handle the down modestly question, and then Ellie and I can give some color to how the Trade business is going, which is actually gangbusters at the moment. So thanks for the question, Drew. Maureen E. O’Connell: We're tracking a little ahead of that right now. We had a strong quarter that exceeded our expectations, particularly strong for The Hunger Games franchise and Harry Potter. But as you realized from our press release, we're not changing any guidance at this point because our important school businesses have not opened yet.

I think Trade was a wonderful quarter for us and was good, not a surprise, but it was just -- underlines the strength of our list in the quality of our best-selling programs, Hunger Games. We've mentioned, Maggie Stiefvater. We've got The 39 Clues coming back and the second part of The 39 Clues. And so everything is going extremely well, and the e-book sales for The Hunger Games have been exceptionally strong. Drew, let me ask Ellie to give any further comments on how the quarter is going in Trade and what her feeling is about the year.

I think Dick said it. I think we have a pipeline of titles that we're really excited about, still to come. We have the big publication that just happened last week of Brian Selznick's Wonderstruck, which is already tracking very well. And again, as Dick said, I think the e-book sales have been really strong, especially on the titles that have a crossover appeal. So we're very optimistic for the rest of the year. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: And guys, any sense or read on how retailers are managing inventory ahead of the holidays? I think we're getting into that seasonally important period for selling ahead of the holidays and would be interest in your comments there. Maureen E. O’Connell: Yes. I think that everyone's being conservative. I think they're not ordering perhaps as deep as they have in the past, but we're getting support for our list for the most important titles of our list across-the-board. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: Got it. Okay. And then maybe a question for Margery on the Ed Publishing business. Any thoughts on what the conversion rate for READ 180 will be? The Next Gen product for fiscal '12. I think you said 18% year-to-date, and that was tracking ahead of the expectation. And then the follow-on is, was there any pick up of the textbook adoption sales in the first quarter? Is that going to flow in the second quarter?

Want me to just go ahead, Dick? Well, I think we're tracking better on conversions than we had planned, as Maureen said, and -- but most of those conversions probably are in. We still are expecting to see more of them, especially in the second quarter. But because of the buying pattern that of putting technology into the summer and having it up and running for back-to-school, a lot of that is already in. But we're getting such a great reaction to Next Gen, as Dick mentioned, and our customers are incredibly enthusiastic. In terms of the adoption revenue, as you know, we don't participate in very many adoptions, but we did participate in the early childhood adoption in Texas. And we are going to see some early childhood revenue come in, in the second quarter, not a truck load, but we are going to see some because Texas has been slow on ordering and having those orders go through the depository and back to the publishers. And I'm sure you've heard this from other people as well. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: Okay, appreciate the color. Last question for me, just on the cost cutting. $15 million is planned, is that enough to offset the incremental spend you guys have planned for on the digital side? Maureen E. O’Connell: Yes, our guidance at the top end is still $140 million, which is $30 million better than we did last year and that includes stronger performance in the business, higher digital spend, as well as the cost-savings reductions which were all anticipated there. We initiated a voluntary retirement program this quarter, so we've really put those cost reductions into action and the results of that will be seen in the remaining quarters. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: And Maureen, you guys showed some nice improvement in terms of reducing the operating loss from the Children's Book business. And if I recall, you had an incremental $5 million in digital spend in the year-ago period. What did that number look like if you can share with us for this current quarter? Maureen E. O’Connell: Well, it didn't come down. I mean, overall, our digital spending, as we had said before, would be up and it is tracking to be up. However, we did reduce our promotion, as Dick mentioned, to better match our promotion spending against the customers who spend the most. And so you're seeing the benefit of that. So we've changed our strategic merchandising and marketing to reflect really targeting the top customers.

[Operator Instructions] Our next question comes from Barry Lucas of Gabelli & Company. Barry L. Lucas - Gabelli & Company, Inc.: Couple of items, Dick. Maybe you could talk a little bit about the funding environment and what do you -- how do you feel about local school districts? And what do you see going forward in this very uncertain period that we're moving through?

Well, I'll ask Margery to supplement this, Barry, but I'm much more optimistic based on my very long experience in education about the funding environment. There's money out there. It's a little hard to come by in states. The federal government is certainly not adding greatly to its investment, but it isn't cutting back very much either at this point. And the local schools are -- will adjust their property taxes to get revenue back in the system. So school spending will probably be up in the United States overall. I think that for -- of course, as you know, 80% of that spending goes to teacher's salaries and professional staff. And if you can upgrade the quality of those teachers and help them do a better job and meet their needs for professional development, which they all want, according to a new survey that we're going to be releasing the results of quite soon, along with the Gates Foundation. Teachers want more professional development, and I think we're providing more of it and that's going to make the existing expenditures more effective for schools. So I think that's how I view it as opposed to people who are looking at the difficulties in the states and so forth and so on. In the past, states have recovered. They found the money. They don't cut education and schools move on to try to do a better job. But let me ask Margery to give her view of this, particularly as it relates to our new segment that she's running.

Well, I agree with what Dick is saying. And I guess I would add to that is a lot of our products and services are purchased with federal earmarked money for -- with Title I, which as you know serves poor children and schools serving poor children and IDEA, which is special ed. So we, as you can see from our results this summer, we've been able to tap into a lot of funding that's out there. I do think when you talk to educators, they're feeling quite a bit of pressure around funding. One thing that I think has benefited us, the past several months, is the tightening up of the screws on funding. It's forcing educators to really focus on supporting the things that are working in their district. And I think our timing on Next Gen gave us a good opportunity to go and reinforce READ 180 in a lot of our best accounts. And it was sort of counterintuitive, but it seems to have worked out really well so far. Barry L. Lucas - Gabelli & Company, Inc.: Great. Margery, as long as I've got you, maybe you could provide a little bit of an update on MATH 180 timing, how the development project is going.

Yes. It's unchanged. It's the same that we've been saying, and we're making really good progress in math. We're thrilled with our acquisition of Math Solutions, which is doing really well, and it's helped -- bolstering our capacity within our organization. So we're working on all fronts, not just product development, but also getting our sales force ready, our marketing ready. And yes, I think it's going to be really exciting. Barry L. Lucas - Gabelli & Company, Inc.: And a target date for when that we might...

We're going to be -- it's about 24 months away, something like that. Barry L. Lucas - Gabelli & Company, Inc.: Two more quickies, if I may. Dick, I think you have mentioned or you talked a little bit about the app for -- free app that kids could download to their readers for Scholastic and other titles. How are you positioned now with the other important participants in that pipeline, whether we're talking, in particular, Apple?

Well, we are going to -- our app is going to be -- is going to support the Apple systems, as well as Android, PC and Macs. So you'll be able to use this app on iPhones, iPads, Android pad, tablets, et cetera, like Android phones, as well as PC and Mac. So we're supporting all of those platforms because all -- people are buying books -- e-books on all those different -- in all those different ways. Deborah, do you want to enhance that answer?

I think it's a perfect answer. We created the app so it's platform agnostic. So kids can read anytime, anywhere. And as Dick said, we start with the PC, which is ready and then we go to the IOS, and we'll have the Android early in the winter. Barry L. Lucas - Gabelli & Company, Inc.: And will product be available in the Apple stores or the iStore? And how -- or is it more the direct sell that you're expecting?

Well, as you know, the challenge for us, Barry, is to make e-books available, a wide variety of e-books, including those published by us, but also by other publishers to our Book Club and Book Fair customers primarily, because that's where the parents and the kids are in our customer environment, so that's our major focus for those titles. We're outreaching to our customers and selling and getting them to download our app and get them to order our books from us. Deborah, do you want to go farther with that?

Yes. No, I think that the creation of this was that we needed to supply the very best experience for kids who wanted to read children's books. And so we made something that we think does that. And certainly, because the app is cross-platform, it can be accessed anywhere. We'll be on each of the operating systems. But as Dick said, our focus is really giving our customers the very best experience and really dedicating ourselves to the best eReading experience for children's books. Barry L. Lucas - Gabelli & Company, Inc.: Great. Last area for Maureen or -- what would motivate you at this point given the good start to the year to start accelerating share repurchases? Maureen E. O’Connell: Good question, Barry. We didn't aggressively buy this quarter because we are renegotiating our bank deal. Our bank deal is due at the end of the year, and we felt we'd be in a better negotiation position, not to draw down on our revolver and really focus on generating as much cash as possible and not using it. So we are more than ever committed to our stock buyback program. We have 45 million authorized and available for us, and I think you'll see us back in the market.

Our next question comes from Dennis Barrett of Sidoti. Dennis Barrett - Sidoti & Company, LLC: Just as a follow-on, Maureen, on the free cash flow question. Do you have any -- or does the company have any plans to consider acquisitions going forward, especially in the technology educational area? Maureen E. O’Connell: We have looked at everything in that area, but we do have the market-leading program and so it's very difficult to find something as good as READ 180, something that we want to brand READ 180. So we've really been buying service companies. And as you know, we bought Math Solutions in the second quarter last year and a few years ago we bought ICLE, which was a reading consulting business. Now we have a math consulting business. But we do look at companies as they are available. We just have not seen anything that's the right fit. Dennis Barrett - Sidoti & Company, LLC: Okay, great. And my other question was just on whether -- is it too soon to start talking about what margins may look like or e-books or how the cost structure changes as the product mix changes? Maureen E. O’Connell: At this point, we're guiding for margins that are similar to our current margins because we expect that we will save in print, paper, postage, shipping, but we will pay a higher royalty rate. So we're guiding for similar margins.

I'm showing no further questions at this time. And I'd like to turn the call back over to Mr. Dick Robinson for any closing remarks.

Well, thank you all for your support. We're delighted by the first quarter. We have good expectations for the balance of the year, and we'll look forward to talking to you in December. Thanks very much.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect, and have a wonderful day.