(SCHOLASTIC LOGO)

UNITED STATES
~~SECURITIES AND EXCHANGE COMMISSION~~
~~Washington, D.C. 20549~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended ~~February 28,~~August 31, 2009	Commission File No. 000-19860


SCHOLASTIC CORPORATION
(Exact name of Registrant as specified in its charter)


Delaware		13-3385513
(State or other jurisdiction of ~~incorporation or organization)~~		(IRS Employer Identification No.)
incorporation or organization)

557 Broadway, New York, New York		10012
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (212) 343-6100

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


~~Large accelerated filer~~x	~~Accelerated filer~~o
~~Non-accelerated filer~~o ~~(Do not check if a smaller reporting company)~~	~~Smaller reporting company~~o

~~Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~
~~Yes~~o Nox

~~Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.~~


	~~Title~~ ~~of each class~~Large accelerated filero	~~Number of shares outstanding~~ ~~as of March 31, 2009~~	Accelerated filerx
Non-accelerated filero		Smaller reporting companyo

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yeso Nox

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.


Title	Number of shares outstanding
of each class	as of September 30, 2009


Common Stock, $.01 par value		~~34,738,598~~	34,780,638
	Class A Stock, $.01 par value		1,656,200

SCHOLASTIC CORPORATION

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED ~~FEBRUARY 28,~~AUGUST 31, 2009

INDEX


				Page

Part I -– Financial Information

	Item 1.	Financial Statements

		Condensed Consolidated Statements of Operations ~~- Unaudited for the Three and Nine months ended February 28, 2009 and February 29, 2008~~(Unaudited)	1

		Condensed Consolidated Balance Sheets ~~– February 28, 2009 and February 29, 2008 - Unaudited; and May 31, 2008~~(Unaudited)	2

		Consolidated Statements of Cash Flows ~~- Unaudited for the Nine months ended February 28, 2009 and February 29, 2008~~(Unaudited)	3

		Notes to Condensed Consolidated Financial Statements ~~- Unaudited~~(Unaudited)	45

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1719

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2528

	Item 4.	Controls and Procedures	2629

Part II – Other Information

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2730

	Item 6.	Exhibits	28

~~Signatures~~			2931

Signatures
		32

PART I -– FINANCIAL INFORMATION

Item 1. Financial Statements

SCHOLASTIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED

(Dollar amounts in millions, except per share data)




	*Three months ended*						*Nine months ended*
	*February 28,*			*February 29,*			*February 28,*			*February 29,*
													Three months ended August 31,
	2009			2008			2009			2008
				*(Restated)*						*(Restated)*			2009				2008

Revenues	$	424.9		$	440.4		$	1,359.0		$	1,644.2			$	315.6			$	276.4

Operating costs and expenses:
Cost of goods sold		214.1			216.0			643.2			800.3				156.1				146.0
Selling, general and administrative expenses		193.7			200.9			599.6			625.2				173.7				172.9
Bad debt expense		2.4			3.1			11.1			8.3				2.1				1.1
Depreciation and amortization		14.5			14.4			45.4			44.6				14.7				15.7
Severance		5.8			1.8			19.8			5.2				4.3				3.0
Goodwill impairment charge		17.0			—			17.0			—

Total operating costs and expenses		447.5			436.2			1,336.1			1,483.6				350.9				338.7

Operating (loss) income		(22.6	)		4.2			22.9			160.6

Other income (expense)		0.3			(0.9	)		0.3			(0.9	)
Operating loss															(35.3	)			(62.3	)

Other income															0.9				—
Interest expense, net		5.6			6.0			18.5			24.4				3.9				5.9
Loss on investments		13.5			—			13.5			—


(Loss) earnings from continuing operations before income taxes		(41.4	)		(2.7	)		(8.8	)		135.3
(Benefit) provision for income taxes		(6.3	)		(1.3	)		10.6			49.0
Loss from continuing operations before income taxes															(38.3	)			(68.2	)
Benefit for income taxes															(13.7	)			(25.3	)


(Loss) earnings from continuing operations		(35.1	)		(1.4	)		(19.4	)		86.3
Loss from discontinued operations, net of tax		(0.9	)		(77.9	)		(22.6	)		(92.8	)
Loss from continuing operations															(24.6	)			(42.9	)
Earnings (loss) from discontinued operations, net of tax															1.6				(6.2	)


Net loss	$	(36.0	)	$	(79.3	)	$	(42.0	)	$	(6.5	)		$	(23.0	)		$	(49.1	)


Basic and diluted earnings per Share of Class A and Common Stock
Basic and diluted (loss) earnings per Share of Class A and Common Stock

Basic:
(Loss) earnings from continuing operations	$	(0.95	)	$	(0.03	)	$	(0.52	)	$	2.22
Loss from discontinued operations, net of tax	$	(0.03	)	$	(2.03	)	$	(0.60	)	$	(2.39	)
Loss from continuing operations														$	(0.68	)		$	(1.13	)
Earnings (loss) from discontinued operations, net of tax														$	0.05			$	(0.17	)
Net loss	$	(0.98	)	$	(2.06	)	$	(1.12	)	$	(0.17	)		$	(0.63	)		$	(1.30	)
Diluted:
(Loss) earnings from continuing operations	$	(0.95	)	$	(0.03	)	$	(0.52	)	$	2.19
Loss from discontinued operations, net of tax	$	(0.03	)	$	(2.03	)	$	(0.60	)	$	(2.35	)
Loss from continuing operations														$	(0.68	)		$	(1.13	)
Earnings (loss) from discontinued operations, net of tax														$	0.05			$	(0.17	)
Net loss	$	(0.98	)	$	(2.06	)	$	(1.12	)	$	(0.16	)		$	(0.63	)		$	(1.30	)

Dividends declared per common share	$	0.075		$	—		$	0.225		$	—			$	0.075			$	0.075

See accompanying notes

SCHOLASTIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS – UNAUDITED

(Dollar amounts in millions, except per share data)


	February 28, 2009			May 31, 2008			February 29, 2008 (Restated)
										August 31, 2009				May 31, 2009				August 31, 2008
	(Unaudited)						(Unaudited)
ASSETS
*Current Assets:*
Cash and cash equivalents	$	37.0		$	117.3		$	191.7			$	54.2			$	143.6			$	29.5
Accounts receivable, net		196.6			205.3			199.2				228.0				197.4				180.4
Inventories		413.8			360.9			423.6
Deferred promotion costs		10.0			5.9			9.5
Inventories, net												435.0				344.8				471.0
Deferred income taxes		130.7			116.9			93.0				83.8				62.7				129.1
Prepaid expenses and other current assets		57.3			53.1			72.8				57.8				40.3				83.6
Current assets of discontinued operations		40.6			86.3			165.7				29.4				31.0				88.9



Total current assets		886.0			945.7			1,155.5				888.2				819.8				982.5

Property, plant and equipment, net		316.3			338.8			331.8				309.9				315.4				330.0
Prepublication costs		116.6			110.6			105.9				119.7				121.5				111.3
Royalty advances		44.9			48.4			52.0
Royalty advances, net												41.1				41.5				48.1
Production costs		5.9			4.9			4.8				6.4				6.0				5.3
Goodwill		141.0			164.4			164.4				157.0				157.0				162.5
Other intangibles		46.9			47.4			49.7				51.7				46.8				47.3
Other assets and deferred charges		96.5			101.4			111.4				96.8				100.8				118.7


Total assets	$	1,654.1		$	1,761.6		$	1,975.5			$	1,670.8			$	1,608.8			$	1,805.7


LIABILITIES AND STOCKHOLDERS’ EQUITY
*Current Liabilities:*
Lines of credit, short-term debt and current portion of long-term debt	$	52.6		$	54.6		$	53.5				56.2				53.7				105.8
Capital lease obligations		3.5			4.9			4.9				2.6				3.4				4.7
Accounts payable		132.1			109.1			113.8				167.2				128.2				134.2
Accrued royalties		60.2			45.5			151.5				56.8				41.7				52.7
Deferred revenue		48.7			35.4			50.3				55.5				34.2				45.9
Other accrued expenses		147.1			171.2			169.5				159.5				138.9				148.5
Current liabilities of discontinued operations		16.3			21.3			40.9				6.0				7.3				21.0



Total current liabilities		460.5			442.0			584.4				503.8				407.4				512.8

*Noncurrent Liabilities:*
Long-term debt		262.7			295.1			320.1				234.4				250.0				324.4
Capital lease obligations		55.0			56.7			57.6				54.7				54.5				56.1
Other noncurrent liabilities		110.6			94.7			118.6				110.4				111.9				111.1


Total noncurrent liabilities		428.3			446.5			496.3				399.5				416.4				491.6

*Commitments and Contingencies:*		—			—			—				—				—				—

*Stockholders’ Equity:*
Preferred Stock, $1.00 par value		—			—			—				—				—				—
Class A Stock, $.01 par value		0.0			0.0			0.0				0.0				0.0				0.0
Common Stock, $.01 par value		0.4			0.4			0.4				0.4				0.4				0.4
Additional paid-in capital		550.7			539.1			531.9				558.4				552.9				542.3
Accumulated other comprehensive loss		(71.9	)		(34.7	)		(31.0	)			(73.3	)			(77.1	)			(46.0	)
Retained earnings		537.7			588.3			598.9				537.0				562.8				536.3
Treasury stock at cost		(251.6	)		(220.0	)		(205.4	)			(255.0	)			(254.0	)			(231.7	)


Total stockholders’ equity		765.3			873.1			894.8				767.5				785.0				801.3

Total liabilities and stockholders’ equity	$	1,654.1		$	1,761.6		$	1,975.5			$	1,670.8			$	1,608.8			$	1,805.7

See accompanying notes

SCHOLASTIC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED

(Dollar amounts in ~~millions)~~millions, except per share data)

Nine months ended

February 28, 2009
February 29, 2008

(Restated)
Cash flows provided by operating activities:

Net loss

$
(42.0
)
$
(6.5
)
Loss from discontinued operations, net of tax

(22.6
)

(92.8
)
(Loss) earnings from continuing operations

(19.4
)

86.3

Adjustments to reconcile (loss) earnings from continuing operations to net cash provided by operating activities of continuing operations:

Provision for losses on accounts receivable and other reserves

39.4

38.1

Amortization of prepublication and production costs

32.5

33.0

Depreciation and amortization

45.4

44.6

Deferred income taxes

(6.3
)

(25.2
)
Non cash write off related to asset impairment

17.0

—

Unrealized loss on investment

13.5

—

Changes in assets and liabilities:

Accounts receivable

(16.3
)

11.5

Inventories

(96.5
)

(76.9
)
Prepaid expenses and other current assets

(5.3
)

(10.9
)
Deferred promotion costs

(4.2
)

(4.4
)
Royalty advances

(6.0
)

(5.0
)
Accounts payable and other accrued expenses

15.6

58.4

Accrued royalties

16.3

115.8

Deferred revenue

14.7

27.5

Pension and postretirement liability

(6.7
)

(4.4
)
Other net

21.0

14.1

Total adjustments

74.1

216.2

Net cash provided by operating activities of continuing operations

54.7

302.5

Net cash (used in) provided by operating activities of discontinued operations

(20.6
)

1.2

Net cash provided by operating activities

34.1

303.7

Cash flows used in investing activities:

Prepublication expenditures

(37.2
)

(36.6
)
Additions to property, plant and equipment

(32.7
)

(34.3
)
Net proceeds from sale of businesses

33.0

—

Production expenditures

(3.8
)

(2.8
)
Repayment of loan from investee

6.0

6.2

Loan to investee

(4.4
)

(6.1
)
Acquisition related payments

(3.8
)

(1.1
)
Other

—

(0.1
)
Net cash used in investing activities of continuing operations

(42.9
)

(74.8
)
Net cash used in investing activities of discontinued operations

(0.8
)

(3.6
)
Net cash used in investing activities

(43.7
)

(78.4
)

Cash flows used in financing activities:

Borrowings under credit agreement and revolving loan

220.3

190.0

Repayment of credit agreement and revolving loan

(220.3
)

(190.0
)
Borrowings under term loan

—

200.0

Repayment of term loan

(32.1
)

(10.7
)
Repurchase of 5.00% notes

(0.4
)

—

Borrowings under lines of credit

429.5

412.5

Repayment under lines of credit

(429.2
)

(468.7
)
Repayment of capital lease obligations

(3.7
)

(4.2
)
Reacquisition of common stock

(31.6
)

(205.4
)
Proceeds pursuant to stock-based compensation plans

1.4

33.3

Payment of dividends

(5.7
)

—

Other

—

0.6

Net cash used in financing activities of continuing operations

(71.8
)

(42.6
)

Net cash used in financing activities

(71.8
)

(42.6
)
Effect of exchange rate changes on cash and cash equivalents

(0.5
)

(4.4
)
Net (decrease) increase in cash and cash equivalents

(81.9
)

178.3

Cash and cash equivalents at beginning of period, including cash of discontinued operations of $3.1 and $2.4 at June 1, 2008 and 2007, respectively

120.5

22.8

Cash and cash equivalents at end of period, including cash of discontinued operations of $1.6 and $9.4 at February 28, 2009 and February 29, 2008, respectively

38.6

201.1


	Three months ended August 31,

	2009				2008

Cash flows used in operating activities:
Net loss		$	(23.0	)		$	(49.1	)
Earnings (loss) from discontinued operations, net of tax			1.6				(6.2	)

Loss from continuing operations			(24.6	)			(42.9	)

Adjustments to reconcile loss from continuing operations to net cash used in operating activities of continuing operations:
Provision for losses on accounts receivable and other reserves			9.3				8.0
Amortization of prepublication and production costs			12.1				10.0
Depreciation and amortization			14.7				15.7
Deferred income taxes			(20.6	)			(31.2	)
Changes in assets and liabilities:
Accounts receivable			(32.4	)			16.2
Inventories			(95.0	)			(125.9	)
Prepaid expenses and other current assets			(11.6	)			(11.0	)
Deferred promotion costs			(5.8	)			(8.5	)
Royalty advances			(1.0	)			(1.5	)
Accounts payable and other accrued expenses			56.0				17.0
Accrued royalties			15.0				5.2
Deferred revenue			21.3				10.9
Pension and postretirement liability			(2.9	)			(2.8	)
Other net			5.4				3.2

Total adjustments			(35.5	)			(94.7	)

Net cash used in operating activities of continuing operations			(60.1	)			(137.6	)
Net cash provided by (used in) operating activities of discontinued operations			1.8				(3.4	)

Net cash used in operating activities			(58.3	)			(141.0	)

Cash flows used in investing activities:
Prepublication and production expenditures			(10.7	)			(11.5	)
Additions to property, plant and equipment			(8.5	)			(9.8	)
Net proceeds from sale of discontinued operations			—				4.0
Other			—				(0.7	)

Net cash used in investing activities of continuing operations			(19.2	)			(18.0	)
Net cash used in investing activities of discontinued operations			—				(0.4	)

Net cash used in investing activities			(19.2	)			(18.4	)

See accompanying notes

SCHOLASTIC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED

(Dollar amounts in millions, except per share data)


	*Three months ended*

	August 31, 2009			August 31, 2008

Cash flows (used in) provided by financing activities:
Borrowings under credit agreement and revolving loan		—			40.0
Repayment of term loan		(10.7	)		(10.7	)
Repurchase of 5.00% notes		(4.1	)		—
Borrowings under lines of credit		40.7			114.4
Repayment under lines of credit		(34.5	)		(63.2	)
Repayment of capital lease obligations		(0.9	)		(0.8	)
Reacquisition of common stock		(1.0	)		(11.7	)
Proceeds pursuant to stock-based compensation plans		—			0.3

Net cash (used in) provided by financing activities of continuing operations		(10.5	)		68.3
Net cash provided by financing activities of discontinued operations		—			—

Net cash (used in) provided by financing activities		(10.5	)		68.3
Effect of exchange rate changes on cash and cash equivalents		(1.4	)		2.4

Net decrease in cash and cash equivalents		(89.4	)		(88.7	)

Cash and cash equivalents at beginning of period, including cash of discontinued operations of $0.0 and $4.3 at June 1, 2009 and 2008, respectively		143.6			120.4

Cash and cash equivalents at end of period, including cash of discontinued operations of $0.0 and $2.2 at August 31, 2009 and August 31, 2008, respectively		54.2			31.7

See accompanying notes

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

1. Basis of Presentation

The accompanying condensed consolidated financial statements consist of the accounts of Scholastic Corporation (the “Corporation”) and all wholly-owned and majority-owned subsidiaries (collectively, “Scholastic” or the “Company”). These financial statements have not been audited but reflect those adjustments consisting of normal recurring items that management considers necessary for a fair presentation of financial position, results of operations and cash flows. These financial statements should be read in conjunction with the consolidated financial statements and related notes in the Annual Report on Form 10-K for the fiscal year ended May 31, ~~2008, as amended on Form 10-K/A.~~2009.

The Company’s fiscal year is not a calendar year. Accordingly, references in this document to fiscal 2009 relate to the twelve month period ended May 31, 2009.

As more fully described in Note 2, “Discontinued Operations,” ~~in August 2008,~~ the Company ~~completed the~~closed or sold several operations during fiscal 2008 and 2009, and presently holds for sale other operations. All of ~~its domestic direct-to-home continuity business (the “DTH business”) and has ceased~~these businesses are classified as discontinued operations ~~of its direct-to-home continuity business~~ in the United Kingdom as of February 28, 2009. The Company expects to complete the divestiture of its direct-to-home continuity business located in Canada, as well as a warehousing and distribution facility located in Maumelle, Arkansas (the “Maumelle Facility”), by the end of the current fiscal year. As previously announced, during the fourth quarter of fiscal 2008, due to the impending sale of the DTH business, it was also determined that the Scholastic school-based continuities business (the “SC business”) would not have an adequate infrastructure and, as a result, the SC business was shut down effective May 31, 2008. The DTH business, the Canada and United Kingdom direct-to-home continuity businesses, the Maumelle Facility and the SC business are hereinafter referred to collectively as the “Former Continuities Business.”

In addition to the foregoing, during the six months ended February 28, 2009, the Company determined to exit certain other unprofitable, non-core businesses or operations as detailed in Note 2, “Discontinued Operations,” which operations have been or are in the process of being sold or shut down. The Company continuously evaluates its portfolio of businesses for both impairment and economic viability.

Also, in a separate transaction during the three months ended February 28, 2009, the Company sold Quality Education Data (“QED”), a non-core business which markets databases serving the school market, for proceeds of $29.0, resulting in a pre-tax profit of $21.9.Company’s financial statements.

The remaining assets and liabilities associated with the foregoing discontinued businesses or operations are presented onin the Company’s Condensed Consolidated Balance Sheets as “Current assets of discontinued operations” and “Current liabilities of discontinued operations” as of ~~February 28,~~August 31, 2009, May 31, ~~2008~~2009 and ~~February 29,~~August 31, 2008. The aggregate results of operations of these businesses for the three ~~and nine~~ months ended ~~February 28,~~August 31, 2009 and ~~February 29,~~ 2008 are included in the Condensed Consolidated Statements of Operations as ~~“Loss~~“Earnings (loss) from discontinued operations, net of tax.” The aggregate cash flows of these businesses are also presented separately in the Company’s Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~February 28,~~August 31, 2009 and ~~February 29,~~ 2008. All corresponding prior year periods presented in the Company’s Condensed Consolidated Financial Statements and accompanying notes have been reclassified to reflect the discontinued operations presentation.

The Company’s school-based book clubs, school-based book fairs and most of its magazines operate on a school-year basis. Therefore, the Company’s business is highly seasonal. As a result, the Company’s revenues in the first and third quarters of the fiscal year generally are lower than its revenues in the other two fiscal quarters. Typically, school-based book club and book fair revenues are greatest in the second and fourth quarters of the fiscal year, while revenues from the sale of instructional materials and educational technology products are highest in the first and fourth quarters. The Company typically experiences losses from operations in the first and third quarters of each fiscal year. Due to the seasonal fluctuations that occur, the ~~February 29,~~August 31, 2008 Condensed Consolidated Balance Sheet is included for comparative purposes.

The Company’s Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Regulation S-X. The preparation of these financial statements involves the use of estimates and assumptions by management, which affects the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business factors, and various other assumptions believed to be reasonable under the circumstances, all of which are necessary in order to form a basis for determining the carrying values of assets and liabilities. Actual results may differ from those estimates and assumptions. On an ongoing basis, the Company evaluates the adequacy of its reserves and the estimates used in calculations, including, but not limited to: collectability of accounts receivable; sales returns; gross margin rates used to determine inventory values and gross profits for book fair operations during interim periods; amortization periods; stock-based compensation expense; pension and other post-retirement obligations; tax obligations; and recoverability of inventories, deferred ~~promotion costs, deferred~~ income ~~taxes and~~ tax ~~reserves,~~benefits, prepublication costs, royalty advances, and the fair value of goodwill and other intangibles.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. In February 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13,” and FSP No. FAS 157-2, “Effective Date of FASB Statement No. 157.” Collectively, these Staff Positions allow a one-year deferral of adoption of SFAS 157 for ~~nonfinancial~~non financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis and amend SFAS 157 to exclude FASB Statement No. 13 and its related interpretive accounting pronouncements that address leasing transactions.

The Company adopted SFAS 157 beginning June 1, 2008, except for non financial assets and liabilities measured at fair value on a non-recurring basis, for which ~~will be effective for~~ the Company adopted SFAS 157 on June 1, 2009. The impact of the ~~adoption~~adoptions on June 1, 2008 and June 1, 2009 was not material to the Company’s condensed consolidated financial statements. ~~The Company is currently evaluating the impact that the adoption of the deferred portion of SFAS 157 will have on its consolidated financial position, results of operations and cash flows.~~

SFAS 157 establishes a three-level hierarchy for fair value measurements to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below with Level 1 having the highest priority and Level 3 having the lowest.

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

The Company’s financial assets and liabilities measured at fair value on a recurring basis subject to the presentation requirements of SFAS 157 at ~~February 28,~~August 31, 2009 consisted of cash and cash equivalents, and foreign currency forward contracts, ~~neither of~~ which were not material as of the reporting date. Cash and cash equivalents are comprised of bank deposits and short-term investments, such as money market funds, the fair value of which is based on quoted market prices, a Level 1 fair value measure. The fair values of foreign currency forward contracts, used by the Company to manage the impact of foreign exchange rate changes to the financial statements, are based on quotations from financial institutions, a Level 2 fair value measure.

~~In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), to provide companies with an option to report selected~~Non financial assets and liabilities atfor which the Company employs fair ~~value. The objective~~value measures on a non-recurring basis include:


	●	long-lived assets when impaired under the provisions of SFAS 144,
	●	assets acquired in a business combination,
	●	goodwill and indefinite-lived intangible assets,
	●	long-lived assets held for sale,
	●	long-lived assets held and used,
	●	pension assets, and
	●	debt.

Level 2 and level 3 inputs will be employed by the Company in the fair value measurement of ~~SFAS 159 is to reduce both the complexity in accounting for financial instruments and the volatility in earnings caused by measuring related~~these assets and liabilities differently. SFAS 159 was effective for the Company beginning June 1, 2008. The Company has not elected to measure any financial assets and financial liabilities at fair value which were not previously required to be measured at fair value. Therefore, the adoption of this standard has had no impact on the Company’s consolidated financial position, results of operations and cash flows.liabilities.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

In December 2007, the FASB issued SFAS No. 141 (revised), “Business Combinations” (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer accounts for business combinations. SFAS 141R includes guidance for the recognition and measurement of the identifiable assets acquired, the liabilities assumed, and any non-controlling or minority interest in the acquiree. It also provides guidance for the measurement of goodwill, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies and acquisition-related transaction costs, and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS 141R applies prospectively and is effective for business combinations made by the Company beginning June 1, 2009. This pronouncement did not impact the Company in the current period.

In December ~~2007,~~2008, the FASB issued Staff Position FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP 132R-1”). FSP 132R-1 requires additional disclosure regarding investment allocations, major categories, valuation techniques and concentrations of risk related to plan assets held in an employer’s defined benefit pension or postretirement plan. FSP 132R-1 further requires disclosure of any effects of utilizing significant unobservable inputs as defined in SFAS No. ~~160, “Non-controlling Interests~~157, “Fair Value Measurements,” upon the overall change in ~~Consolidated Financial Statements, an amendment~~the fair value of ~~ARB~~the plan assets during the reporting period. FSP 132R-1 is effective for fiscal years ending after December 15, 2009.

In April 2009, the FASB issued FSP No. ~~51” (“SFAS 160”). SFAS 160 amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to establish accounting~~FAS 157-4, “Determining Fair Value When the Volume and ~~reporting standards for any non-controlling interest in a subsidiary and~~Level of Activity for the ~~deconsolidation~~Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP No. FAS 157-4”), which provides additional guidance for estimating fair value in accordance with SFAS No. 157, “Fair Value Measurements,” where the volume and level of ~~a subsidiary. SFAS 160 clarifies that a non-controlling interest in a subsidiary should be reported as a component~~activity for the asset or liability have significantly decreased. The FSP provides additional guidance on determining fair value when the volume and level of ~~equity in~~activity for the ~~consolidated financial statements and requires disclosure, on~~asset or liability have significantly decreased when compared with normal market activity for the ~~face~~asset or liability (or similar groups of ~~the consolidated statement of operations, of the amounts of consolidated net income attributable to the parent and to the non-controlled interest. SFAS 160~~assets or liabilities). FSP No. FAS 157-4 is effective for the Company ~~beginning~~for interim and annual reporting periods ending after June 1,15, 2009, and ~~is to be applied prospectively, except for~~applies prospectively. This pronouncement did not impact the presentation and disclosure requirements, which upon adoption will be applied retrospectively for all periods presented. The Company is currently evaluating the impact, if any, that SFAS 160 will have on itsCompany’s condensed consolidated financial position, results of operations and cash flows.

In ~~April 2008,~~August 2009, the FASB issued ~~FSP~~Accounting Standard Update No. ~~FAS 142-3, “Determination of the Useful Life of Intangible Assets”~~2009-05, “Fair Value Measurements and Disclosures - Measuring Liabilities at Fair Value” (“~~FAS 142-3”~~ASU No. 2009-05”). ~~FAS 142-3 amends the factors that should be considered~~The update provides clarification for circumstances in ~~developing renewal or extension assumptions used to determine the useful life of~~which a ~~recognized intangible asset under FASB Statement~~quoted price in an active market for an identical liability is not available. ASU No. ~~142, “Goodwill and Other Intangible Assets.” FAS 142-3~~2009- 05 is effective for ~~fiscal years~~the first reporting period beginning after December 15, 2008 and early adoption is prohibited. The Company is currently evaluating the impact, if any, that FAS 142-3 will have on its consolidated financial position, results of operations and cash flows.

In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP 03-6-1”), which classifies unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents as participating securities and requires them to be included in the computation of earnings per share pursuant to the two-class method described in SFAS No. 128, “Earnings per Share.” FSP 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. It requires all prior period earnings per share data presented to be adjusted retrospectively.August 2009. The Company is currently evaluating the effect, if any, that the adoption of ~~FSP 03-6-1~~ASU No. 2009-05 will have on its condensed consolidated financial position, results of operations and cash flows.

In September 2008, the FASB issued FSP No. 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 requires more extensive disclosure regarding potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows of sellers of credit derivatives. FSP 133-1 also amends FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require additional disclosure about the current status of the payment or performance risk of a guarantee. FSP 133-1 also clarifies the effective date of FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” by stating that the disclosures required should be provided for any reporting period (annual or quarterly interim) beginning after November 15, 2008. The adoption of FSP 133-1 did not impact the Company.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

2. Discontinued Operations

~~As previously announced,~~In fiscal 2008, the Company ~~sold its DTH business in August 2008 and~~determined to sell or shut down its ~~SC business (which, together with the DTH business, were formerly included in the Children’s Book Publishing~~domestic, Canadian and ~~Distribution segment) effective May 31, 2008, ceased operations at its direct-to-home continuity business in the United Kingdom (formerly included in the International Segment)~~UK continuities businesses, and intends to sell a related warehousing and distribution facility located in Maumelle, Arkansas (the “Maumelle Facility”) and an office and distribution facility in Danbury, Connecticut (the “Danbury Facility”). During fiscal 2009, the Company also ceased its ~~Maumelle Facility (formerly included~~operations in ~~Overhead).~~Argentina and Mexico, its door-to-door selling operations in Puerto Rico, its continuities business in Australia and New Zealand and its corporate book fairs business and closed its Scarsdale, NY store. The Company also ~~intends to complete the divestiture of its direct-to-home continuity business in Canada (formerly included in the International segment) in fiscal 2009. In the three months ended November 30, 2008,~~sold a trade magazine. Additionally, the Company ~~discontinued its subsidiary in Argentina, which served multiple distribution channels including book clubs, book fairs~~sold a non-core market research business and ~~trade, and its door-to-door encyclopedia sales business in Puerto Rico (both of which were formerly included in the International segment), as well as~~ a trade magazine (formerly included in the Media, Licensing and Advertising segment). Additionally, in the three months ended February 28, 2009, the Company shut down its Scarsdale, NY retail store and its book and gift fairs operation serving adult markets (both of which were formerly included in the Children’s Book Publishing and Distribution segment), and determined to sell annon-core on-line resource for teachers business and intends to sell a Spanish language book ~~channel (both~~channel. All of ~~which were formerly included in~~ the Educational Publishing segment), as well as its Danbury, CT distribution facility (formerly included in Overhead). During this period, in a separate transaction, the Company sold its QED business (formerly included in the Media, Licensing and Advertising segment). The results of operations associated with theseabove businesses are ~~presented~~classified as discontinued operations in the Company’s ~~Condensed Consolidated Financial Statements in fiscal 2009 and prior year periods.~~ financial statements.

The Company continues to monitor the expected cash proceeds to be realized from the disposition of discontinued operations assets, and adjusts asset values accordingly. ~~During the three months ended February 28, 2009, the Company recognized impairment charges related to discontinued operations of $19.6 pre-tax.~~

The Company continuously evaluates its portfolio of businesses for both impairment and economic viability. The Company did not cease any additional operations or classify any additional operations as “held for sale” during the three month period ended August 31, 2009.

The following table summarizes the operating results of the discontinued operations for the periods indicated:

Three months ended

Nine months ended

February 28,

February 29,

February 28,

February 29,

2009

2008

2009

2008

(Restated)

(Restated)

Revenues

$
6.8

$
58.0

$
64.3

$
187.3

Gain on sale

21.9

—

32.4

—

Non-cash impairment

(19.6
)

(103.2
)

(39.2
)

(103.2
)
Loss before income taxes

(1.7
)

(114.6
)

(27.1
)

(135.1
)
Income tax benefit

0.8

36.7

4.5

42.3

Loss from discontinued operations, net of tax

$
(0.9
)

$
(77.9
)

$
(22.6
)

$
(92.8
)


	Three months ended August 31,

	2009			2008

Revenues	$	1.3		$	43.1
Gain on sale		—			10.5
Earnings (loss) before income taxes		1.9			(15.2	)
Income tax (expense) benefit		(0.3	)		(1.5	)


Earnings (loss) from discontinued operations, net of tax	$	1.6		$	(6.2	)

The following table sets forth the assets and liabilities of the discontinued operations included in the Condensed Consolidated Balance Sheets of the Company as of the dates indicated:

February 28, 2009

May 31, 2008

February 29, 2008

(Restated)

Accounts receivable, net

21.3

30.6

54.8

Inventories, net

0.8

13.9

49.0

Other assets⁽¹⁾

18.5

41.8

61.9

Current assets of discontinued operations

$
40.6

$
86.3

$
165.7

Accounts payable and accrued expenses

16.3

21.2

39.5

Other liabilities

0.0

0.1

1.4

Current liabilities of discontinued operations

$
16.3

$
21.3

$
40.9


~~(1)~~	Cash from discontinued operations was $1.6, $3.1 and $9.4 for the periods ended February 28, 2009, May 31, 2008 and February 29, 2008, respectively. The cash in discontinued operations resides primarily in foreign subsidiaries, for which the Company is evaluating the repatriation.



	*August 31, 2009*			*May 31, 2009*			*August 31, 2008*

Accounts receivable, net			11.8			13.6			36.5
Inventories, net			0.7			0.8			11.5
Other assets			16.9			16.6			40.9

Current assets of discontinued operations		$	29.4		$	31.0		$	88.9

Accounts payable			1.2			2.2			13.0
Accrued expenses and other liabilities			4.8			5.1			8.0

Current liabilities of discontinued operations		$	6.0		$	7.3		$	21.0

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

3. Segment Information

The Company categorizes its businesses into four reportable segments:Children’s Book Publishing and Distribution; Educational Publishing; International; and Media, Licensing and Advertising ~~(which collectively represent the Company’s domestic operations)~~; ~~and~~ ~~International~~. This classification reflects the nature of products and services consistent with the method by which the Company’s chief operating decision-maker assesses operating performance and allocates resources. Revenues and operating margin related to a segment’s products sold or services rendered through another segment’s distribution channel are reallocated to the segment originating the products or services.

• Children’s Book Publishing and Distributionoperates as an integrated business which includes the publication and distribution of children’s books, media and interactive products in the United States through school-based book clubs and book fairs and the trade channel. This segment is comprised of three operating segments.

• Educational Publishingincludes the production and/or publication and distribution to schools and libraries of educational technology products, curriculum materials, children’s books, classroom magazines and print and on-line reference and non-fiction products for grades pre-kindergarten to 12 in the United States.

• ~~Media, Licensing and Advertising~~~~includes the production and/or distribution~~ This segment is comprised of media and electronic products and programs (including children’s television programming, videos, DVDs, software, feature films, interactive and audio products, promotional activities and non-book merchandise), and advertising revenue, including sponsorship programs.two operating segments.

• Internationalincludes the publication and distribution of products and services outside the United States by the Company’s international operations, and its export and foreign rights businesses. This segment is comprised of two operating segments.

~~The following tables set forth information~~•Media, Licensing and Advertisingincludes the production and/or distribution of media, merchandising and advertising revenue, including sponsorship programs and consumer promotions. This segment is comprised of three operating segments.

In the first quarter of fiscal 2010, the Company reclassified certain revenues and operating expenses formerly included in the Media, Licensing and Advertising segment to the Children’s Book Publishing and Distribution segment. This reclassification consists of revenues and operating expenses derived from sales of media and interactive products sold through the various channels employed by the Children’s Book Publishing and Distribution segment. This change in reporting is consistent with changes in the Company’s internal financial reporting structure, and reflects the chief operating decision maker’s assessment of performance and asset allocation. Prior period results have been reclassified for consistency with this change in reporting structure. Revenues and operating income of $0.6 and $0.3 for the ~~Company’s segments~~quarter ended August 31, 2009, and $0.8 and $0.3 for the ~~periods indicated~~quarter ended August 31, 2008, respectively, were reclassified and ~~reflect~~are now reported in the ~~Company’s continuing operations:~~Children’s Book Publishing and Distribution segment.

Children’s Book
Publishing and
Distribution⁽¹⁾

Educational
Publishing⁽¹⁾

Media,
Licensing and
Advertising⁽¹⁾

Overhead⁽¹⁾⁽²⁾

Total
Domestic

International⁽¹⁾

Total

Three months ended
February 28, 2009

Revenues

$
223.3

$
74.7

$
38.4

$
—

$
336.4

$
88.5

$
424.9

Bad debt

2.1

(0.2
)

0.0

0.0

1.9

0.5

2.4

Depreciation and amortization⁽³⁾

4.0

0.9

0.2

8.2

13.3

1.2

14.5

Amortization⁽⁴⁾

3.2

6.2

2.2

0.0

11.6

0.2

11.8

Royalty advances expensed

5.5

0.4

0.0

0.0

5.9

0.6

6.5

Operating income (loss)

12.6

0.9

1.4

(23.6
)

(8.7
)

(13.9
)

(22.6
)
Expenditures for long-lived assets

11.9

10.5

2.9

5.0

30.3

1.5

31.8

Three months ended
February 29, 2008

Revenues

218.3

76.5

38.6

0.0

333.4

107.0

440.4

Bad debt

1.5

0.6

0.0

0.0

2.1

1.0

3.1

Depreciation and amortization⁽³⁾

3.4

1.1

1.8

6.3

12.6

1.8

14.4

Amortization⁽⁴⁾

2.4

6.2

1.5

0.0

10.1

0.2

10.3

Royalty advances expensed

4.5

0.3

0.1

0.0

4.9

0.3

5.2

Operating income (loss)

14.0

(0.2
)

1.7

(17.0
)

(1.5
)

5.7

4.2

Expenditures for long-lived assets

17.1

10.4

0.9

3.9

32.3

2.8

35.1

~~SCHOLASTIC CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED~~

~~(Dollar amounts in millions, except per share data)~~


	Children’s Book Publishing and Distribution⁽¹⁾		Educational Publishing⁽¹⁾		Media, Licensing and Advertising⁽¹⁾		Overhead⁽¹⁾⁽²⁾			Total Domestic		International⁽¹⁾			Total		Children’s Book Publishing and Distribution⁽¹⁾			Educational Publishing⁽¹⁾		Media, Licensing and Advertising⁽¹⁾			Overhead⁽¹⁾⁽²⁾			Total Domestic			International⁽¹⁾			Total


Nine months ended February 28, 2009
Three months ended August 31, 2009


Revenues	$	664.2	$	280.8	$	114.9	$	—		$	1,059.9	$	299.1		$	1,359.0	$	76.2		$	148.7	$	15.1		$	—		$	240.0		$	75.6		$	315.6
Bad debt		6.5		1.0		0.3		0.0			7.8		3.3			11.1
Bad debt expense																		1.0			0.2		—			—			1.2			0.9			2.1
Depreciation and amortization⁽³⁾		12.2		2.9		0.7		24.9			40.7		4.7			45.4		3.3			0.9		0.2			8.8			13.2			1.5			14.7
Amortization⁽⁴⁾		8.7		16.8		5.7		0.0			31.2		1.3			32.5		2.5			6.8		2.2			—			11.5			0.6			12.1
Royalty advances expensed		17.7		0.9		0.4		0.0			19.0		2.7			21.7		5.1			0.2		0.1			—			5.4			1.5			6.9
Operating income (loss)		57.3		36.2		6.4		(73.6	)		26.3		(3.4	)		22.9
Operating (loss) income																		(47.5	)		41.3		(3.7	)		(23.5	)		(33.4	)		(1.9	)		(35.3	)
Segment Assets		543.0		319.1		58.4		463.2			1,383.7		229.8			1,613.5		512.3			393.7		65.5			410.0			1,381.5			259.9			1,641.4
Goodwill		38.2		88.4		5.8		0.0			132.4		8.6			141.0		54.3			88.4		5.8			—			148.5			8.5			157.0
Expenditures for long-lived assets		36.7		25.9		9.7		17.8			90.1		7.4			97.5		12.7			5.6		1.6			2.9			22.8			2.8			25.6
Long-lived Assets⁽⁵⁾		175.8		203.6		27.5		223.7			630.6		63.0			693.6		180.6			204.8		30.2			219.0			634.6			74.1			708.7



Nine months ended February 29, 2008

Three months ended August 31, 2008

Revenues		898.8		300.4		104.9		0.0			1,304.1		340.1			1,644.2		61.1			115.1		16.1			—			192.3			84.1			276.4
Bad debt		3.9		1.0		0.4		0.0			5.3		3.0			8.3
Bad debt expense																		—			0.5		(0.1	)		—			0.4			0.7			1.1
Depreciation and amortization⁽³⁾		11.3		2.4		2.9		22.5			39.1		5.5			44.6		6.2			1.3		0.1			6.3			13.9			1.8			15.7
Amortization⁽⁴⁾		8.8		18.3		4.6		0.0			31.7		1.3			33.0		2.6			5.3		1.5			—			9.4			0.6			10.0
Royalty advances expensed		16.7		0.9		0.4		0.0			18.0		1.9			19.9		4.6			0.3		0.1			—			5.0			1.0			6.0
Operating income (loss)		137.7		43.4		5.4		(55.6	)		130.9		29.7			160.6
Operating (loss) income																		(54.6	)		21.5		(4.8	)		(21.1	)		(59.0	)		(3.3	)		(62.3	)
Segment Assets		688.8		314.0		56.0		430.2			1,489.0		320.8			1,809.8		538.1			355.3		63.9			463.5			1,420.8			296.0			1,716.8
Goodwill		38.2		89.0		5.8		0.0			133.0		31.4			164.4		38.2			89.1		5.8			—			133.1			29.4			162.5
Expenditures for long-lived assets		40.7		22.1		8.3		13.8			84.9		11.2			96.1		10.7			5.6		3.5			5.5			25.3			3.1			28.4
Long-lived Assets⁽⁵⁾		180.0		193.3		25.9		231.8			631.0		117.3			748.3		176.0			202.3		25.5			229.6			633.4			109.9			743.3


(1)	~~As discussed~~During fiscal 2008, the Company determined to sell or shut down its domestic, Canadian and UK continuities businesses, and intends to sell the Maumelle Facility and the Danbury Facility. During fiscal 2009, the Company also ceased its operations in ~~Note 2, “Discontinued Operations”,~~Argentina and Mexico, its door-to-door selling operations in Puerto Rico, its continuities business in Australia and New Zealand and its corporate book fairs business and closed its Scarsdale NY store. The Company also sold a trade magazine. Additionally, the ~~Children’s Book Publishing~~Company sold a non-core market research business and ~~Distribution segment,~~a non-core on-line resource for teachers and intends to sell a Spanish language book channel. All of the ~~Educational Publishing segment, the Media Licensing and Advertising segment, the International segment and Overhead formerly included operations that were reclassified~~above businesses are classified as discontinued operations in the Company’s financial statements and, as such, are not reflected in this table.

(2)	Overhead includes all domestic corporate amounts not allocated to segments, including expenses and costs related to the management of corporate assets. Unallocated assets are principally comprised of deferred income taxes and property, plant and equipment related to the Company’s headquarters in the metropolitan New York area and its fulfillment and distribution facilities located in Missouri.

(3)	Includes depreciation of property, plant and equipment and amortization of intangible ~~assets, but excludes amortization of promotion costs.~~assets.

(4)	Includes amortization of prepublication costs and production ~~costs~~,~~but excludes amortization of promotion~~ costs.

(5)	Includes property, plant and equipment, prepublication costs, goodwill, other intangibles, royalty advances, production costs and long-term investments.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

4. Debt

The following table summarizes debt as of the dates indicated:



	August 31, 2009				May 31, 2009				August 31, 2008


Lines of Credit (weighted average interest rates of 2.9%, 3.3% and 4.1%, respectively)		$	13.4			$	10.9			$	63.0
Loan Agreement:
Revolving Loan (interest rate of 3.2% as of August 31, 2008)			—				—				40.0
Term Loan (interest rates of 1.2%, 1.2% and 3.3%, respectively)			125.1				135.8				167.9
5% Notes due 2013, net of discount			152.1				157.0				159.3



Total debt			290.6				303.7				430.2

Less lines of credit, short-term debt and current portion of long-term debt			(56.2	)			(53.7	)			(105.8	)


Total long-term debt		$	234.4			$	250.0			$	324.4

The following table sets forth the maturities of the Company’s debt obligations as of August 31, 2009 for the remainder of fiscal 2010 and thereafter:




Nine-month period ending May 31:
2010	$	45.5
Fiscal years ending May 31:
2011		42.8
2012		42.8
2013		159.5
2014		—
Thereafter		—


Total debt	$	290.6

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

~~4. Debt~~

~~The following table summarizes debt as of the dates indicated:~~

February 28, 2009

May 31, 2008

February 29, 2008

Lines of Credit

$
9.8

$
11.8

$
10.7

Loan Agreement:

Revolving Loan

—

—

—

Term Loan

146.5

178.6

189.3

5% Notes due 2013, net of discount

159.0

159.3

173.6

Total debt

315.3

349.7

373.6

Less lines of credit, short-term debt and current portion of long-term debt

(52.6
)

(54.6
)

(53.5
)

Total long-term debt

$
262.7

$
295.1

$
320.1

~~The following table sets forth the maturities of the Company’s debt obligations as of February 28, 2009 for the remainder of fiscal 2009 and thereafter:~~

2009

$
20.5

Fiscal years ending May 31:

2010

42.8

2011

42.8

2012

42.8

2013

166.4

Thereafter

—

Total debt

$
315.3

~~SCHOLASTIC CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED~~
~~(Dollar amounts in millions, except per share data)~~

Loan Agreement

On June 1, 2007, Scholastic Corporation and Scholastic Inc. (each, a “Borrower” and together, the “Borrowers”) ~~elected to replace the Company’s then-existing credit facilities with~~entered into a ~~new~~ $525.0 credit facility with certain banks (the “Loan Agreement”), consisting of a $325.0 revolving credit component (the “Revolving Loan”) and a $200.0 amortizing term loan component (the “Term Loan”). The Loan Agreement is a contractually committed unsecured credit facility that is scheduled to expire on June 1, 2012. The $325.0 Revolving Loan component allows the Company to borrow, repay or prepay and reborrow at any time prior to the stated maturity date, and the proceeds may be used for general corporate purposes, including financing for acquisitions and share repurchases. The Loan Agreement also provides for an increase in the aggregate Revolving Loan commitments of the lenders of up to an additional $150.0. The $200.0 Term Loan component was established in order to fund the reacquisition by the Corporation of shares of its Common Stock pursuant to an Accelerated Share Repurchase Agreement and was fully drawn on June 28, 2007 in connection with that transaction. The Term Loan, which may be prepaid at any time without penalty, requires quarterly principal payments of $10.7, with the first payment on December 31, 2007, and a final payment of $7.4 due on June 1, 2012.

Interest on both the Term Loan and Revolving Loan is due and payable in arrears on the last day of the interest period (defined as the period commencing on the date of the advance and ending on the last day of the period selected by the Borrower at the time each advance is made). At the election of the Borrower, the interest rate charged for each loan made under the Loan Agreement is based on (1) a rate equal to the higher of (a) the prime rate or (b) the prevailing ~~Federal Funds~~federal funds rate plus 0.500% or (2) an adjusted LIBOR rate plus an applicable margin, ranging from 0.500% to 1.250% based on the Company’s prevailing consolidated debt to total capital ratio. As of ~~February 28,~~August 31, 2009, the applicable margin of the Term Loan was 0.875% and the applicable margin on the Revolving Loan was 0.700%. The Loan Agreement also provides for the payment of a facility fee ranging from 0.125% to 0.250% per annum on the Revolving Loan only, which at ~~February 28,~~August 31, 2009 was 0.175%.

The fair value of the Loan Agreement approximates its carrying value due to its variable interest rate.

As of ~~February 28,~~August 31, 2009, ~~the Term Loan had an~~there was $0.5 of outstanding balance of $146.5, at an interest rate of 1.4%; at May 31, 2008 the Term Loan had an outstanding balance of $178.6 at an interest rate of 3.8%; and at February 29, 2008 the Term Loan had an outstanding balance of $189.3 at an interest rate of 4.0%. There were no outstanding borrowings under the Revolving Loan as of February 28, 2009, May 31, 2008 or February 29, 2008. As of February 28, 2009, standby letters of credit ~~outstanding~~issued under the Loan ~~Agreement totaled $0.5 million.~~Agreement. The Loan Agreement contains certain covenants, including interest coverage and leverage ratio tests and certain limitations on the amount of dividends and other distributions, and at ~~February 28,~~August 31, 2009 the Company was in compliance with these covenants.

5% Notes due 2013

In April 2003, Scholastic Corporation issued $175.0 of 5% Notes (the “5% Notes”). The 5% Notes are senior unsecured obligations that mature on April 15, 2013. Interest on the 5% Notes is payable semi-annually on April 15 and October 15 of each year through maturity. The Company may at any time redeem all or a portion of the 5% Notes at a redemption price (plus accrued interest to the date of the redemption) equal to the greater of (i) 100% of the principal amount, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest discounted to the date of redemption. ~~In fiscal~~

The fair value of the 5% notes was $130.1 as of August 31, 2009, $129.6 as of May 31, 2009 and $131.6 as of August 31, 2008, respectively. The fair value of the 5% notes was estimated based on market quotes, where available, or dealer quotes.

The Company repurchased $2.5 and $14.5 of the 5% Notes on the open ~~market.~~market in fiscal 2009 and 2008, respectively. For the ~~nine~~three months ended ~~February 28,~~August 31, 2009, the Company repurchased an additional ~~$0.5~~$5.0 of the 5% notes on the open ~~market.~~market for $4.1 million.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

Lines of Credit

~~During~~As of August 31, 2009, the ~~fourth quarter of fiscal 2008, the Company renewed~~Company’s domestic credit lines available under unsecured money market bid rate credit lines ~~totaling $50.0 that were originally entered into during the fourth quarter of fiscal 2007. At February 28, 2009 the Company’s credit lines available under these facilities aggregate $45.0.~~totaled $20.0. There were no outstanding borrowings under these credit lines at ~~February 28,~~August 31, 2009 and May 31, 2009. The credit lines had an outstanding balance of $37.8 as of August 31, 2008 ~~and February 29, 2008.~~at a weighted average interest rate of 2.9%. All loans made under these credit lines are at the sole discretion of the lender and at an interest rate and term, not to exceed ~~364~~180 days, agreed to at the time each loan is made.

As of ~~February 28,~~August 31, 2009, the ~~Company~~Company’s foreign operations had various local currency credit lines, with maximum available borrowings in amounts equivalent to ~~$35.9,~~$39.4, underwritten by banks primarily in the United States, Canada and the United Kingdom. These credit lines are typically available for overdraft borrowings or loans up to 364 days and may be renewed, if requested by the Company, at the sole option of the lender. There were borrowings outstanding under these international facilities equivalent to ~~$9.8~~$13.4 at ~~February 28,~~August 31, 2009 at a weighted average interest rate of ~~3.8%~~2.9%; ~~$11.8~~$10.9 at May 31, 2009 at a weighted average interest rate of 3.3%; and $25.2 at August 31, 2008 at a weighted average interest rate of ~~6.4%;~~5.9%.

The Company’s lines of credit carrying value approximates fair value as of August 31, 2009, May 31, 2009 and ~~$10.7~~August 31, 2008, respectively.

As of August 31, 2009 and May 31, 2009, the Company had open standby letters of credit of $7.4 issued under certain credit lines, as compared to $8.1 as of August 31, 2008. These letters of credit are scheduled to expire within one year; however, the Company expects that substantially all of these letters of credit will be renewed, at ~~February 29, 2008 at a weighted average interest rate of 7.5%.~~similar terms, prior to expiration.

SCHOLASTIC CORPORATION
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~
~~(Dollar amounts in millions, except per share data)~~

~~5. Comprehensive Income (Loss)~~

~~The following table sets forth comprehensive income (loss) for the periods indicated:~~

Three months ended

Nine months ended

February 28,

February 29,

February 28,

February 29,

2009

2008

2009

2008

(Restated)

(Restated)

Net loss

$
(36.0
)
$
(79.3
)
$
(42.0
)
$
(6.5
)

Other comprehensive (loss) income

Foreign currency translation adjustments

(6.6
)

6.6

(39.9
)

2.7

Retirement plans and post-retirement healthcare, net of tax

0.4

0.5

2.7

0.9

Comprehensive loss

$
(42.2
)
$
(72.2
)
$
(79.2
)
$
(2.9
)

~~SCHOLASTIC CORPORATION~~
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

5. Comprehensive Loss

The following table sets forth comprehensive loss for the periods indicated:

~~6. Earnings (loss)~~

Three months ended August 31,

2009

2008

Net loss

$
(23.0
)
$
(49.1
)

Other comprehensive income (loss)

Foreign currency translation adjustments

3.3

(12.0
)
Retirement plans and post-retirement healthcare, net of tax

0.5

0.7

Comprehensive loss

$
(19.2
)
$
(60.4
)

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

6. Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average Shares of Class A Stock and Common Stock outstanding during the period. Diluted earnings (loss) per share is calculated to give effect to potentially dilutive options to purchase Class A ~~Stock~~ and Common Stock and restricted stock units granted pursuant to the Company’s stock-based compensation plans that were outstanding during the period. In accordance with SFAS No. 128, “Earnings Per Share,” in a period in which the Company reports a discontinued operation, income (loss) from continuing operations is used as the “control number” in determining whether potentially dilutive common shares are dilutive or ~~antidilutive.~~anti-dilutive. The Company calculates per share figures prior to rounding in millions. The following table summarizes the reconciliation of the numerators and denominators for the basic and diluted earnings (loss) per share computation for the periods indicated:


	*Three months ended*						*Nine months ended*						Three months ended August 31,
	*February 28,*			*February 29,*			*February 28,*			*February 29,*
													2009			2008
	2009			2008			2009			2008
				(Restated)						(Restated)


(Loss) earnings from continuing operations	$	(35.1	)	$	(1.4	)	$	(19.4	)	$	86.3
Loss from discontinued operations, net of tax		(0.9	)		(77.9	)		(22.6	)		(92.8	)
Loss from continuing operations													$	(24.6	)	$	(42.9	)
Earnings (loss) from discontinued operations, net of tax														1.6			(6.2	)
Net loss		(36.0	)		(79.3	)		(42.0	)		(6.5	)		(23.0	)		(49.1	)
Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings per share (in millions)		36.9			38.4			37.5			38.9			36.4			37.9
Dilutive effect of Class A Stock and Common Stock potentially issuable pursuant to stock-based compensation plans (in millions)		—			—			—			0.5			*			*
Adjusted weighted average Shares of Class A Stock and Common Stock outstanding for diluted earnings per share (in millions)		36.9			38.4			37.5			39.4			*			*

(Loss) earnings per share of Class A Stock and Common Stock:
Basic (loss) earnings per share:
(Loss) earnings from continuing operations	$	(0.95	)	$	(0.03	)	$	(0.52	)	$	2.22
Loss from discontinued operations, net of tax	$	(0.03	)	$	(2.03	)	$	(0.60	)	$	(2.39	)
Loss from continuing operations													$	(0.68	)	$	(1.13	)
Earnings (loss) from discontinued operations, net of tax													$	0.05		$	(0.17	)
Net loss	$	(0.98	)	$	(2.06	)	$	(1.12	)	$	(0.17	)	$	(0.63	)	$	(1.30	)

Diluted (loss) earnings per share:
(Loss) earnings from continuing operations	$	(0.95	)	$	(0.03	)	$	(0.52	)	$	2.19
Loss from discontinued operations, net of tax	$	(0.03	)	$	(2.03	)	$	(0.60	)	$	(2.35	)
Loss from continuing operations													$	(0.68	)	$	(1.13	)
Earnings (loss) from discontinued operations, net of tax													$	0.05		$	(0.17	)
Net loss	$	(0.98	)	$	(2.06	)	$	(1.12	)	$	(0.16	)	$	(0.63	)	$	(1.30	)


*	In the three months ended August 31, 2009 and 2008, the Company experienced a loss from continuing operations and therefore did not reflect any dilutive share impact.

Potentially dilutive shares do not impact earnings per share as they are ~~antidilutive~~anti-dilutive due to losses in the three ~~and nine month periods~~months ended ~~February 28,~~August 31, 2009 and 2008, respectively. The number of potentially dilutive options with market prices exceeding exercise prices to purchase Class A and Common Stock and of restricted stock units excluded from the ~~three month period ended February 29, 2008. Antidilutive shares pursuant~~computation of diluted earnings per share, because they were anti-dilutive due to ~~stock-based compensation plans were 0.2 million, 0.5~~a loss from continuing operations, was approximately 0.1 million and 0.2 million for the three ~~month period~~months ended ~~February 28,~~August 31, 2009 ~~the three month period ended February 29,~~and 2008, ~~and the nine month period ended February 28, 2009~~ respectively. Options outstanding pursuant to compensation plans total ~~6.1~~6.4 million ~~at February 28,~~as of August 31, 2009.

~~In March~~During the three months ended August 31, 2009, the Company repurchased ~~234,169~~53,150 common shares for ~~$2.3~~approximately $1.0 pursuant to share buy-back programs authorized by the Board of Directors.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -– UNAUDITED

(Dollar amounts in millions, except per share data)

7. Goodwill and Other Intangibles

Goodwill and other intangible assets with indefinite lives are reviewed annually for impairment ~~annually~~ or more frequently if impairment indicators arise.

The following table summarizes the activity in Goodwill for the periods indicated:



	Three months ended August 31, 2009			Twelve months ended May 31, 2009				Three months ended August 31, 2008


Beginning balance		$	157.0		$	164.4			$	164.4
Impairment charge			—			(17.0	)			—
Deferred tax adjustment			—			16.1				—
Purchase adjustment			—			(0.7	)			—
Translation adjustment			—			(5.8	)			(1.9	)

Ending balance		$	157.0		$	157.0			$	162.5

At February 28, 2009, the total market value of the Company’s outstanding Common and Class A shares was less than the carrying value of the Company’s net assets. Due to the reduced total market value of the Company’s Common Stock, the Company evaluated the goodwill for its reporting units for impairment as of February 28, 2009. The Company employed internally developed discounted cash flow forecasts to determine the fair values of its reporting units, based upon the best available financial data. The Company concluded that goodwill associated with the Company’s United Kingdom operations was impaired as of February 28, 2009, and recognized a goodwill impairment of $17.0. Operating results in the United Kingdom have declined in recent periods. ~~No other reporting units have carrying values that exceeded estimated fair values as of February 28, 2009.~~ The ~~Company’s annual impairment test for goodwill is in the fourth quarter of the fiscal year, when the~~ Company ~~completes~~performed its annual ~~strategic planning and budget processes, and therefore the Company will also~~ test for goodwill impairment in the fourth quarter of fiscal 2009, and determined that no additional goodwill, other than the goodwill attributable to the UK operations previously mentioned, was impaired in the prior year. The Company did not experience any goodwill impairment indicators in the current ~~fiscal year.~~quarter.

The ~~following table summarizes~~purchase adjustments in fiscal 2009 are related to the ~~activity~~acquisition of a school consulting and professional development services company in ~~Goodwill for~~fiscal 2007. The deferred tax adjustment relates to a prior acquisition included in the ~~periods indicated:~~Children’s Book Publishing and Distribution segment.

Nine months ended
February 28, 2009

Twelve months ended
May 31, 2008

Nine months ended
February 29, 2008
(Restated)

Beginning balance

$
164.4

$
165.5

$
165.5

Other adjustments

(0.6
)

(1.2
)

(1.2
)

Goodwill impairment

(17.0
)

0.0

0.0

Foreign currency translation

(5.8
)

0.1

0.1

Total

$
141.0

$
164.4

$
164.4

The following table summarizes Other intangibles subject to ~~amortization at the dates indicated:~~amortization:



	*February 28, 2009*				*May 31, 2008*				*February 29, 2008*				Three months ended August 31, 2009				Twelve months ended May 31, 2009				Three months ended August 31, 2008


Customer lists		$	1.0			$	1.0			$	1.0			$	1.0			$	1.0			$	1.0
Additions															5.1				0.0				0.0
Accumulated amortization			(0.9	)			(0.8	)			(0.8	)			(0.9	)			(0.9	)			(0.8	)


Net customer lists		$	0.1			$	0.2			$	0.2			$	5.2			$	0.1			$	0.2


Other intangibles		$	8.7			$	8.7			$	4.1			$	8.4			$	8.4			$	8.7
Accumulated amortization			(5.8	)			(5.4	)			(3.2	)			(5.8	)			(5.6	)			(5.6	)


Net other intangibles		$	2.9			$	3.3			$	0.9			$	2.6			$	2.8			$	3.1


Total		$	3.0			$	3.5			$	1.1
Total other intangibles subject to amortization														$	7.8			$	2.9			$	3.3

During the ~~fourth~~first quarter of the current fiscal ~~2008~~year, the Company ~~reviewed~~and its ~~intangible assets with indefinite lives and determined that certain intangible assets not previously subject to amortization should begin being amortized as~~joint venture partner terminated a book distribution joint venture in the United Kingdom. As a result of that fiscal period. Accordingly, approximately $4.7 of Other intangibles reported as not subject to amortization as of February 29, 2008 are reported as Other intangibles subject to amortization as of February 28, 2009 and May 31, 2008. This reclassification was based onthis transaction, the ~~Company’s analysis~~Company received a portion of the ~~cash flows~~business and a related ~~to these assets.~~

~~Amortization expense for Other intangibles totaled $0.5 and $0.2~~customer list previously held by the joint venture, in exchange for the ~~nine month periods ended February 28, 2009~~forgiveness of amounts owed to the Company by the joint venture and ~~February 29, 2008, and $2.5 for~~related entities. Accordingly, the twelve months ended May 31, 2008. Amortization expense for these assets is currently estimated to total $0.6 for the fiscal years ending May 31, 2009 through 2011 and $0.5 for the fiscal years ending May 31, 2012 and 2013. Intangible assets with definite lives consist principally ofCompany recognized this customer ~~lists and covenants not to compete. Intangible assets with definite lives are amortized over their estimated useful lives. There were no impairments~~list in the current ~~period.~~period with a carrying value of $5.1.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -– UNAUDITED

(Dollar amounts in millions, except per share data)

Amortization expense for Other intangibles totaled $0.2 and $0.2 for the three months ended August 31, 2009 and 2008, respectively, and $0.7 for the twelve months ended May 31, 2009.

The following table summarizes Other intangibles not subject to amortization at the dates indicated:

				��

	*February 28, 2009*				*May 31, 2008*			*February 29, 2008*			August 31, 2009			May 31, 2009			August 31, 2008


Net carrying value by major class:
Titles		$	28.7			$	28.7		$	31.0		$	28.7		$	28.7		$	28.7
Trademarks and Other			15.2				15.2			17.6			15.2			15.2			15.3


Total		$	43.9			$	43.9		$	48.6		$	43.9		$	43.9		$	44.0

8. Investments

The Company owns non-controlling interests in a book distribution business ~~and related entities~~ located in the United Kingdom. Results of these operations have been negatively impacted by overall market conditions, and ~~accordingly,~~in fiscal 2009 the Company ~~has~~ determined that these assets are other than temporarily impaired. In the three month period ended February 28, 2009, the Company recorded ~~losses~~impairments on investments related to these operations of ~~$13.5, reducing~~$13.5. The Company’s aggregate carrying amount of cost method investments is $10.6, $10.6 and $19.9 for the ~~Company’s carrying~~periods ended August 31, 2009, May 31, 2009 and August 31, 2008, respectively. There were no events or changes in circumstances in the current period that have had an adverse effect on the fair value of these ~~assets to $9.0.~~investments.

9. ~~Pension and Other Post-Retirement Benefits~~Employee Benefit Plans

The following table sets forth components of the net periodic benefit costs under the Company’s cash balance retirement plan for its United States employees meeting certain eligibility requirements (the ~~“U. S.~~“U.S. Pension Plan”), the defined benefit pension plan of Scholastic Ltd., an indirect subsidiary of Scholastic Corporation located in the United Kingdom (the ~~“U. K.~~“UK Pension Plan”), the defined benefit pension plan of Grolier Ltd., an indirect subsidiary of Scholastic Corporation located in Canada (the “Canadian Pension Plan” and together with the U. S. Pension Plan and the ~~U. K.~~UK Pension Plan, the “Pension Plans”), and the post-retirement benefits, consisting of certain healthcare and life insurance benefits, provided by the Company to its retired United States-based employees, ~~consisting of certain healthcare and life insurance benefits,~~ including participants associated with both continuing operations and discontinued operations, for the periods indicated:

Pension Plans
Three months ended

Post-Retirement Benefits
Three months ended

February 28,

February 29,

February 28,

February 29,

2009

2008

2009

2008

Components of net periodic benefit costs:

Service cost

$
2.0

$
2.4

$
—

$
—

Interest cost

2.5

2.5

0.4

0.5

Expected return on assets

(2.8
)

(2.9
)

—

—

Net amortization of prior service (credit)

—

—

(0.2
)

(0.2
)
Amortization of loss

0.5

0.5

0.2

0.4

Net periodic benefit costs

$
2.2

$
2.5

$
0.4

$
0.7

Pension Plans
Nine months ended

Post-Retirement Benefits
Nine months ended

February 28,

February 29,

February 28,

February 29,

2009

2008

2009

2008

Components of net periodic benefit costs:

Service cost

$
6.0

$
6.7

$
0.1

$
0.1

Interest cost

7.6

7.5

1.1

1.4

Expected return on assets

(8.3
)

(8.7
)

—

—

Net amortization of prior service (credit)

(0.1
)

(0.1
)

(0.6
)

(0.6
)
Amortization of loss

1.4

1.5

0.5

1.1

Net periodic benefit costs

$
6.6

$
6.9

$
1.1

$
2.0

Pension Plans
Three months ended August 31,

Post-Retirement Benefits
Three months ended August 31,

2009

2008

2009

2008

Components of net periodic benefit costs:

Service cost

$
—

$
2.1

$
—

$
0.1

Interest cost

2.4

2.7

0.4

0.5

Expected return on assets

(2.0
)

(2.9
)

—

Net amortization of prior service credit

(0.1
)

(0.2
)

(0.2
)
Amortization of loss

1.1

0.5

0.2

0.2

Net periodic benefit costs

$
1.5

$
2.3

$
0.4

$
0.6

Effective June 1, 2009, the Company modified the U.S Pension Plan, such that no further benefits will accrue to employees under the plan. Accordingly, the Company recognized a curtailment loss of $0.5 associated with this action in fiscal 2009. This action was taken by the Company as a cost reduction measure.

Effective June 1, 2009, the Company modified the terms of the Post-Retirement Benefits, effectively excluding a large percentage of current employees from the plan. Under the plan amendments, only employees with 10 or more years of service to the Company and whose age plus service is at least 65 as of June 1, 2009 will be eligible to receive post-retirement benefits upon retirement. Accordingly, the Company recognized a $3.0 curtailment gain associated with this action in fiscal 2009, resulting from recognition of an unamortized prior service credit. This action was taken by the Company as a cost reduction measure.

~~SCHOLASTIC CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~(Dollar amounts in millions, except per share data)~~

The Company’s funding practice with respect to the Pension Plans is to contribute on an annual basis at least the minimum amounts required by applicable laws. ~~These contributions are intended to provide for future benefits earned to date and those expected to be earned in the future.~~ For the ~~nine~~three months ended ~~February 28,~~August 31, 2009, the Company contributed ~~$9.9~~$2.9 to the ~~U. S.~~U.S. Pension ~~Plan, the U. K. Pension Plan and the Canadian Pension Plan in the aggregate.~~ Plan.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The Company expects, based on actuarial calculations, to contribute cash of approximately ~~$14.5~~$12.3 to the U.S. Pension Plan, the UK Pension Plan and the Canadian Pension Plan in the aggregate ~~to the Pension Plans in~~for the fiscal year ending May 31, ~~2009.~~2010.

10. Stock-Based Compensation

The following table summarizes stock-based compensation included in Selling, general and administrative expenses for the periods indicated:


	*Three months ended*				*Nine months ended*
	*February 28,*		*February 29,*		*February 28,*		*February 29,*		Three months ended August 31,

	2009		2008		2009		2008		2009		2008

Stock option expense	$	1.5	$	1.1	$	4.3	$	3.0	$	1.8	$	1.5
Restricted stock unit expense^(a)		1.0		0.8		4.7		1.7
Restricted stock unit expense										3.0		0.6
Management stock purchase plan										—		—
Employee stock purchase plan expense		0.1		0.2		0.4		0.4		0.1		0.1

Total stock-based compensation	$	2.6	$	2.1	$	9.4	$	5.1	$	4.9	$	2.2

~~(a) Restricted stock unit expense for~~During each of the ~~nine~~three months ended ~~February 28,~~August 31, 2009 ~~includes $2.2 million due to the accelerated vesting of units for employees eligible for retirement pursuant to such plans~~

~~During the three month periods ended February 28, 2009~~ and ~~February 29,~~ 2008, shares of Common Stock issued by the Corporation pursuant to its stock-based compensation plans were not material.

11. Accrued Severance

During fiscal ~~year~~ 2009, the Company initiated certain cost reduction measures, including employee headcount reductions. The table below ~~table~~ provides information regarding severance costs appearing on the Company’s Condensed Consolidated Statements of Operations associated with these cost reduction measures. ~~The below accrual~~Accrued severance of ~~$2.9~~$1.4 as of ~~February 28,~~August 31, 2009 and $3.4 as of May 31, 2009 is included in Other accrued expenses on the Company’s Condensed Consolidated Balance Sheets.


	Nine months ended February 28, 2009				Three months ended August 31, 2009				Twelve months ended May 31, 2009

Balance at May 31, 2008		$	0.4
Beginning balance						$	3.4		$	0.4
Accruals			19.8				4.3			23.9
Payments			(17.3	)			(6.3	)		(20.9	)

Balance at February 28, 2009		$	2.9
Ending balance						$	1.4		$	3.4

12. Treasury Stock

On May 28, 2008, the Company announced that its Board of Directors had authorized a new program to repurchase up to $20.0 of Common Stock as conditions allow, on the open market or through negotiated private transactions. On November 20, 2008, the Board of Directors authorized a further program to repurchase up to an additional $10.0 of its Common Stock and, on February 4, 2009, the Board of Directors authorized an additional program to repurchase up to another $5.0 of its Common Stock, ~~which will~~to be funded with available cash, pursuant to which the Company ~~may~~could purchase shares, from time to time as conditions allow, on the open market. The repurchase program may be suspended at any time without prior notice. During the ~~nine~~three months ended ~~February 28,~~August 31, 2009, the Company repurchased ~~approximately 1.7 million~~53,150 shares on the open market for ~~$31.6~~approximately $1.0 at an average cost of ~~$18.56~~$19.36 per share. As of August 31, 2009, approximately $0.1 remained of the current authorization and therefore the program is virtually completed. See Part II, “Other Information, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.”

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

13. Income Taxes

The Company calculates its interim income tax provision in accordance with Accounting Principles Board Opinion No. 28, “Interim Financial Reporting,” and FASB Interpretation No. 18, “Accounting for Income Taxes in Interim Periods” (“FIN 18”). In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known and applies that rate to its ordinary year to date earnings or losses. The Company’s effective tax rate is based on expected income and statutory tax rates and ~~factors~~takes into consideration permanent differences between financial statement and tax return income applicable to the Company in the various jurisdictions in which the Company operates. The effect of discrete items, such as changes in estimates, changes in enacted tax laws or rates or tax status, and unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the result of new judicial interpretations or regulatory or tax law changes.

The Company anticipates a full fiscal year tax rate ~~of approximately 43%~~ranging between 40% and 42% for continuing operations for the current fiscal year, exclusive of ~~expected~~ discrete items. ~~Inclusive of discrete items, the Company expects a full year effective tax rate of approximately 77%.~~ The Company’s expected full year effective tax rate excluding discrete items exceeds statutory rates primarily as a result of net operating losses ~~experienced~~ in foreign ~~operations, primarily~~jurisdictions, mainly in the ~~United Kingdom, for which~~UK, where the Company does not expect to realize future tax benefits. ~~Accordingly,~~As a result, valuation allowances are provided for the net operating loss carry forwards ofin these operations. The high expected full year tax rate inclusive of discrete items is primarily due to goodwill impairments and losses on investments occurring in the current quarter in the United Kingdom, where the Company does not expect to realize any associated tax benefits for these charges.jurisdictions. Due to the seasonality of the Company’s operations and discrete items, current period effective tax rates are not meaningful.

In the current year, the Company completed the sale of the DTH business (see Note 3, “Discontinued Operations”). In fiscal 2008, the Company recognized significant pretax losses and deferred tax benefits associated with this transaction. The Company expects to realize a significant portion of these deferred tax assets in the current fiscal year, reducing the Company’s domestic taxable income to levels significantly below the expected pretax income levels. Accordingly, the Company expects reduced federal and state tax payments in the current fiscal year as a result of the realization of these deferred tax assets, and expects a significant reduction in deferred tax assets at the end of the current fiscal year. The Company expects to realize future tax benefits on all domestic net operating losses generated in the current fiscal year.

The Company recognizes tax benefits of uncertain tax positions in accordance with FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). The Company does not currently anticipate a material change to its unrecognized tax benefits within twelve months of ~~February 28,~~August 31, 2009; however, actual developments can change these expectations, including settlement of audits.

The Corporation, including its domestic subsidiaries, files a consolidated U.S. income tax return, and also files tax returns in various states and other local jurisdictions. Also, certain subsidiaries of the Corporation file income tax returns in foreign jurisdictions. The Company is routinely audited by various tax authorities. The Company ~~believes it~~ is ~~no longer subject to~~currently engaged in an ~~income tax assessment by the United States Internal Revenue Service (“IRS”)~~IRS examination for the ~~years ended on or before May 31, 2003 due to the expiration of the statute of limitations. The Company has been selected for audit by the IRS for its~~ fiscal years ended May 2003, 2004, 2005 and 2006. The Company is also currently under audit by both New York State and New York City for its fiscal years ended May 2002, 2003 and 2004. It is possible that federal, state and foreign tax examinations will be settled during the next twelve months. If any of these tax examinations are ~~concluded~~settled within that period, the Company will make any necessary adjustments to its unrecognized tax benefits.

14. ~~Related Party Transactions~~

On October 10, 2008, the Company agreed to purchase 100,000 shares of Common Stock from Richard Robinson, Chairman of the Board, President and Chief Executive Officer of the Company, at a price of $20.59 per share, or an aggregate purchase price of $2.1, pursuant to the Company’s previously announced stock repurchase program which had been approved by the Board in May 2008. The purchase price was determined with reference to the last transaction price reported on NASDAQ immediately prior to the purchase. The closing price of the Common Stock on NASDAQ on October 10, 2008 was $23.11 per share. The shares became available for sale due to Mr. Robinson, as a result of current market conditions, being required to sell the shares in order to protect the collateral value underlying a personal loan with a bank secured by the shares. The aforementioned transaction was approved by the Board and Audit Committee.

~~15.~~ Subsequent Event

On ~~March 26,~~September 23, 2009, the Company announced that the Board had declared a quarterly dividend of $0.075 per share ~~to be paid~~payable on ~~June~~December 15, 2009 to shareholders of record of the Corporation’s Common Stock and Class A Stock ~~on April~~as of October 30, 2009.

~~SCHOLASTIC CORPORATION~~

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)~~

~~Overview and Outlook~~

~~The Company incurred a loss from continuing operations, net~~Subsequent events have been evaluated through October 2, 2009, which is the filing date of ~~tax,~~the Company’s report with the SEC for the quarter ended February 28, 2009 of $35.1 million compared to a loss of $1.4 million in the quarter ended February 29, 2008. The loss from continuing operations in the current fiscal quarter was higher primarily due to a $17.0 million charge for goodwill impairment relating to the Company’s operations in the U.K., a $13.5 million charge for unrealized losses on investments in the U.K., one-time expenses of $4.8 million associated with the Company’s cost reduction plans, higher promotional costs in the Book Clubs channel and lower results from the Company’s operations in the U.K.

During the third quarter of fiscal 2009, the Company maintained a strong balance sheet and free cash flow. Additionally, in the face of continued declines in consumer retail spending, the Company successfully sustained revenues last quarter in its market-leading children’s book and educational technology businesses. In the~~Children’s Books Publishing and Distribution~~ segment, revenue increased benefiting from strong Trade performance, including the ground-breaking multiplatform series The 39 Clues, as well as solid order volumes in School Book Clubs and higher revenue per fair in School Book Fairs. In Education, double-digit growth in sales of educational technology was led by the Company’s reading intervention programs, including the market-leading READ 180® and the newly launched product-line extension, System 44™, partially offset by lower library publishing revenues.

The Company continued working towards its goal of 9 to 10% operating margins and has implemented additional cost reduction plans in the second half of fiscal 2009 of $20 million, eliminating management bonuses and curtailing discretionary spending, including consulting, travel and entertainment, training and sales conferences, which follows $35 million in annualized reductions in the first half of the year. The Company also intends to continue to review existing unprofitable businesses to determine whether the Company should exit such businesses.

At February 28, 2009, the total market value of the Company’s outstanding Common and Class A shares was less than the carrying value of the Company’s net assets. The Company concluded that goodwill associated with the Company’s United Kingdom operations was impaired as of February 28, 2009, and recognized a goodwill impairment of $17.0 million. Operating results in the United Kingdom have declined in recent periods, as previously reported. No other reporting units have carrying values that exceeded estimated fair values as of February 28,August 31, 2009. Also in the United Kingdom, the Company recognized an unrealized loss on investments in a book distribution business and related entities of $13.5 million in the current quarter. The Company continues to have significant available liquidity and capital resources, and believes that the long term prospects of its businesses remain unchanged. The Company believes that the recent decline in the market value of the Company’s outstanding shares is not indicative of the Company’s expected long-term cash flows of its core businesses, and is a function of the current condition of the capital markets. Accordingly, the Company does not believe that the recent decline in share price is reflective of declines in its businesses. However, the Company will continue to monitor its asset base for further indicators of impairment.

The Company sold its DTH Business in August 2008, ceased operations in its direct-to-home business located in the United Kingdom as of February 28, 2009, expects to complete the divestiture of its direct-to-home continuities business in Canada and sell the Maumelle facility in the current fiscal year. In addition to the foregoing, during the six months ended February 28, 2009, the Company determined to exit certain other unprofitable, non-core businesses or operations as detailed in Note 2, “Discontinued Operations,” which operations have been or are in the process of being sold or shut down. Also, in a separate transaction during the three months ended February 28, 2009, the Company sold Quality Education Data (“QED”), a non-core business which markets databases serving the school market, for proceeds of $29.0, resulting in a pre-tax profit of $21.9.The Company took the foregoing actions as part of its plan to improve short-term and long-term profitability, and focus on its core businesses. The loss from discontinued operations, net of tax, for the quarter ended February 28, 2009 was $0.9 million, compared to a loss of $77.9 million for the quarter ended February 29, 2008. The current year quarter reflects the sale of a non-core business which resulted in the above mentioned gain, while the prior year reflects asset write-downs related to the Company’s decision to exit the Direct to Home continuities business.

The Board of Directors has declared a quarterly cash dividend of $0.075 per share on the Corporation’s Class A and Common Stock for the fourth quarter of fiscal 2009. Additionally, the Corporation continues to repurchase shares of its Common Stock from time to time under current programs approved by the Board.

~~Results of Continuing Operations~~

Revenues for the quarter ended February 28, 2009 decreased by $15.5 million, or 3.5%, to $424.9 million, compared to $440.4 million in the prior fiscal year quarter. This was due to a $21.8 million impact resulting from foreign exchange in the quarter, partially offset by higher revenues in the~~Children’s Book Publishing and Distribution~~ segment of $5.0 million. For the nine months ended February 28, 2009, revenues decreased by $285.2 million, or 17.3%, to $1,359.0 million, compared to $1,644.2 million in the prior fiscal year period, primarily due to lower revenues from the~~Children’s Book Publishing and Distribution~~ ~~segment, which in the prior year benefited from the July 2007 release of~~~~Harry Potter and the Deathly Hallows~~.

Cost of goods sold as a percentage of revenue for the quarter ended February 28, 2009 increased to 50.4%, compared to 49.0% in the prior fiscal year quarter, primarily due to increased revenues in the current quarter associated with the release of J.K. Rowling’s~~The Tales of Beedle the Bard~~ ~~that do not have a correlating impact on operating income, as profits from~~~~The Tales of Beedle the Bard~~ benefit Ms. Rowling’s charity. For the nine months ended February 28, 2009, cost of goods sold decreased to $643.2 million, or 47.3% of revenues, compared to $800.3 million, or 48.7% of revenues, in the prior fiscal year period, primarily due to higher costs related to the Harry Potter release in the prior fiscal year period.

Selling, general and administrative expenses decreased $7.2 million to $193.7 million for the quarter ended February 28, 2009, compared to $200.9 million in the prior fiscal year quarter. Selling, general and administrative expenses as a percentage of revenue remained flat at 45.6% for both fiscal year periods. This decrease was due to lower employee related costs related to cost reduction plans. For the nine months ended February 28, 2009, selling, general and administrative expenses as a percentage of revenues increased to 44.1% from 38.0% in the prior fiscal year period, primarily due to the prior year benefit of Harry Potter revenues without a corresponding increase in expense and the current year acceleration of restricted stock units.

Bad debt expense decreased to $2.4 million for the quarter ended February 28, 2009, compared to $3.1 million in the prior fiscal year quarter. For the nine months ended February 28, 2009, bad debt expense increased to $11.1 million from $8.3 million in the prior fiscal year period due to increased bad debt reserves in the~~Children’s~~~~Book Publishing and Distribution~~ ~~segment, primarily for the Trade channel.~~

Severance expense increased to $5.8 million, or 1.4% of revenues, including $4.8 million related to the Company’s cost reduction actions, for the quarter ended February 28, 2009, compared to $1.8 million, or 0.4% of revenues, in the prior fiscal year quarter. For the nine months ended February 28, 2009, severance expense increased to $19.8 million, or 1.5% of revenues, from $5.2 million, or 0.3% of revenues, in the prior fiscal year period. These increases were primarily the result of expenses incurred related to cost reduction plans.

SCHOLASTIC CORPORATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

InOverview and Outlook

The Company’s first quarter is generally its smallest revenue period as most schools are not in session, resulting in a seasonal loss. Despite this seasonality, as a result of a strong first quarter, the net loss for the quarter ended ~~February 28,~~August 31, 2009 was significantly reduced to $23.0 million compared to a net loss of $49.1 million in the fiscal quarter ended August 31, 2008.

Accordingly, the Company ~~recorded~~is on plan to achieve significantly higher earnings and free cash flow in fiscal 2010, and if it reaches the high end of its guidance range, to achieve its goal of 9% operating margins. In particular, the Educational Publishing segment had a ~~non-cash charge for impairment~~record quarter, with technology sales up more than 50% over the prior year as a result of ~~goodwill~~strong execution, new products and adoptions, and the arrival of federal stimulus funds in local districts. Trade sales of the Company’s children’s books rose by 25%, driven by best-selling series including The 39 Clues^®and Harry Potter^®.

The Company continued to aggressively manage cost, sustaining last year’s reductions. Selling, general and administrative expenses were generally flat. Lower payroll, travel and consulting expenses were offset by higher variable costs resulting from increased education revenues as well as increased stock compensation expense. The Company continues to experience difficulties in its ~~U.K. business~~UK operations and expects to restructure these operations in the current fiscal year.

The Company has strengthened its balance sheet by carefully controlling working capital and by generating substantial free cash flow over the past twelve months, while continuing to invest in core operations.

Results of ~~$17.0 million.~~Continuing Operations

Revenues for the quarter ended August 31, 2009 increased by $39.2 million, or 14.2%, to $315.6 million, compared to $276.4 million in the prior fiscal year quarter. This was due to higher revenues in theEducational Publishing andChildren’s Book Publishing and Distribution segments of $33.6 million and $15.1 million, respectively, partially offset by lower revenues in theInternationalandMedia, Licensing and Advertising segments of $8.5 million and $1.0 million, respectively.

Cost of goods sold as a percentage of revenue for the quarter ended August 31, 2009 decreased to 49.5%, compared to 52.8% in the prior fiscal year quarter, primarily due to growth in higher margin education technology sales.

Selling, general and administrative expenses as a percentage of revenue decreased to 55.0%, compared to 62.5% in the prior fiscal year quarter, primarily resulting from the higher revenues as well as reduced spending due to the implementation of cost cutting measures, partially offset by an increase in commission expense related to the higher education technology sales as well as higher stock compensation expense.

Bad debt expense increased to $2.1 million for the quarter ended August 31, 2009, compared to $1.1 million in the prior fiscal year quarter, primarily in theChildren’s Book Publishing and Distribution segment.

Severance expense increased to $4.3 million for the quarter ended August 31, 2009, compared to $3.0 million in the prior fiscal year quarter, as the Company continued to implement its cost reduction plans.

The resulting operating loss for the quarter ended ~~February 28,~~August 31, 2009 was ~~$22.6~~$35.3 million, compared to ~~operating income of $4.2~~$62.3 million in the prior fiscal year quarter.

Net interest expense decreased to $3.9 million in the quarter ended August 31, 2009, compared to $5.9 million in the prior fiscal year quarter, ~~primarily~~ due to lower borrowings and lower interest rates.

The loss from continuing operations was $24.6 million, or $0.68 per share, for the ~~non-cash charge associated with~~quarter ended August 31, 2009, compared to a loss of $42.9 million, or $1.13 per share, in the ~~Company’s U.K. goodwill impairment,~~prior fiscal year quarter.

The income from discontinued operations, net of tax, was $1.6 million, or $0.05 per share, for the quarter ended August 31, 2009, compared to a loss of $6.2 million, or $0.17 per share, in the prior fiscal year quarter. Prior period losses reflect higher severance and ~~related expenses associated with~~

SCHOLASTIC CORPORATION

Item 2. MD&A

impairment charges. Current period income reflects favorable accounts receivable collections without the ~~Company’s cost reduction plans~~higher level of offsetting charges.

The net loss was $23.0 million, or $0.63 per share, for the quarter ended August 31, 2009, compared to a net loss of $49.1 million, or $1.30 per share, in the prior fiscal year quarter.

Results of Continuing Operations – Segments

Children’s Book Publishing and ~~unfavorable foreign exchange rates. For~~Distribution


($ amounts in millions)	Three months ended August 31,

	2009			2008


Revenues	$	76.2		$	61.1
Operating loss		(47.5	)		(54.6	)


Operating margin			*			*

* Not meaningful

Revenues in the ~~nine months~~Children’s Book Publishing and Distribution segment for the quarter ended ~~February 28,~~August 31, 2009 ~~operating income decreased~~increased by $15.1 million, or 24.7%, to ~~$22.9~~$76.2 million, compared to ~~$160.6 million in the prior year, primarily due to lower Harry Potter revenues and profits, higher severance expense, and the U.K. goodwill impairment in the current period.~~

~~Net interest expense decreased to $5.6 million in the quarter ended February 28, 2009, compared to $6.0~~$61.1 million in the prior fiscal year quarter. ~~For~~This improvement was due to an increase in revenues in the ~~nine months~~Company’s trade business in the first fiscal quarter of 2010, driven by the release ofHarry Potter and the Deathly Hallowspaperback book and boxed sets of the series as well as higher sales of the multi platform series The 39 Clues^®. School book clubs and book fairs have minimal activity in the Company’s first fiscal quarter, as most schools are not in session.

Segment operating loss for the quarter ended ~~February 28,~~August 31, 2009 ~~net interest expense~~ decreased by ~~$5.9~~$7.1 million, or 13.0%, to ~~$18.5~~a loss of $47.5 million, as compared to ~~$24.4~~a loss of $54.6 million in the prior fiscal year ~~period,~~quarter, principally due to the increase in revenues as well as reduced overhead expenses in the segment, driven by ~~lower borrowing levels and favorable interest rates.~~previously implemented cost reduction initiatives.

InEducational Publishing


($ amounts in millions)	Three months ended August 31,

	2009			2008


Revenues	$	148.7		$	115.1
Operating income		41.3			21.5


Operating margin		27.8	%		18.7	%

Revenues in the ~~quarter ended February 28, 2009, the Company recorded non-cash unrealized losses on investments in a U.K. book distribution business and related entities of $13.5 million.~~

~~The loss from continuing operations was $35.1 million, or $0.95 per diluted share,~~Educational Publishingsegment for the quarter ended ~~February 28,~~August 31, 2009 increased by $33.6 million, or 29.2%, to $148.7 million, compared to ~~a loss of $1.4~~$115.1 million ~~or $0.03 per diluted share,~~ in the prior fiscal year quarter. ~~For~~This increase was principally driven by higher sales of education technology products of approximately $35 million, due to improved sales and marketing execution, new product launches, including System 44, and new adoptions, in particular the ~~nine months~~California adoption of READ180 and System 44, as well as the impact of the federal economic stimulus funding for education, which began to reach school districts in the first quarter.

Segment operating income for the quarter ended ~~February 28,~~August 31, 2009 ~~the loss from continuing operations was $19.4~~increased by $19.8 million ~~or $0.52 per diluted share,~~to $41.3 million, compared to ~~earnings from continuing operations of $86.3~~$21.5 million ~~or $2.19 per diluted share,~~ in the prior fiscal year ~~period.~~

~~The loss~~quarter, principally driven by the increase in revenues from discontinued operations, net of tax, was $0.9 million, or $0.03 per diluted share, for the quarter ended February 28, 2009, compared to a loss of $77.9 million, or $2.03 per diluted share, in the prior fiscal year quarter. For the nine months ended February 28, 2009, the loss from discontinued operations, net of tax, was $22.6 million, or $0.60 per diluted share, compared to a loss of $92.8 million, or $2.35 per diluted share, in the prior fiscal year period.

The net loss was $36.0 million, or $0.98 per diluted share, for the quarter ended February 28, 2009, compared to $79.3 million, or $2.06 per diluted share, in the prior fiscal year quarter. For the nine months ended February 28, 2009, the net loss was $42.0 million, or $1.12 per diluted share, compared to $6.5 million, or $0.16 per diluted share, in the prior fiscal year period.education technology sales.

SCHOLASTIC CORPORATION

Item 2. MD&A

~~Results of Continuing Operations - Segments~~

~~Children’s Book Publishing and Distribution~~International

Three months ended

Nine months ended

($ amounts in millions)

February 28,

February 29,

February 28,

February 29,

2009

2008

2009

2008

Revenues

$
223.3

$
218.3

$
664.2

$
898.8

Operating income

12.6

14.0

57.3

137.7

Operating margin

5.6
%

6.4
%

8.6
%

15.3
%
~~Revenues in the~~~~Children’s Book Publishing and Distribution~~ segment for the quarter ended February 28, 2009 increased by $5.0 million, or 2.3%, to $223.3 million, compared to $218.3 million in the prior fiscal year quarter. This improvement was due to an increase in revenues in the Company’s trade business related to higher front list revenues from the release of~~The Tales of Beedle the Bard~~ ~~and~~~~The 39 Clues~~ ~~in the current period partially offset by lower revenues in school book clubs and school book fairs. The higher revenues in the current quarter associated with the release of~~~~The Tales of Beedle the Bard~~ ~~do not have a correlating impact on operating income, as profits from~~~~The Tales of Beedle the Bard~~ benefit charity. The revenue decline in school book clubs was primarily due to lower revenue per order partially offset by an increase in order volume. The decline in school book fairs was primarily due to lower revenue from clearance sales. Revenues for the nine months ended February 28, 2009 decreased by $234.6 million to $664.2 million, compared to $898.8 million in the prior fiscal year period. This decrease was due to the unprecedented success of~~Harry Potter and the Deathly Hallows,~~ ~~the seventh and final book in the series, in the prior year, which included approximately $260 million of Harry Potter revenues.~~
Segment operating income for the quarter ended February 28, 2009 decreased by $1.4 million, or 10.0%, to $12.6 million, compared to $14.0 million in the prior fiscal year quarter, principally due to increased promotional costs in school book clubs and higher royalty expense in the Company’s trade business, partially offset by improved results in school book fairs. Segment operating income for the nine months ended February 28, 2009 declined by $80.4 million to $57.3 million, compared to $137.7 million in the prior fiscal year period, primarily due to lower operating results in the Company’s trade business related to the prior year’s release of~~Harry Potter and the Deathly Hallows.~~
~~Educational Publishing~~

Three months ended

Nine months ended

($ amounts in millions)

February 28,

February 29,

February 28,

February 29,

2009

2008

2009

2008

Revenues

$
74.7

$
76.5

$
280.8

$
300.4

Operating income (loss)

0.9

(0.2
)

36.2

43.4

Operating margin

1.2
%

*

12.9
%

14.4
%
     * Not meaningful
~~Revenues in the~~~~Educational Publishing~~segment for the quarter ended February 28, 2009 decreased by $1.8 million, or 2.4%, to $74.7 million, compared to $76.5 million in the prior fiscal year quarter. The revenue decline was due to lower classroom and library publishing revenues, partially offset by higher sales of technology products. Technology products were positively impacted by the release of System 44 in the current quarter. Segment revenues for the nine months ended February 28, 2009 decreased by $19.6 million, or 6.5%, to $280.8 million, compared to $300.4 million in the prior fiscal year period. This decrease was principally driven by lower revenues from sales of technology products, primarily due to lower sales of ~~READ180in the first quarter of fiscal 2009.~~
Segment operating income for the quarter ended February 28, 2009 increased to $0.9 million, as compared to an operating loss of $0.2 million in the prior fiscal year quarter, principally driven by lower selling expenses, more than offsetting the impact of lower revenues in the current fiscal year quarter. Segment operating income for the nine months ended February 28, 2009 decreased by $7.2 million, or 16.6%, to $36.2 million, compared to $43.4 million in the prior fiscal year period. This decrease is primarily due to lower revenues partially offset by lower selling expenses.

~~SCHOLASTIC CORPORATION~~
~~Item 2. MD&A~~
~~Media, Licensing and Advertising~~

Three months ended

Nine months ended

($ amounts in millions)

February 28,

February 29,

February 28,

February 29,

2009

2008

2009

2008

Revenues

$
38.4

$
38.6

$
114.9

$
104.9

Operating income

1.4

1.7

6.4

5.4

Operating margin

3.6
%

4.4
%

5.6
%

5.1
%
~~Revenues in the~~ ~~Media, Licensing and Advertising~~ segment for the quarter ended February 28, 2009 slightly decreased to $38.4 million, compared to $38.6 million in the prior fiscal year quarter, primarily due to lower revenues in Back To Basics Toys®, the Company’s catalog toy business. Segment revenues for the nine months ended February 28, 2009 increased by $10.0 million, or 9.5%, to $114.9 million, compared to $104.9 million in the prior fiscal year period, primarily due to higher revenues from sales of software and interactive products, as well as higher advertising revenue in the custom publishing business.,
Segment operating income for the quarter ended February 28, 2009 decreased to $1.4 million, compared to $1.7 million in the prior fiscal year quarter, primarily due to the lower revenues. Segment operating income for the nine months ended February 28, 2009 increased by $1.0 million, or 18.5%, to $6.4 million, compared to $5.4 million in the prior fiscal year period, primarily due to the higher revenues, partially offset by higher prepublication expense amortization on new interactive product lines.
~~International~~

Three months ended

Nine months ended

($ amounts in millions)

February 28,

February 29,

February 28,

February 29,

Three months ended
August 31,

2009

2008

2009

2008

2009

2008

Revenues

$
88.5

$
107.0

$
299.1

$
340.1

$
75.6

$
84.1

Operating (loss) income

(13.9
)

5.7

(3.4
)

29.7

Operating loss

(1.9
)

(3.3
)

Operating margin

*

5.3
%

*

8.7
%

*

*
     * Not meaningful
Revenues in the Internationalsegment for the quarter ended ~~February 28,~~August 31, 2009 decreased by ~~$18.5~~$8.5 million, or ~~17.3%~~10.1%, to ~~$88.5~~$75.6 million, compared to ~~$107.0~~$84.1 million in the prior fiscal year quarter, due to the unfavorable impact of foreign currency exchange rates of $21.8 million. Segment revenues for the nine months ended February 28, 2009 decreased by $41.0 million, or 12.1%, to $299.1 million, compared to $340.1 million in the prior fiscal year period, primarily due to the unfavorable impact of foreign currency exchange rates of ~~$40.3 million.~~$7.6 million, in addition to a decrease in revenue of $1.6 million in the UK.
Segment operating loss for the quarter ended ~~February 28,~~August 31, 2009 ~~was $13.9~~decreased to a loss of $1.9 million, compared to ~~operating income~~a loss of ~~$5.7~~$3.3 million in the prior fiscal year quarter, primarily due to ~~lower operating income~~reduced employee-related expenses in the ~~United Kingdom including a non-cash charge for impairment of goodwill of $17.0 million. Segment operating loss~~Company’s Australia operations and the Company’s export operations.
Media, Licensing and Advertising

($ amounts in millions)

Three months ended
August 31,

2009

2008

Revenues

$
15.1

$
16.1

Operating loss

(3.7
)

(4.8
)

Operating margin

*

*
     * Not meaningful
Revenues in the Media, Licensing and Advertising segment for the ~~nine months~~quarter ended ~~February 28,~~August 31, 2009 ~~was $3.4~~decreased by $1.0 million, or 6.2%, to $15.1 million, compared to ~~operating income of $29.7~~$16.1 million in the prior fiscal year ~~period. This decrease was~~quarter, primarily due to lower ~~operating income~~revenues from third party sales of software and interactive products, partially offset by higher revenues in the ~~United Kingdom, including~~custom publishing business and higher production revenues. For additional information regarding changes in the ~~non-cash goodwill impairment charge~~Company’s reporting structure and segments, please see Note 3 of ~~$17.0 million.~~Notes to Condensed Consolidated Financial Statements - Unaudited in Item 1, “Financial Statements.”
Segment operating loss for the quarter ended August 31, 2009 decreased to a loss of $3.7 million, compared to a loss of $4.8 million in the prior fiscal year quarter, primarily due to reduced selling, general and administrative expenses in the segment driven by cost reduction initiatives.

SCHOLASTIC CORPORATION
Item 2. MD&A
Results of Discontinued Operations
~~As previously announced,~~In fiscal 2008, the Company ~~sold its DTH business in August 2008, has~~determined to sell or shut down its ~~SC business effective May 31, 2008, ceased operation in its direct-to-home continuity business located in the United Kingdom~~domestic, Canadian and UK continuities businesses, and intends to sell a related warehousing and distribution facility located in Maumelle, Arkansas (the “Maumelle Facility”) and an office and distribution facility in Danbury, Connecticut (the “Danbury Facility”). During fiscal 2009, the Company also ceased its ~~Maumelle facility.~~operations in Argentina and Mexico, its door-to-door selling operations in Puerto Rico, its continuities business in Australia and New Zealand and its corporate book fairs business and closed its Scarsdale, NY store. The Company also sold a trade magazine. Additionally, the Company sold a non-core market research business and a non-core on-line resource for teachers business and intends to ~~complete~~sell a Spanish language book channel. All of the divestiture of its direct-to-home business located in Canada in fiscal 2009. In addition to the foregoing, during the six months ended February 28, 2009, the Company determined to exit certain other unprofitable, non-core businesses or operations as detailed in Note 2, “Discontinued Operations,” which operations have been or are in the process of being sold or shut down. Also, in a separate transaction during the three months ended February 28, 2009, the Company sold Quality Education Data (“QED”), a non-core business which markets databases serving the school market. The results of operations associated with theseabove businesses are ~~presented~~classified as discontinued operations ~~for accounting purposes~~ in the Company’s financial statements for fiscal ~~2009~~2010 and prior year periods. ~~During the three months ended February 28, 2009, the Company recognized impairment and other charges related to discontinued operations, net of tax, of $12.5 million.~~
The ~~loss~~earnings from discontinued operations, net of tax, ~~was $0.9~~were $1.6 million for the quarter ended ~~February 28,~~August 31, 2009, compared to ~~$77.9~~a loss, net of tax, of $6.2 million in the prior fiscal year quarter. ~~The loss from discontinued operations, net~~Prior period losses reflect higher severance and impairment charges, while current period income reflects favorable accounts receivable collections without the higher level of tax, was $22.6 million for the nine months ended February 28, 2009, compared to $92.8 million in the prior fiscal year. The higher losses in the previous year period are primarily due to the DTH business.offsetting charges.
Seasonality
The Company’s school-based book clubs, school-based book fairs and most of its magazines operate on a school-year basis. Therefore, the Company’s business is highly seasonal. As a result, the Company’s revenues in the first and third quarters of the fiscal year generally are lower than its revenues in the other two fiscal quarters. Typically, school-based book club and book fair revenues are greatest in the second and fourth quarters of the fiscal year, while revenues from the sale of instructional materials and educational technology products are highest in the first and fourth quarters. The Company historically has experienced a loss from operations in the first and third quarters of each fiscal year.
Liquidity and Capital Resources
The Company’s cash and cash equivalents, including cash from discontinued operations, totaled ~~$37.0~~$54.2 million at ~~February 28,~~August 31, 2009, compared to ~~$117.3~~$143.6 million at May 31, ~~2008~~2009 and ~~$191.7~~$31.7 million at ~~February 29, 2008. Cash from discontinued operations was $1.6 million at February 28, 2009, $3.1 million at May~~August 31, ~~2008 and $9.4 million at February 29,~~ 2008.
Cash ~~provided by~~used in operating activities ~~was $34.1~~decreased by $82.7 million to $58.3 million for the ~~nine~~three months ended ~~February 28,~~August 31, 2009, compared to ~~$303.7~~$141.0 million in the prior fiscal year period. ~~The net~~In addition to the reduced loss of $26.1 million, the $82.7 million decrease ~~of $269.6 million is~~was primarily related to favorable working capital changes which included:
•
a $56.0 million increase in accounts payable and other accrued expenses compared to a $17.0 million increase in the prior year period;
•
a $95.0 million increase in inventory in the current period compared to a $125.9 million increase in the prior period;
•
partially offset by increased accounts receivable of $32.4 million in the current period compared to decreases of $16.2 million in the prior year period.
Accounts payable increases were primarily due to the timing of payments and improved terms with key vendors. Inventory reductions resulted from the timing of purchases and Company initiatives designed to reduce inventory levels. Higher accounts receivable balances resulted from higher revenues related to Harry Potter realized in the prior year nine month period, for which related royalty payments were paid by the Company subsequent to February 29, 2008, in addition to lower accounts payable and accrued expenses in the current nine month period.August sales of education technology products.
Cash used in investing activities ~~decreased~~increased by ~~$34.7~~$0.8 million to $19.2 million for the ~~nine~~three months ended ~~February 28,~~August 31, 2009, ~~primarily~~compared to $18.4 million in the prior fiscal year period. This change is related to the receipt of proceeds from the sale of ~~QED~~discontinued operations of $4.0 million in the prior period, partially offset by reduced spending in property, plant and ~~proceeds from the sale of the DTH business totaling $33.0 million.~~equipment.
Cash used in financing activities was ~~$71.8~~$10.5 million for the ~~nine~~three months ended ~~February 28,~~August 31, 2009, compared to ~~$42.6~~cash provided by financing activities of $68.3 million for the prior fiscal year ~~period, representing a $29.2 million increase year over year.~~period. The change is primarily due to ~~lower~~reduced borrowings under ~~the Term Loan in the current year period~~lines of ~~$200.0~~credit of $73.7 million and reduced borrowings under credit agreements and revolving loans of $40.0 million, partially offset by lower ~~common stock~~repayments under lines of credit of $28.7 million and lower repurchases of Common Stock of $1.0 million in the ~~current~~first fiscal quarter of 2010 compared to $11.7 million in the prior year ~~of $173.8 million.~~fiscal quarter.
Due to the seasonal nature of its business as discussed under “Seasonality” above, the Company usually experiences negative cash flows in the June through October time period. As a result of the Company’s business cycle, borrowings have historically increased during June, July and August, have generally peaked in September or October, and have been at their lowest point in May. In the current fiscal year, borrowings peaked in October 2008, and have declined in the second half of the fiscal year. The Company expects to realize the benefit of deferred tax assets related to the DTH business divestiture in the current fiscal year. Accordingly, net tax payments will be lower than historical levels in the current fiscal year.

SCHOLASTIC CORPORATION
Item 2. MD&A
The Company’s operating philosophy is to use cash provided from operating activities to create value by paying down debt, reinvesting in existing businesses and, from time to time, making acquisitions that will complement its portfolio of businesses, as well as engaging in shareholder enhancement initiatives, such as share repurchases or dividend declarations. The Company believes that funds generated by its operations and funds available under its current credit facilities will be sufficient to finance its short-and long-term capital requirements for the foreseeable future.
In the current fiscal year, the Company expects higher uses of cash than in previous years for severance payments and dividends while continuing modest discretionary common share repurchases under its current repurchase program. Despite the current economic conditions, ~~and the aforementioned uses of cash expected in the current fiscal year,~~ the Company has maintained ~~and expects to maintain for the foreseeable future~~ sufficient liquidity to fund ongoing operations, ~~(including severance payments and pension contributions),~~ dividends, authorized common share repurchases, debt service, planned capital expenditures and other investments. As of ~~February 28,~~August 31, 2009, the Company’s primary sources of liquidity consisted of cash and cash equivalents of ~~$37.0~~$54.2 million, cash from operations, and borrowings remaining available under the Revolving Loan (as described under “Financing” below) totaling $325.0 million. Approximately ~~53%~~55% of the Company’s outstanding debt is not due until fiscal ~~year~~ 2013, and the remaining ~~47%~~45% is spread ratably over each preceding period. The Company may at any time, but in any event not more than once in any calendar year, request that the aggregate availability of credit under the Revolving Loan be increased by an amount of $10.0 million or an integral multiple of $10.0 million (but not to exceed $150.0 million). Accordingly, the Company believes these sources of liquidity are sufficient to finance its ongoing operating needs, ~~and~~as well as its financing and investing activities.
~~In March 2009, the~~The Company’s credit rating ~~was reduced to “BB-” by~~from Standard & Poor’s Rating Services is “BB-” and ~~“Ba2” by~~from Moody’s Investors ~~Service.~~Service is “Ba2.” Both agencies have rated the outlook for the Company as ~~“Stable”.~~“Stable.” The Company believes that existing committed credit lines, cash from operations and other sources of cash are sufficient to meet the Company’s liquidity needs for the near term, as the Company is currently compliant with its debt covenants and expects to remain compliant for the foreseeable future. The Company’s interest rates for the Loan Agreement are associated with certain leverage ratios, and, accordingly, a change in the Company’s credit rating does not result in an increase in interest costs under the Company’s Loan Agreement.

~~SCHOLASTIC CORPORATION~~
~~Item 2. MD&A~~
Financing
Loan Agreement
On June 1, 2007, Scholastic Corporation and Scholastic Inc. (each, a “Borrower” and together, the “Borrowers”) ~~elected to replace the Company’s then-existing credit facilities with~~entered into a ~~new~~ $525.0 million credit facility with certain banks (the “Loan Agreement”), consisting of a $325.0 million revolving credit component (the “Revolving Loan”) and a $200.0 million amortizing term loan component (the “Term Loan”). The Loan Agreement is a contractually committed unsecured credit facility that is scheduled to expire on June 1, 2012. The $325.0 million Revolving Loan component allows the Company to borrow, repay or prepay and reborrow at any time prior to the stated maturity date, and the proceeds may be used for general corporate purposes, including financing for acquisitions and share repurchases. The Loan Agreement also provides for an increase in the aggregate Revolving Loan commitments of the lenders of up to an additional $150.0 million. The $200.0 million Term Loan component was established in order to fund the reacquisition by the Corporation of shares of its Common Stock pursuant to an Accelerated Share Repurchase Agreement and was fully drawn on June 28, 2007 in connection with that transaction. The Term Loan, which may be prepaid at any time without penalty, requires quarterly principal payments of $10.7 million, with the first payment ~~made~~ on December 31, 2007, and a final payment of $7.4 million due on June 1, 2012.
Interest on both the Term Loan and Revolving Loan is due and payable in arrears on the last day of the interest period (defined as the period commencing on the date of the advance and ending on the last day of the period selected by the Borrower at the time each advance is made). At the election of the Borrower, the interest rate charged for each loan made under the Loan Agreement is based on (1) a rate equal to the higher of (a) the prime rate or (b) the prevailing ~~Federal Funds~~federal funds rate plus 0.500% or (2) an adjusted LIBOR rate plus an applicable margin, ranging from 0.500% to 1.250% based on the Company’s prevailing consolidated debt to total capital ratio. As of ~~February 28,~~August 31, 2009, the applicable margin onof the Term Loan was 0.875% and the applicable margin on the Revolving Loan was 0.700%. The Loan Agreement also provides for the payment of a facility fee ranging from 0.125% to 0.250% per annum on the Revolving Loan only, which at ~~February 28,~~August 31, 2009 was 0.175%.
As of ~~February 28, 2009, the term loan had an outstanding balance of $146.5 million at an interest rate of 1.4%.; at May~~August 31, 2008 the Term Loan had an outstanding balance of $178.6 million at an interest rate of 3.8%; and at February 29, 2008, the Term Loan had an outstanding balance of $189.3 million at an interest rate of 4.0%. There were no outstanding borrowings under the Revolving Loan as of February 28, 2009, May 31, 2008 and February 29, 2008. As of February 28, 2009, there was $0.5 million of outstanding standby letters of credit issued under the Loan Agreement. The Loan Agreement contains certain covenants, including interest coverage and leverage ratio tests and certain limitations on the amount of dividends and other distributions, and at ~~February 28,~~August 31, 2009 the Company was in compliance with these covenants. Please see Note 4 of Notes to Condensed Consolidated Financial Statements – Unaudited in Item 1, for outstanding balances and interest rates for these notes.

SCHOLASTIC CORPORATION
Item 2. MD&A
5% Notes due 2013
~~During~~In April 2003, Scholastic Corporation issued $175.0 million of 5% Notes (the “5% Notes”). The 5% Notes are senior unsecured obligations that mature on April 15, 2013. Interest on the ~~fourth quarter~~5% Notes is payable semi-annually on April 15 and October 15 of each year through maturity. The Company may at any time redeem all or a portion of the 5% Notes at a redemption price (plus accrued interest to the date of the redemption) equal to the greater of (i) 100% of the principal amount, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest discounted to the date of redemption. The Company repurchased $2.5 million and $14.5 million of the 5% Notes on the open market in fiscal 2009 and 2008, respectively. For the three months ended August 31, 2009, the Company ~~renewed~~repurchased an additional $5.0 million of the 5% notes on the open market.
Lines of Credit
As of August 31, 2009, the Company’s credit lines available under unsecured money market bid rate credit lines ~~totaling $50.0 million that were originally entered into during the fourth quarter of fiscal 2007. As of February 28, 2009, the Company’s credit lines under these facilities aggregate $45.0~~totaled $20.0 million. There were no outstanding borrowings under these credit lines at ~~February 28,~~August 31, 2009 and May 31, ~~2008 and February 29, 2008. On March 20, 2009, the Company’s aggregate~~2009. The credit lines ~~available under these facilities were reduced to $20~~had an outstanding balance of $37.8 million ~~resulting from~~as of August 31, 2008 at a ~~lender’s cancellation~~weighted average interest rate of ~~its $25.0 million line.~~2.9%. All loans made under these credit lines are at the sole discretion of the lender and at an interest rate and term, not to exceed ~~364~~180 days, agreed to at the time each loan is made. ~~These credit lines are typically available for loans up to 364 days and may be renewed, if requested by the Company, at the sole option of the lender.~~
As of ~~February 28,~~August 31, 2009, the Company had various local currency credit lines, with maximum available borrowings in amounts equivalent to ~~$35.9~~$39.4 million, underwritten by banks primarily in the United States, Canada and the United Kingdom. These credit lines are typically available for overdraft borrowings or loans up to 364 days and may be renewed, if requested by the Company, at the sole option of the lender. There were borrowings outstanding under these international facilities equivalent to ~~$9.8~~$13.4 million at ~~February 28,~~August 31, 2009 at a weighted average interest rate of ~~3.8%, compared to the equivalent of $11.8~~2.9%; $10.9 million at May 31, 2009 at a weighted average interest rate of 3.3%; and $25.2 million at August 31, 2008 at a weighted average interest rate of ~~6.4%~~5.9%.
As of August 31, 2009 and to the equivalent of $10.7 million at February 29, 2008 at a weighted average interest rate of 7.5%. In December 2008, the Company recapitalized its United Kingdom operations via a cash contribution from the Company’s domestic operations, due to the cancellation of the local currency credit line in the United Kingdom.
~~At February 28,~~May 31, 2009, the Company had open standby letters of credit of ~~$7.6~~$7.4 million issued under certain credit lines, as compared to ~~$8.4~~$8.1 million as of ~~May~~August 31, ~~2008 and February 29,~~ 2008. These letters of credit are scheduled to expire within one year; however, the Company expects that substantially all of these letters of credit will be renewed, at similar terms, prior to expiration.
The Company’s total debt obligations were ~~$315.3~~$290.6 million at ~~February 28,~~August 31, 2009, ~~$349.7~~$303.7 million at May 31, ~~2008~~2009 and ~~$373.6~~$430.2 million at ~~February 29,~~August 31, 2008. The lower level of debt at ~~February 28,~~August 31, 2009 as compared to May 31, ~~2008~~2009 and ~~February 29,~~August 31, 2008 was primarily due to ~~the~~ repayments made on the Term Loan, ~~and~~ a repurchase of the Company’s 5% Notes on the open ~~market.~~market and reduced borrowings resulting from lower debt requirements. The Company utilized existing cash balances in the first fiscal quarter of 2010 to meet seasonal working capital requirements. As a result, cash balances declined $89.4 million in such fiscal quarter.
For a more complete description of the Company’s debt obligations, see Note 4 of Notes to Condensed Consolidated Financial Statements – Unaudited in Item 1, “Financial Statements.”

SCHOLASTIC CORPORATION
Item 2. MD&A
New Accounting Pronouncements
In December ~~2007,~~2008, the FASB issued Staff Position FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP 132R-1”). FSP 132R-1 requires additional disclosure regarding investment allocations, major categories, valuation techniques and concentrations of risk related to plan assets held in an employer’s defined benefit pension or postretirement plan. FSP 132R-1 further requires disclosure of any effects of utilizing significant unobservable inputs as defined in SFAS No. ~~141 (revised), “Business Combinations” (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer accounts for business combinations. SFAS 141R includes guidance for~~157, “Fair Value Measurements,” upon the ~~recognition and measurement~~overall change in the fair value of the ~~identifiable~~plan assets ~~acquired,~~during the liabilities assumed, and any noncontrolling or minority interest in the acquiree. It also provides guidance for the measurement of goodwill, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies and acquisition-related transaction costs, and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS 141R applies prospectively andreporting period. FSP 132R-1 is effective for ~~business combinations made by the Company beginning June 1,~~fiscal years ending after December 15, 2009.
In ~~December 2007,~~April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP No. FAS 157-4”), which provides additional guidance for estimating fair value in accordance with SFAS No. ~~160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment~~157, “Fair Value Measurements,” where the volume and level of ARB No. 51” (“SFAS 160”). SFAS 160 amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for any noncontrolling interest in a subsidiary andactivity for the ~~deconsolidation~~asset or liability have significantly decreased. . The FSP provides additional guidance on determining fair value when the volume and level of ~~a subsidiary. SFAS 160 clarifies that a noncontrolling interest in a subsidiary should be reported as a component~~activity for the asset or liability have significantly decreased when compared with normal market activity for the asset or liability (or similar groups of equity in the consolidated financial statements and requires disclosure, on the face of the consolidated statement of operations, of the amounts of consolidated net income attributable to the parent and to the noncontrolled interest. SFAS 160assets or liabilities). FSP No. FAS 157-4 is effective for the Company ~~beginning~~for interim and annual reporting periods ending after June 1,15, 2009, and ~~is to be applied prospectively, except for~~applies prospectively. This pronouncement did not impact the presentation and disclosure requirements, which upon adoption will be applied retrospectively for all periods presented. The Company is currently evaluating the impact, if any, that SFAS 160 will have on itsCompany’s condensed consolidated financial position, results of operations and cash flows.
In ~~April 2008,~~August 2009, the FASB issued ~~FSP~~Accounting Standard Update No. ~~FAS 142-3, “Determination of the Useful Life of Intangible Assets”~~2009-05, “Fair Value Measurements and Disclosures - Measuring Liabilities at Fair Value” (“~~FAS 142-3”~~ASU No. 2009-05”). ~~FAS 142-3 amends the factors that should be considered~~The update provides clarification for circumstances in ~~developing renewal or extension assumptions used to determine the useful life of~~which a ~~recognized intangible asset under FASB Statement~~quoted price in an active market for an identical liability is not available. ASU No. ~~142, “Goodwill and Other Intangible Assets.” FAS 142-3~~2009- 05 is effective for ~~fiscal years~~the first reporting period beginning after December 15, 2008 and early adoption is prohibited. The Company is currently evaluating the impact, if any, that FAS 142-3 will have on its consolidated financial position, results of operations and cash flows.
In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP 03-6-1”), which classifies unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents as participating securities and requires them to be included in the computation of earnings per share pursuant to the two-class method described in SFAS No. 128, “Earnings per Share.” FSP 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. It requires all prior period earnings per share data presented to be adjusted retrospectively.August 2009. The Company is currently evaluating the effect, if any, that the adoption of ~~FSP 03-6-1~~ASU No. 2009-05 will have on its condensed consolidated financial position, results of operations and cash flows.
Recently Adopted Accounting Pronouncements
In September 2008, the FASB issued FSP No. 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 requires more extensive disclosure regarding potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows of sellers of credit derivatives. FSP 133-1 also amends FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require additional disclosure about the current status of the payment or performance risk of a guarantee. FSP 133-1 also clarifies the effective date of FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” by stating that the disclosures required should be provided for any reporting period (annual or quarterly interim) beginning after November 15, 2008.
~~In September~~ 2006, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. In February 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement ~~13”~~13,” and FSP No. FAS 157-2, “Effective Date of FASB Statement No. 157.” Collectively, these Staff Positions allow a one-year deferral of adoption of SFAS 157 for ~~nonfinancial~~non financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis and amend SFAS 157 to exclude FASB Statement No. 13 and its related interpretive accounting pronouncements that address leasing transactions.

~~SCHOLASTIC CORPORATION~~
~~Item 2. MD&A~~
The Company adopted SFAS 157 beginning June 1, 2008, except for ~~nonfinancial~~non financial assets and liabilities measured at fair value on a non-recurring basis, for which ~~will be effective for~~ the Company ~~beginning~~adopted SFAS 157 on June 1, 2009. The impact of the ~~adoption~~adoptions on June 1, 2008 and June 1, 2009 was not material to the Company’s condensed consolidated financial statements. ~~The Company is currently evaluating the impact that the adoption of the deferred portion of SFAS 157 will have on its consolidated financial position, results of operations and cash flows.~~
SFAS 157 establishes a three-level hierarchy for fair value measurements to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below with Level 1 having the highest priority and Level 3 having the lowest.
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
The Company’s financial assets and liabilities measured at fair value on a recurring basis subject to the presentation requirements of SFAS 157 at ~~February 28,~~August 31, 2009 consisted of cash and cash equivalents and foreign currency forward contracts, ~~neither of~~ which were not material as of the reporting date. Cash and cash equivalents are comprised of bank deposits and short-term investments, such as money market funds, the fair value of which is based on quoted market prices, a Level 1 fair value measure. The fair values of foreign currency forward contracts, used by the Company to manage the impact of foreign exchange ~~impact~~rate changes to the financial statements, are based on quotations from financial institutions, a Level 2 fair value measure.

SCHOLASTIC CORPORATION
Item 2. MD&A
Non financial assets and liabilities for which the Company employs fair value measurement on a non-recurring basis include:
•
long-lived assets when impaired under the provisions of SFAS 144,
•
assets acquired in a business combination,
•
goodwill and indefinite-lived intangible assets,
•
long-lived assets held for sale,
•
long-lived assets held and used,
•
pension assets, and
•
debt.
Level 2 and level 3 inputs will be employed by the Company in the fair value measurement of these assets and liabilities.
In ~~February~~December 2007, the FASB issued SFAS No. ~~159, “The Fair Value Option~~141 (revised), “Business Combinations” (“SFAS 141R”). SFAS 141R establishes principles and requirements for ~~Financial Assets~~how an acquirer accounts for business combinations. SFAS 141R includes guidance for the recognition and ~~Financial Liabilities” (“SFAS 159”), to provide companies with an option to report selected financial~~measurement of the identifiable assets acquired, the liabilities assumed, and ~~liabilities at fair value. The objective~~any non-controlling or minority interest in the acquiree. It also provides guidance for the measurement of ~~SFAS 159 is to reduce both~~goodwill, the ~~complexity in~~recognition of contingent consideration, the accounting for ~~financial instruments~~pre-acquisition gain and loss contingencies and acquisition-related transaction costs, and the ~~volatility~~recognition of changes in ~~earnings caused by measuring related assets~~the acquirer’s income tax valuation allowance. SFAS 141R applies prospectively and ~~liabilities differently. SFAS 159 was~~is effective for business combinations made by the Company beginning June 1, ~~2008. The~~2009. This pronouncement did not impact the Company ~~has not elected to measure any financial assets and financial liabilities at fair value which were not previously required to be measured at fair value. Therefore,~~in the ~~adoption of this standard has had no impact on the Company’s consolidated financial position, results of operations and cash flows.~~current period.
Since the date of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2008, as amended (the “Annual Report”), there have been no material changes to the Company’s critical accounting policies and estimates.

SCHOLASTIC CORPORATION
Item 2. MD&A
Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. These 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 in this Report, in the Annual Report and from time to time in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). Actual results could differ materially from those currently anticipated.

SCHOLASTIC CORPORATION
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company conducts its business in various foreign countries, and as such, its cash flows and earnings are subject to fluctuations from changes in foreign currency exchange rates. The Company manages its exposures to this market risk through internally established procedures and, when deemed appropriate, through the use of short-term forward exchange contracts. ~~All foreign exchange hedging~~As of August 31, 2009, these transactions ~~are supported by an identifiable commitment or a forecasted transaction.~~were not significant. The Company does not enter into derivative transactions or use other financial instruments for trading or speculative purposes.
Market risks relating to the Company’s operations result primarily from changes in interest rates, which are managed through the mix of variable-rate versus fixed-rate borrowings. Additionally, financial instruments, including swap agreements, have been used to manage interest rate exposures. Approximately ~~50%~~48% of the Company’s debt at ~~February 28,~~August 31, 2009 and May 31, 2009 bore interest at a variable rate and was sensitive to changes in interest rates, compared to approximately ~~55%~~63% at ~~May~~August 31, ~~2008 and approximately 54% at February 29,~~ 2008. The decrease in variable-rate debt as of ~~February 28,~~August 31, 2009 and May 31, 2009, compared to ~~May~~August 31, ~~2008 and February 29,~~ 2008, was primarily due to repayments made on the Term Loan, ~~and~~ a repurchase of 5% Notes on the open ~~market.~~market and reduced borrowings as a result of lower debt requirements. The Company is subject to the risk that market interest rates and its cost of borrowing will increase and thereby increase the interest charged under its variable-rate debt.
Additional information relating to the Company’s outstanding financial instruments is included in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The following table sets forth information about the Company’s debt instruments as of ~~February 28,~~August 31, 2009 (see Note 4 of Notes to Condensed Consolidated Financial Statements - Unaudited in Item 1, “Financial Statements”):

($ amounts in millions)

Fiscal Year Maturity

Fiscal Year Maturity

2009

2010

2011

2012

2013

Thereafter

Total

2010⁽³⁾

2011

2012

2013

2014

Thereafter

Total

Debt Obligations

Lines of Credit

$
9.8

$
—

$
—

$
—

$
—

$
—

$
9.8

$
13.4

$
—

$
—

$
—

$
—

$
—

$
13.4

Average interest rate

3.8
%

2.9
%

Long-term debt including current

Fixed-rate debt

$
—

$
—

$
—

$
—

$
160.0

$
—

$
160.0

$
—

$
—

$
—

$
153.0

$
—

$
153.0

Interest rate

5.0
%

5.0
%

Variable rate debt

$
10.7

$
42.8

$
42.8

$
42.8

$
7.4
⁽¹⁾
$
—

$
146.5

$
32.1

$
42.8

$
42.8

$
7.4
⁽¹⁾

$
—

$
125.1

Interest rate⁽²⁾

1.4
%

1.4
%

1.4
%

1.4
%

1.4
%

1.2
%

1.2
%

1.2
%

1.2
%

(1)
Represents the final payment under the Term Loan, which has a final maturity of June 1, 2012 but may be repaid at any time.

(2)
Represents the interest rate under the Term Loan at ~~February 28,~~August 31, 2009; the interest rate is subject to change over the life of the Term Loan.
(3)
2010 includes the remaining nine months of the current fiscal year.

SCHOLASTIC CORPORATION
Item 4. Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer of the Corporation, after conducting an evaluation, together with other members of the Company’s management, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as of ~~February 28,~~August 31, 2009, have concluded that the Corporation’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Corporation in its reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and accumulated and communicated to members of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. There was no change in the Corporation’s internal control over financial reporting that occurred during the quarter ended ~~February 28,~~August 31, 2009 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II – OTHER INFORMATION

SCHOLASTIC CORPORATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information with respect to repurchases of shares of Common Stock by the Corporation during the ~~nine~~three months ended ~~February 28,~~August 31, 2009:
Issuer Purchases of Equity Securities
(Dollars in millions except per share amounts)

Period

Total number of
shares purchased

Average price paid
per share

Total number of shares
purchased as part of publicly
announced plans or
programs

Maximum number of shares
(or approximate dollar
value) that may yet be
purchased under the plans
or programs

June 1, 2008 through
June 30, 2008

151,075

$
28.95

151,075

$
15.6
⁽¹⁾

July 1, 2008 through
July 31, 2008

100,713

$
27.36

100,713

$
12.9
⁽¹⁾

August 1, 2008 through August 31, 2008

171,792

$
26.36

171,792

$
8.3
⁽¹⁾

September 1, 2008 through September 30, 2008

33,508

$
25.58

33,508

$
7.4
⁽¹⁾

October 1, 2008 through October 31, 2008

345,380

$
21.67

345,380

$
—
⁽¹⁾

November 1, 2008 through November 30, 2008

6,407

$
13.28

6,407

$
9.9
⁽¹⁾

December 1, 2008 through December 31, 2008

426,979

$
13.83

426,979

$
4.0
⁽¹⁾

January 1, 2009 through January 31, 2009

314,600

$
12.61

314,600

$
—
⁽¹⁾

February 1, 2009 through February 28, 2009

154,066

$
10.89

154,066

$
3.4
⁽¹⁾

Total

1,704,520

$
18.56

1,704,520

$
3.4
⁽¹⁾

Period

Total number of
shares purchased

Average price paid
per share

Total number of shares
purchased as part of
publicly announced
plans or programs

Maximum number of
shares (or approximate
dollar value) that may
yet be purchased
under the plans or
programs

June 1, 2009 through
June 30, 2009

28,195

$
19.91

28,195

$
0.5
⁽¹⁾

July 1, 2009 through
July 31, 2009

24,955

$
18.73

24,955

$
0.1

August 1, 2009 through
August 31, 2009

—

$
—

—

$
0.1

Total

53,150

$
19.36

53,150

$
0.1

(1)
On May 28, 2008, the Company announced that its Board of Directors had authorized a new program to purchase up to $20.0 million of Common Stock, from time to time as conditions allow, on the open market or through negotiated private transactions. On November 20, 2008 and February 4, 2009, the Board of Directors authorized further programs to repurchase up to an additional $10.0 million and $5.0 million, respectively, of its Common Stock, ~~which will~~to be funded with available cash and pursuant to which the Company ~~may~~could purchase shares from time to time as conditions allow on the open market. As of August 31, 2009, approximately $0.1 remained of the current authorization and therefore the program is virtually completed.

SCHOLASTIC CORPORATION
Item 6. Exhibits

Exhibits:

10.1** (1)
Scholastic Corporation 2001 Stock Incentive Plan (the”2001 Plan”) amended and restated as of July 21, 2009.
10.2** (1)
Form of Restricted Stock Unit Agreement under the 2001 Plan as of July 21, 2009.
10.3** (1)
Amended and Restated Guidelines for Stock Units Granted under the 2001 Plan as of July 21, 2009.
10.4** (1)
Form of Option Agreement under the 2001 Plan as of July 21, 2009.
31.1
Certification of the Chief Executive Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2
Certification of the Chief Financial Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32
Certifications of the Chief Executive Officer and Chief Financial Officer of Scholastic Corporation furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
** The referenced exhibit is a management contract or compensation plan or arrangement described in Item 601(b)(10)(iii) of Regulation S-K.

(1) Corrected exhibit replacing corresponding exhibits 10.9 through 10.12 (inclusive) of Registrant’s Annual Report on Form 10-K for the year-ended May 31, 2009.

SCHOLASTIC CORPORATION

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~SCHOLASTIC CORPORATION~~

SCHOLASTIC CORPORATION
(Registrant)

Date: ~~April 9,~~October 2, 2009
By:
/s/ Richard Robinson

Richard Robinson

Chairman of the Board,

President and Chief

Executive Officer

Date: ~~April 9,~~October 2, 2009
By:
/s/ Maureen O’Connell

Maureen O’Connell

Executive Vice President,

Chief Administrative Officer

and Chief Financial Officer

(Principal Financial Officer)

SCHOLASTIC CORPORATION
QUARTERLY REPORT ON FORM 10-Q, DATED ~~FEBRUARY 28,~~AUGUST 31, 2009
Exhibits Index

Exhibit
Number

Description of Document

10.1
Scholastic Corporation 2001 Stock Incentive Plan (the “2001 Plan”) amended and restated as of July 21, 2009.
10.2
Form of Restricted Stock Unit Agreement under the 2001 Plan as of July 21, 2009.
10.3
Amended and Restated Guidelines for Stock Units Granted under the 2001 Plan as of July 21, 2009.
10.4
Form of Option Agreement under the 2001 Plan as of July 21, 2009.

31.1

Certification of the Chief Executive Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of the Chief Financial Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32

Certifications of the Chief Executive Officer and Chief Financial Officer of Scholastic Corporation furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
3033




2009	$	20.5
Fiscal years ending May 31:
2010		42.8
2011		42.8
2012		42.8
2013		166.4
Thereafter		—


Total debt	$	315.3



	Nine months ended February 28, 2009				Twelve months ended May 31, 2008				Nine months ended February 29, 2008 (Restated)


Beginning balance		$	164.4			$	165.5			$	165.5
Other adjustments			(0.6	)			(1.2	)			(1.2	)
Goodwill impairment			(17.0	)			0.0				0.0
Foreign currency translation			(5.8	)			0.1				0.1

Total		$	141.0			$	164.4			$	164.4


	Pension Plans Three months ended						Post-Retirement Benefits Three months ended
	*February 28,*			*February 29,*			*February 28,*			*February 29,*

	2009			2008			2009			2008

Components of net periodic benefit costs:
Service cost	$	2.0		$	2.4		$	—		$	—
Interest cost		2.5			2.5			0.4			0.5
Expected return on assets		(2.8	)		(2.9	)		—			—
Net amortization of prior service (credit)		—			—			(0.2	)		(0.2	)
Amortization of loss		0.5			0.5			0.2			0.4

Net periodic benefit costs	$	2.2		$	2.5		$	0.4		$	0.7


	Pension Plans Nine months ended						Post-Retirement Benefits Nine months ended
	*February 28,*			*February 29,*			*February 28,*			*February 29,*

	2009			2008			2009			2008

Components of net periodic benefit costs:
Service cost	$	6.0		$	6.7		$	0.1		$	0.1
Interest cost		7.6			7.5			1.1			1.4
Expected return on assets		(8.3	)		(8.7	)		—			—
Net amortization of prior service (credit)		(0.1	)		(0.1	)		(0.6	)		(0.6	)
Amortization of loss		1.4			1.5			0.5			1.1

Net periodic benefit costs	$	6.6		$	6.9		$	1.1		$	2.0


	•	a $56.0 million increase in accounts payable and other accrued expenses compared to a $17.0 million increase in the prior year period;

	•	a $95.0 million increase in inventory in the current period compared to a $125.9 million increase in the prior period;

	•	partially offset by increased accounts receivable of $32.4 million in the current period compared to decreases of $16.2 million in the prior year period.


($ amounts in millions)	Fiscal Year Maturity																			Fiscal Year Maturity

	2009			2010			2011			2012			2013			Thereafter		Total		2010⁽³⁾			2011			2012			2013			2014		Thereafter		Total


Debt Obligations
Lines of Credit	$	9.8		$	—		$	—		$	—		$	—		$	—	$	9.8	$	13.4		$	—		$	—		$	—		$	—	$	—	$	13.4
Average interest rate		3.8	%																		2.9	%

Long-term debt including current
Fixed-rate debt	$	—		$	—		$	—		$	—		$	160.0		$	—	$	160.0	$	—		$	—		$	—		$	153.0				$	—	$	153.0
Interest rate														5.0	%															5.0	%


Variable rate debt	$	10.7		$	42.8		$	42.8		$	42.8		$	7.4	⁽¹⁾	$	—	$	146.5	$	32.1		$	42.8		$	42.8		$	7.4	⁽¹⁾			$	—	$	125.1
Interest rate⁽²⁾		1.4	%		1.4	%		1.4	%		1.4	%		1.4	%						1.2	%		1.2	%		1.2	%		1.2	%


(1)	Represents the final payment under the Term Loan, which has a final maturity of June 1, 2012 but may be repaid at any time.

(2)	Represents the interest rate under the Term Loan at ~~February 28,~~August 31, 2009; the interest rate is subject to change over the life of the Term Loan.

(3)	2010 includes the remaining nine months of the current fiscal year.



Period	Total number of shares purchased	Average price paid per share			Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares (or approximate dollar value) that may yet be purchased under the plans or programs


June 1, 2008 through June 30, 2008	151,075		$	28.95	151,075		$	15.6	⁽¹⁾

July 1, 2008 through July 31, 2008	100,713		$	27.36	100,713		$	12.9	⁽¹⁾

August 1, 2008 through August 31, 2008	171,792		$	26.36	171,792		$	8.3	⁽¹⁾

September 1, 2008 through September 30, 2008	33,508		$	25.58	33,508		$	7.4	⁽¹⁾

October 1, 2008 through October 31, 2008	345,380		$	21.67	345,380		$	—	⁽¹⁾

November 1, 2008 through November 30, 2008	6,407		$	13.28	6,407		$	9.9	⁽¹⁾

December 1, 2008 through December 31, 2008	426,979		$	13.83	426,979		$	4.0	⁽¹⁾

January 1, 2009 through January 31, 2009	314,600		$	12.61	314,600		$	—	⁽¹⁾

February 1, 2009 through February 28, 2009	154,066		$	10.89	154,066		$	3.4	⁽¹⁾

Total	1,704,520		$	18.56	1,704,520		$	3.4	⁽¹⁾


Exhibits:

10.1** (1)		Scholastic Corporation 2001 Stock Incentive Plan (the”2001 Plan”) amended and restated as of July 21, 2009.

10.2** (1)		Form of Restricted Stock Unit Agreement under the 2001 Plan as of July 21, 2009.

10.3** (1)		Amended and Restated Guidelines for Stock Units Granted under the 2001 Plan as of July 21, 2009.

10.4** (1)		Form of Option Agreement under the 2001 Plan as of July 21, 2009.

31.1		Certification of the Chief Executive Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certifications of the Chief Executive Officer and Chief Financial Officer of Scholastic Corporation furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


		~~SCHOLASTIC CORPORATION~~
		SCHOLASTIC CORPORATION (Registrant)

Date: ~~April 9,~~October 2, 2009	By:	/s/ Richard Robinson


		Richard Robinson
		Chairman of the Board,
		President and Chief
		Executive Officer



Date: ~~April 9,~~October 2, 2009	By:	/s/ Maureen O’Connell


		Maureen O’Connell
		Executive Vice President,
		Chief Administrative Officer
		and Chief Financial Officer
		(Principal Financial Officer)


Exhibit Number		Description of Document


	10.1	Scholastic Corporation 2001 Stock Incentive Plan (the “2001 Plan”) amended and restated as of July 21, 2009.

	10.2	Form of Restricted Stock Unit Agreement under the 2001 Plan as of July 21, 2009.

	10.3	Amended and Restated Guidelines for Stock Units Granted under the 2001 Plan as of July 21, 2009.

	10.4	Form of Option Agreement under the 2001 Plan as of July 21, 2009.

	31.1	Certification of the Chief Executive Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification of the Chief Financial Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32	Certifications of the Chief Executive Officer and Chief Financial Officer of Scholastic Corporation furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.