New York — December 17, 2009 — Scholastic Corporation (NASDAQ: SCHL)today reported strong results for the second quarter ended November 30, 2009, with a nearly 100% increase in higher margin educational technology sales, as well as margin benefit from targeted price increases and company-wide cost reductions. Before one-time, mostly non-cash charges, the Company recorded a 30% increase in earnings. In addition, substantial free cash flow (as defined) further reduced debt. The Company affirmed its fiscal 2010 guidance.

On a continuing operations basis, revenue for the quarter was $660.1 million, up 1% from $653.3 million in the prior period, and earnings per diluted share were $1.54, compared to $1.55 a year ago. Results in the current period included one-time, mostly non-cash charges of $0.75 per diluted share; the prior year period included one-time expenses related to cost reductions, primarily severance, of $0.17 per diluted share. Before these factors, which are not included in the Company's guidance, earnings per diluted share from continuing operations were $2.29, compared to $1.72 a year ago, and operating margins increased to 22% from 18%.

Consolidated earnings per diluted share in the quarter were $1.51 compared to $1.15 in the prior year period. These results included a loss per share from discontinued operations, net of tax, of $0.03 compared to a loss of $0.40 in the prior year. Free cash flow (as defined) in the second quarter was $141.2 million compared to $48.7 million a year ago, and net debt (as defined) at quarter end decreased by $257.9 million, to $101.3 million.

"Last quarter Scholastic delivered substantially higher operating margins, earnings and free cash flow, before one-time, primarily non-cash items, on a slight increase in revenue. These results position us well to achieve our fiscal 2010 plan, reaching 9% operating margins if we attain the upper end of our guidance. In Scholastic Education, sales of READ 180® and other educational technology almost doubled compared to the prior year, reflecting strong execution as well as the impact of the federal stimulus program, which is supplementing tight school budgets," commented Richard Robinson, Chairman, President and Chief Executive Officer. "Pursuing our goal of 9% operating margins, we made significant progress with cost reductions and increased pricing across the Company, particularly in the Children's Book segment. This yielded higher margins and profits in that segment compared to a year ago, despite lower revenue partially due to planned reductions in promotion spending, as well as the late start of schools this year. Improved cash earnings and working capital improvements resulted in strong free cash flow and lower debt levels."

Scholastic affirmed its outlook for fiscal 2010 earnings per diluted share from continuing operations in the range of $1.80 to $2.30, before the impact of any one-time items associated with cost reductions or non-cash, non-operating items. Free cash flow continues to be forecast at $90 million to $120 million.

Second Quarter Results

Children's Book Publishing and Distribution. Segment operating income increased 3% to $107.8 million, compared to $105.1 million in the prior year period, while segment revenue declined by 6% to $368.8 million from $392.9 million in the prior year period. In School Book Fairs, an increase in the number of fairs held relative to a year ago offset a slight decrease in revenue per fair, and overall revenue held even with the prior year. In Trade Publishing, revenue declined 5% relative to the prior year period, which benefited from strong Harry Potter sales. Continued robust sales of The 39 Clues® and Suzanne Collins' The Hunger Games and its sequel Catching Fire benefited the quarter, as did new titles including Shiver and How Do Dinosaurs Say I Love You. In School Book Clubs, revenue declined 14%, partially due to fewer orders related to planned cuts in promotion spending and the late start of the school year. Teacher layoffs and reassignments in some districts also disrupted book club ordering, primarily in September. Segment profit and margins increased as a result of the planned reductions in promotion and other costs, as well as targeted price increases.

Educational Publishing. Segment revenue in the quarter rose 35% to $122.6 million from $91.0 million in the prior year period, driven by an almost 100%, or over $25 million, increase in sales of educational technology and related services. READ 180® and System 44® delivered over 100% growth combined, while math products and consulting services also achieved substantial gains in the quarter. Sales continued to benefit from the federal stimulus program. Sales of supplemental print products were down modestly, primarily reflecting lower sales to libraries. As part of the Company’s plan, the segment's publishing of new supplemental print non-fiction and reference titles has been consolidated into the Children's Book segment. In connection with this consolidation, the Company recorded a non-cash charge for impairment of intangible and other long-lived assets associated with print publishing for libraries of $36.3 million ($0.60 per diluted share) during the quarter. Excluding this item, segment operating income grew by almost 135% to $32.2 million, from $13.8 million in the prior year period, reflecting the higher margin benefit of record educational technology sales.

International. Segment revenue in the quarter was $130.9 million, compared to $122.0 million in the prior year period. Excluding a positive foreign exchange impact of $8.9 million in the period, revenue held level year-over-year. This primarily reflects higher sales in Canada, Asia and Australia, offset by a decline in export sales. Segment operating income was $14.8 million, which included a mostly non-cash charge of $5.7 million ($0.15 per diluted share) related to the write-off of a customer list and of leasehold obligations, as well as severance, in connection with a consolidation of facilities in the UK. Excluding this factor, segment operating income was $20.5 million, compared to $14.0 million a year ago. The year-over-year improvement primarily reflects the negative impact of foreign exchange a year ago, as well as higher operating profit in Canada and Asia in the current period. Based on its plan to restructure operations in the UK this year, the Company expects total one-time severance, asset impairment and other charges, including the current quarter’s charges, of between $7 million and $10 million, or $0.19 and $0.27 per diluted share, in fiscal 2010.

Media, Licensing and Advertising. Segment revenue in the second quarter was $37.8 million, compared to $47.4 million in the prior year period, and segment operating income was $2.6 million, compared to $4.0 million in the prior year period. Lower results primarily reflect a decrease in interactive product sales through retail channels and in advertising sales, partially offset by cost reductions.

Other Financial Results. Corporate overhead in the quarter was $15.5 million, compared to $28.9 million in the prior year period. This decline primarily reflects one-time severance and expenses associated with cost reductions of $9.5 million ($0.15 per diluted share) in the prior year period. Excluding this factor, corporate overhead declined by $3.9 million, reflecting lower salary expense, partially offset by sales tax accruals. Total stock-related compensation expense was $3.5 million ($0.06 per diluted share), compared to $4.5 million ($0.07 per diluted share) in the prior year period. Other severance in the period was $1.1 million ($0.02 per diluted share), compared to $2.7 million ($0.04 per diluted share) in the prior year period.

Net inventories declined to $374.7 million from $422.5 million, reflecting more efficient purchasing in the Children’s Book segment. As a result of lower working capital usage and strong free cash flow over the past 12 months, net debt (as defined) at quarter end was $101.3 million, compared to $359.2 million a year ago.

As previously announced, the Company's Board of Directors authorized a program to repurchase up to $20 million of its common stock. Under this program, which will be funded with available cash, the Company may purchase shares, from time to time as conditions allow, on the open market or in negotiated private transactions. The share repurchase program may be suspended at any time without prior notice. The Board of Directors also declared a quarterly cash dividend of $0.075 per share on the Company’s Class A and Common Stock for the third fiscal quarter of fiscal 2010, as previously announced. The dividend is payable on March 15, 2010 to shareholders of record as of the close of business on January 29, 2010.

Year to Date Results

For the first half of fiscal 2010, revenue from continuing operations was $975.7 million compared to $929.7 million in the prior year period. Earnings per diluted share from continuing operations in the first half were $0.88 compared to $0.41 a year ago, including one-time, mostly non-cash charges of $0.75 and $0.17, respectively. Excluding these items, earnings per diluted share from continuing operations were $1.63 in the first half, compared to $0.58 a year ago. Higher results in the current period primarily reflect a significant increase in sales of educational technology, as well as the benefit of cost reductions. Earnings from discontinued operations in the first half were less than $0.01 per diluted share, compared to a loss of $0.57 per share in the prior year. This difference primarily reflected non-cash, non-operating charges associated with the Company's decision to exit certain business operations in the prior year period.

Including continuing and discontinued operations, the Company reported consolidated earnings in the first half of $0.88 per diluted share, compared to a loss of $0.16 per share a year ago.

Conference Call

The Company will hold a conference call to discuss its results at 8:30 am ET today, December 17, 2009. Scholastic’s Chairman, President and CEO, Richard Robinson, and Executive Vice President, CAO and CFO, Maureen O'Connell, will moderate the call.

The conference call and accompanying slides will be webcast and accessible through the Investor Relations section of Scholastic's website, investor.scholastic.com. Participation by telephone will be available by dialing (888) 297-0360 from within the U.S. or +1 (719) 325-2336 internationally. Shortly following the call, an archived webcast and accompanying slides from the conference call will also be posted at investor.scholastic.com. An audio only replay of the call will be available toll-free at (888) 203-1112 or, for international calls, at +1 (719) 457-0820 and by entering access code 7260845. The recording will be available through Friday, February 5, 2010.

About Scholastic

Scholastic Corporation (NASDAQ: SCHL) is the world's largest publisher and distributor of children's books and a leader in educational technology and children’s media. Scholastic creates quality educational and entertaining materials and products for use in school and at home, including children’s books, magazines, technology-based products, teacher materials, television programming, film, videos and toys. The Company distributes its products and services through a variety of channels, including proprietary school-based book clubs and school-based book fairs, retail stores, schools, libraries, television networks and the Company's Internet Site, www.scholastic.com.

Forward-Looking Statements

This news release contains certain forward-looking statements. Such forward-looking statements 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 within 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.

Contact:

Scholastic Corporation
Investors: Jeffrey Mathews 212-343-6741 Media: Kyle Good 212-343-4563