(SCHOLASTIC LOGO)

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

FORM 10-Q

~~QUARTERLY REPORT PURSUANT TO SECTION~~Quarterly Report pursuant to section 13 ~~OR 15(D) OF~~
~~THE SECURITIES EXCHANGE ACT OF~~or 15(d) of the Securities Exchange Act of 1934


For the quarterly period ended November 30, ~~2009~~2010	Commission File No. 000-19860

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


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


Delaware		13-3385513
(State or other jurisdiction of		(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.
Yesx Noo

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). Yesox 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 filerox		Accelerated filerxo
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 of each class		Number of shares outstanding as of November 30, ~~2009~~2010


Common Stock, $.01 par value	~~34,781,850~~	29,190,030
Class A Stock, $.01 par value		1,656,200

SCHOLASTIC CORPORATION
~~SCHOLASTIC CORPORATION~~
~~FORM 10-Q FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2009~~
~~INDEX~~
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2010
INDEX



			Page

Part I –- Financial Information

Item 1.		Financial Statements


	Condensed Consolidated Statements of Operations (Unaudited)		1

		Condensed Consolidated Balance Sheets (Unaudited)		2

		Consolidated Statements of Cash Flows (Unaudited)		3

		Notes to Condensed Consolidated Financial Statements (Unaudited)		5

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	21	24

Item 3.		Quantitative and Qualitative Disclosures about Market Risk	31	34

Item 4.		Controls and Procedures	32	35

Part II – Other Information

Item 1.	Legal Proceedings		36

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	33
		37
~~Item 4.~~		~~Submission of Matters to a Vote of Security Holders~~	34

Item 6.		Exhibits	35	38

Signatures
39

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 November 30,						Six months ended November 30,					Three months ended November 30,						Six months ended November 30,

	2009			2008			2009		2008			2010			2009			2010			2009

Revenues	$	660.1		$	653.3		$	975.7	$	929.7		$	675.7		$	660.1		$	966.6		$	975.7

Operating costs and expenses:
Cost of goods sold		269.7			281.2			425.8		427.2
Selling, general and administrative expenses		224.4			230.5			398.1		403.4
Cost of goods sold (exclusive of depreciation and amortization)													296.2			273.6			443.9			431.9
Selling, general and administrative expenses (exclusive of depreciation and amortization)													232.3			220.5			402.9			392.0
Bad debt expense		4.4			7.2			6.5		8.3			3.0			4.4			5.9			6.5
Depreciation and amortization		14.8			15.0			29.5		30.7			14.5			14.8			28.9			29.5
Asset impairments		40.1			—			40.1		—			—			40.1			—			40.1
Severance		1.1			11.4			5.4		14.4			1.0			1.1			3.1			5.4

Total operating costs and expenses		554.5			545.3			905.4		884.0			547.0			554.5			884.7			905.4


Operating income		105.6			108.0			70.3		45.7			128.7			105.6			81.9			70.3

Other income		—			—			0.9		—
Other (expense) income													(0.4	)		—			(0.4	)		0.9
Interest expense, net		4.3			7.0			8.2		12.9			4.0			4.3			7.8			8.2


Earnings from continuing operations before income taxes		101.3			101.0			63.0		32.8			124.3			101.3			73.7			63.0

Provision for income taxes		44.5			42.5			30.8		17.2			47.4			44.5			31.0			30.8


Earnings from continuing operations		56.8			58.5			32.2		15.6			76.9			56.8			42.7			32.2

(Loss) earnings from discontinued operations, net of tax		(1.3	)		(15.4	)		0.3		(21.6	)		(2.0	)		(1.3	)		(3.0	)		0.3


Net income (loss)	$	55.5		$	43.1		$	32.5	$	(6.0	)
Net income												$	74.9		$	55.5		$	39.7		$	32.5


Basic and diluted earnings (loss) per Share of Class A and Common Stock
Basic:
Earnings from continuing operations	$	1.56		$	1.56		$	0.88	$	0.41		$	2.23		$	1.56		$	1.20		$	0.88

(Loss) earnings from discontinued operations, net of tax	$	(0.04	)	$	(0.41	)	$	0.01	$	(0.57	)	$	(0.06	)	$	(0.04	)	$	(0.08	)	$	0.01
Net earnings (loss)	$	1.52		$	1.15		$	0.89	$	(0.16	)
Net income												$	2.17		$	1.52		$	1.12		$	0.89
Diluted:
Earnings from continuing operations	$	1.54		$	1.55		$	0.88	$	0.41		$	2.19		$	1.54		$	1.19		$	0.88
Loss from discontinued operations, net of tax	$	(0.03	)	$	(0.40	)	$	0.00	$	(0.57	)
Net earnings (loss)	$	1.51		$	1.15		$	0.88	$	(0.16	)

(Loss) earnings from discontinued operations, net of tax												$	(0.05	)	$	(0.03	)	$	(0.08	)	$	0.00
Net income												$	2.14		$	1.51		$	1.11		$	0.88

Dividends declared per common share	$	0.075		$	0.075		$	0.150	$	0.150		$	0.075		$	0.075		$	0.150		$	0.150

See accompanying notes

SCHOLASTIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS –- UNAUDITED

(Dollar amounts in millions, except per share data)


	November 30, 2009				May 31, 2009				November 30, 2008				November 30, 2010				May 31, 2010				November 30, 2009

ASSETS
Current Assets:
Cash and cash equivalents		$	178.3			$	143.6			$	29.8			$	54.4			$	244.1			$	178.3
Accounts receivable, net			284.6				197.4				264.3				287.7				212.5				284.6
Inventories, net			374.7				344.8				422.5				371.6				315.7				374.7
Deferred income taxes			65.2				62.7				125.2				59.8				59.3				65.2
Prepaid expenses and other current assets			41.7				40.3				70.6
Other current assets															51.3				42.5				41.7
Current assets of discontinued operations			24.4				31.0				73.3				10.2				12.9				16.9


Total current assets			968.9				819.8				985.7				835.0				887.0				961.4

Property, plant and equipment, net			305.3				315.4				323.8				343.5				316.6				312.8
Prepublication costs			111.1				121.5				114.5				109.8				110.7				111.1
Royalty advances, net			41.3				41.5				44.9				38.6				38.0				41.3
Production costs			6.7				6.0				5.6				7.6				7.1				6.7
Goodwill			157.0				157.0				159.7				163.7				156.6				157.0
Other intangibles			18.8				46.8				47.1				15.0				15.5				18.8
Noncurrent deferred income taxes															33.4				33.6				59.6
Other assets and deferred charges			98.6				100.8				108.4				37.8				35.3				39.0

Total assets		$	1,707.7			$	1,608.8			$	1,789.7			$	1,584.4			$	1,600.4			$	1,707.7


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Lines of credit, short-term debt and current portion of long-term debt		$	55.8			$	53.7			$	70.2			$	50.0			$	50.3			$	55.8
Capital lease obligations			2.2				3.4				4.4				0.5				0.9				2.2
Accounts payable			134.4				128.2				120.1				164.5				101.0				134.4
Accrued royalties			47.9				41.7				35.3				48.8				42.3				47.9
Deferred revenue			73.7				34.2				69.8				81.7				39.8				73.7
Other accrued expenses			183.1				138.9				167.1				165.8				156.2				184.2
Current liabilities of discontinued operations			3.2				7.3				19.4				1.7				2.9				2.1


Total current liabilities			500.3				407.4				486.3				513.0				393.4				500.3

Noncurrent Liabilities:
Long-term debt			223.8				250.0				318.8				181.2				202.5				223.8
Capital lease obligations			54.6				54.5				55.5				54.5				55.0				54.6
Other noncurrent liabilities			101.9				111.9				109.7				115.0				119.1				101.9


Total noncurrent liabilities			380.3				416.4				484.0				350.7				376.6				380.3

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			559.8				552.9				548.2				577.7				569.2				559.8
Accumulated other comprehensive loss			(70.4	)			(77.1	)			(65.7	)			(72.6	)			(85.4	)			(70.4	)
Retained earnings			589.8				562.8				576.6				642.4				607.8				589.8
Treasury stock at cost			(252.5	)			(254.0	)			(240.1	)			(427.2	)			(261.6	)			(252.5	)

Total stockholders’ equity			827.1				785.0				819.4				720.7				830.4				827.1

Total liabilities and stockholders’ equity		$	1,707.7			$	1,608.8			$	1,789.7			$	1,584.4			$	1,600.4			$	1,707.7

See accompanying notes

SCHOLASTIC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED

(Dollar amounts in millions, except per share data)


	Six months ended November 30,						Six months ended November 30,

	2009			2008			2010			2009

Cash flows provided by (used in) operating activities:
Net income (loss)	$	32.5		$	(6.0	)
Earnings (loss) from discontinued operations, net of tax		0.3			(21.6	)
Net income							$	39.7		$	32.5
(Loss) earnings from discontinued operations, net of tax								(3.0	)		0.3

Earnings from continuing operations		32.2			15.6			42.7			32.2

Adjustments to reconcile earnings from continuing operations to net cash provided by (used in) operating activities of continuing operations:
Provision for losses on accounts receivable and other reserves		24.3			27.1
Provision for losses on accounts receivable								5.9			6.5
Provision for losses on inventory								12.0			13.8
Provision for losses on royalty								1.7			4.0
Amortization of prepublication and production costs		24.3			20.7			24.5			24.3
Depreciation and amortization		29.5			30.7			28.9			29.5
Deferred income taxes		(3.5	)		(11.3	)		1.0			(3.5	)
Stock-based compensation								8.4			8.4
Non-cash write off related to asset impairments		40.1			—			—			40.1
Changes in assets and liabilities:
Accounts receivable		(90.5	)	��	(82.4	)		(75.7	)		(90.5	)
Inventories		(39.1	)		(97.6	)		(62.8	)		(39.1	)
Prepaid expenses and other current assets		2.6			(4.8	)
Other current assets								(9.6	)		2.6
Deferred promotion costs		(3.5	)		(8.3	)		(4.4	)		(3.5	)
Royalty advances		(3.6	)		(3.6	)		(1.9	)		(3.6	)
Accounts payable and other accrued expenses		45.5			22.1
Accounts payable								59.2			4.6
Other accrued expenses								9.1			43.7
Accrued royalties		5.7			(8.0	)		5.8			5.7
Deferred revenue		39.3			35.7			41.6			39.3
Pension and post-retirement liability		(6.8	)		(5.0	)
Pension and postretirement liability								(4.3	)		(6.8	)
Other net		3.8			11.7			(0.1	)		(4.3	)

Total adjustments		68.1			(73.0	)		39.3			71.2

Net cash provided by (used in) operating activities of continuing operations		100.3			(57.4	)
Net cash provided by (used in) operating activities of discontinued operations		2.7			(5.9	)

Net cash provided by (used in) operating activities		103.0			(63.3	)
Net cash provided by operating activities of continuing operations								82.0			103.4
Net cash provided by operating activities of discontinued operations								1.5			2.4

Cash flows provided by (used in) investing activities:

Net cash provided by operating activities								83.5			105.8

Cash flows (used in) provided by investing activities:
Prepublication and production expenditures		(22.1	)		(26.6	)		(23.4	)		(22.1	)
Additions to property, plant and equipment		(17.2	)		(23.4	)		(24.2	)		(17.2	)
Net proceeds from sale of discontinued operations		0.2			4.0			—			0.2
Repayment of loan from investee		—			6.0
Acquisition related payments		—			(2.3	)
Land acquisition								(24.3	)		—
Acquisition-related payments (net of cash received of $2.5)								(9.2	)		—


Net cash used in investing activities of continuing operations		(39.1	)		(42.3	)		(81.1	)		(39.1	)
Net cash used in investing activities of discontinued operations		—			(0.7	)		—			—


Net cash used in investing activities		(39.1	)		(43.0	)		(81.1	)		(39.1	)

See accompanying notes

SCHOLASTIC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED

(Dollar amounts in millions, except per share data)


	Six months ended						Six months ended November 30,

	November 30, 2009			November 30, 2008			2010			2009

Cash flows provided by (used in) financing activities:
Borrowings under credit agreement and revolving loan		—			140.0
Repayment of credit agreement and revolving loan		—			(95.0	)
Cash flows (used in) provided by financing activities:
Repayment of term loan		(21.4	)		(21.4	)		(21.4	)		(21.4	)
Borrowings under Credit Agreement and Revolver								70.0			—
Repayment of Credit Agreement and Revolver								(70.0	)		—
Repurchase of 5% notes		(4.1	)		—			—			(4.1	)
Borrowings under lines of credit		104.5			319.9			78.6			104.5
Repayment of lines of credit		(99.4	)		(300.5	)		(79.8	)		(99.4	)
Repayment of capital lease obligations		(1.8	)		(2.4	)		(1.8	)		(1.8	)
Reacquisition of common stock		(1.0	)		(20.1	)		(165.7	)		(1.0	)
Proceeds pursuant to stock-based compensation plans								1.0			—
Payment of dividends		(2.7	)		(2.8	)		(5.4	)		(5.5	)
Other		(0.5	)		1.7			(0.9	)		(0.5	)

Net cash (used in) provided by financing activities of continuing operations		(26.4	)		19.4
Net cash provided by financing activities of discontinued operations		—			—

Net cash (used in) provided by financing activities		(26.4	)		19.4
Net cash used in financing activities of continuing operations								(195.4	)		(29.2	)
Net cash used in financing activities of discontinued operations								—			—


Net cash used in financing activities								(195.4	)		(29.2	)
Effect of exchange rate changes on cash and cash equivalents		(2.8	)		(1.7	)		3.3			(2.8	)

Net increase (decrease) in cash and cash equivalents		34.7			(88.6	)

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
Net (decrease) increase in cash and cash equivalents								(189.7	)		34.7
Cash and cash equivalents at beginning of period								244.1			143.6

Cash and cash equivalents at end of period, including cash of discontinued operations of $0.0 and $2.0 at November 30, 2009 and 2008, respectively	$	178.3		$	31.8
Cash and cash equivalents at end of period							$	54.4		$	178.3

See accompanying notes

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

1. Basis of Presentation

Principles of consolidation

The accompanying condensed consolidated financial statements ~~consist of~~include the accounts of Scholastic Corporation (the “Corporation”) and all wholly-owned and majority-owned subsidiaries (collectively, “Scholastic” or the “Company”). Intercompany transactions are eliminated in consolidation. 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, ~~2009.~~

2010 (the “Annual Report”).

The Company’s fiscal year is not a calendar year. Accordingly, references in this document to fiscal ~~2009~~2010 relate to the twelve month period ended May 31, ~~2009.~~2010.

Discontinued Operations

As more fully described in Note 2,3, “Discontinued Operations,” the Company ~~has~~ closed or sold several operations during fiscal 2008 and ~~fiscal~~ 2009, and presently holds for sale ~~other operations.~~one operation. All of these businesses are classified as discontinued operations in the Company’s financial statements.

The remaining assets and liabilities associated with the foregoing discontinued businesses or operations are presented in the Company’s ~~Condensed Consolidated Balance Sheets~~condensed consolidated balance sheets as “Current assets of discontinued operations” and “Current liabilities of discontinued operations” as of November 30, ~~2009,~~2010, May 31, ~~2009~~2010 and November 30, ~~2008.~~2009. In fiscal 2010, the Company sold a previously discontinued non-core book distribution business. The aggregate results of operations of these businesses for the six months ended November 30, ~~2009~~2010 and ~~2008~~2009 are included in the ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Operations~~operations as “(Loss) earnings from discontinued operations, net of tax.” The aggregate cash flows of these businesses are also presented separately in the Company’s ~~Consolidated Statements~~consolidated statements of ~~Cash Flows~~cash flows for the six months ended November 30, ~~2009~~2010 and ~~2008.~~2009. All corresponding prior year periods presented in the Company’s ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements and accompanying notes have been reclassified to reflect the discontinued operations presentation.

During the first quarter of fiscal 2011, the Company determined that its distribution facility in Danbury, Connecticut (the “Danbury Facility”) was no longer “held for sale.” Accordingly, the assets, liabilities and results of operations of the Danbury Facility are included in continuing operations for all periods presented.

Reclassification

The current presentation includes a net reclassification of certain costs to “Cost of goods sold” from “Selling, general and administrative expenses,” which totaled $3.9 for the three months ended November 30, 2009 and $6.1 for the six months ended November 30, 2009.

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 typically experiences losses from operations in the first and third quarters of each fiscal year. Due to the seasonal fluctuations that occur, the November 30, ~~2008 Condensed Consolidated Balance Sheet~~2009 condensed consolidated balance sheet is included for comparative purposes.

Use of estimates

The Company’s ~~Condensed Consolidated Financial Statements~~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~~condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, ~~future expectations,~~ 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~~on-going 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 income tax 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)

including, but not limited to: collectability of accounts receivable; sales returns; gross margin rates used to determine inventory values; gross profits for book fair operations during interim periods; amortization periods; stock-based compensation expense; pension and other post-retirement obligations; tax rates; recoverability of inventories, deferred income taxes and tax reserves, prepublication costs and royalty advances; and the fair value of goodwill and other intangibles.

Restricted Cash

The condensed consolidated balance sheets include restricted cash of $1.3, $0.0 and $0.0 as of November 30, 2010, May 31, 2010 and November 30, 2009, respectively, which is reported in “Other current assets.” This restricted cash was acquired with the assets of Marilyn Burn Education Associates (d/b/a Math Solutions) (“Math Solutions”), See Note 2, “Acquisition and Land Purchase,” for a further description of the acquisition.

New Accounting Pronouncements

In ~~December 2008,~~October 2009, the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) issued an ~~amendment~~update to existing standards for employer’s disclosures about postretirement benefit plan assets, which will be effective for fiscal years ending after December 15, 2009. The amendment will require additional disclosures regarding investment allocations, major categories, valuation techniques and concentrations of riskauthoritative guidance on the revenue recognition related to plan assets held in an employer’s defined benefit pension or post-retirement plan. It also requires disclosure of any effects of utilizing significant unobservable inputs upon the overall change in the fair value of the plan assets during the reporting period.multiple deliverable revenue arrangements. The ~~Company will comply with the disclosure requirements upon adoption.~~

~~In October 2009, the FASB issued Accounting Standard Update No. 2009-13, “Revenue Recognition (Topic 605)” (“ASU No. 2009-13”). The accounting standard update~~guidance addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. Vendors often provide multiple products or services to their customers. Those deliverables often are provided at different points in time or over different time periods. ~~ASU No. 2009-13~~The current authoritative guidance establishes the accounting and reporting guidance for arrangements under which the vendor will perform multiple revenue-generating activities. Specifically, this ~~Subtopic~~guidance addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. ~~ASU No. 2009-13~~This guidance will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company has not chosen early adoption and is evaluating the impact on the Company’s consolidated financial position, results of operations and cash flows.

In October 2009, the FASB issued ~~Accounting Standard Update No. 2009-14, “Software (Topic 985) Certain Revenue Arrangements That Include Software Elements” (“ASU No. 2009-14”).~~an update to authoritative guidance related to certain revenue arrangements that include software elements. The accounting ~~standard~~guidance update addresses the accounting revenue arrangements that contain tangible products and software and it affects vendors that sell or lease tangible products in an arrangement that contains software that is more than incidental to the tangible product as a whole. The ~~accounting standard amendment~~update clarifies what guidance should be used in allocating and measuring revenue. Tangible products containing software components and non-software components that function together to deliver the tangible product’s essential functionality are no longer within the scope of the software recognition guidance ~~in Subtopic 985-605.~~“Software – Revenue Recognition.” The amendment requires that hardware components of a tangible product containing software components always be excluded from the software revenue guidance. ~~ASU No. 2009-14~~This guidance will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company has not chosen early adoption and is evaluating the impact on the Company’s consolidated financial position, results of operations and cash flows.

~~Recently Adopted Accounting Pronouncements~~

In ~~August 2009,~~April 2010, the FASB issued ~~Accounting Standard Update No. 2009-05, “Fair Value Measurements and Disclosures - Measuring Liabilities at Fair Value” (“ASU No. 2009-05”). The~~an update provides clarification for circumstances in which a quoted price in an active market for an identical liability is not available. ASU No. 2009- 05 is effective for the first reporting period beginning after August 2009. See Note 13, “Fair Value Measurements” for a discussionto authoritative guidance on the ~~impact~~milestone method of revenue recognition. The objective of this ~~standard.~~

~~In September 2009,~~update is to provide guidance on defining a milestone and determining when it may be appropriate to apply the ~~Company adopted changes issued by~~milestone method of revenue recognition for research or development transactions. Research or development arrangements frequently include payment provisions whereby a portion or all of the ~~FASB~~consideration is contingent upon milestone events such as a specific result from the research or development efforts. An entity often recognizes these milestone payments as revenue in their entirety upon achieving the related milestone, commonly referred to ~~the authoritative hierarchy of U.S. generally accepted accounting principles (“GAAP”). These changes establish the FASB Accounting Standards Codification™~~ as the ~~source~~milestone method. The amendments in this update provide guidance on the criteria that should be met for determining whether the milestone method of ~~authoritative U.S. GAAP~~revenue recognition is appropriate. The amendments in this update are effective on a prospective basis for ~~all non-governmental entities. Rules~~milestones achieved in fiscal years, and ~~interpretive releases of~~interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. The Company has not chosen early adoption and is evaluating the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The adoption of these changes did not have a significant impact on the Company’s consolidated financial position, results of operations and cash flows.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

2. Acquisition and Land Purchase

On September 9, 2010, the Company purchased the assets of Math Solutions, an education resources and professional development company focusing on K-12 math instruction, for $8.0, net of cash. The Company intends to integrate this business with its existing educational technology businesses. As a result of this transaction, the Company recognized $6.9 of goodwill. Transaction costs of $0.4 were expensed in the second quarter of fiscal 2011, and are included in “Other expense income” on the Company’s condensed consolidated statements of operations. The results of operations of this acquisition subsequent to the acquisition date are included in theEducational Publishing segment.

In the current fiscal period, the Company purchased the land where its Corporate Headquarters are located for $24.3 and also satisfied capital lease obligations on this property of $1.3.

3. Discontinued Operations

InDuring fiscal 2008, the Company determined to sell or shut down its 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 operations in Argentina and Mexico, its door-to-door selling operations in Puerto Rico as well as its continuities business in Australia and New Zealand, 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.~~teachers. In fiscal 2010, the Company sold a previously discontinued non-core book distribution business. All of the above businesses are classified as discontinued operations in the Company’s financial statements.

The Company continues to monitor the expected cash proceeds to be realized from the disposition of discontinued ~~operations~~operations’ assets, and adjusts asset values accordingly.

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 ~~six month~~six-month period ended November 30, ~~2009.~~2010. During the first quarter of fiscal 2011, the Company determined that the Danbury Facility was no longer “held for sale.” Accordingly, the assets, liabilities and results of operations of the Danbury Facility are included in continuing operations for all periods presented.

During the second quarter of fiscal 2011, the Company began the process of settling the pension plan of Grolier Limited, a Canadian entity in the continuities business. Losses related to the recognition of prior service costs associated with the portion of the settlement completed in the second quarter are reflected in the table below. See Note 10, “Employee Benefit Plans,” for further details pertaining to the settlement.

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

Three months ended
November 30,

Six months ended
November 30,

2009

2008

2009

2008

Revenues

$
1.1

$
18.8

$
2.3

$
61.9

(Loss) gain on sale

(1.1
)

—

(1.1
)

10.5

Non-cash impairment charges and gain (loss) on operations

0.1

(20.9
)

2.0

(36.0
)
Income tax (expense) benefit

(0.3
)

5.5

(0.6
)

3.9

(Loss) earnings from discontinued operations, net of tax

$
(1.3
)
$
(15.4
)
$
0.3

$
(21.6
)

~~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:~~

November 30, 2009

May 31, 2009

November 30, 2008

Accounts receivable, net

7.4

13.6

26.5

Inventories, net

0.1

0.8

7.8

Other assets

16.9

16.6

39.0

Current assets of discontinued operations

$
24.4

$
31.0

$
73.3

Accounts payable

0.5

2.2

10.0

Accrued expenses and other liabilities

2.7

5.1

9.4

Current liabilities of discontinued operations

$
3.2

$
7.3

$
19.4


	Three months ended November 30,						Six months ended November 30,

	2010			2009			2010			2009

Revenues		—		$	1.1			—		$	2.3

Loss on sale		—			(1.1	)		—			(1.1	)
(Loss) earnings before income taxes		(2.1	)		0.1			(3.4	)		2.0
Income tax benefit (expense)		0.1			(0.3	)		0.4			(0.6	)


(Loss) earnings from discontinued operations, net of tax	$	(2.0	)	$	(1.3	)	$	(3.0	)	$	0.3

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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:



	*November 30, 2010*			*May 31, 2010*			*November 30, 2009*

Accounts receivable, net			—		$	3.7			7.4
Inventories, net			—			—			0.1
Other assets			10.2			9.2			9.4


Current assets of discontinued operations		$	10.2		$	12.9		$	16.9


Accounts payable			—			—			0.5
Accrued expenses and other liabilities			1.7			2.9			1.6

Current liabilities of discontinued operations		$	1.7		$	2.9		$	2.1

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

3.4. 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~~Advertising;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.

• 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 and services, 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. This segment is comprised of two operating segments.

•Media, Licensing and Advertisingincludes the production and/or distribution of media, consumer promotions and merchandising and advertising revenue, including sponsorship programs. This segment is comprised of three 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.

•~~Media, Licensing and Advertising~~includes 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 $12.2 and $5.6, respectively, for the quarter ended November 30, 2008, and $13.0 and $5.9, respectively, for the six months ended November 30, 2008, were reclassified to the Children’s Book Publishing and Distribution segment from the Media, Licensing and Advertising segment.


	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		Educational Publishing⁽¹⁾			Media, Licensing and Advertising		Overhead⁽²⁾			Total Domestic		International		Total


Three months ended November 30, 2009

Three months ended November 30, 2010

Revenues	$	368.8	$	122.6		$	37.8	$	—		$	529.2	$	130.9	$	660.1	$	387.3	$	101.6		$	40.9	$	—		$	529.8	$	145.9	$	675.7
Bad debt expense		1.4		1.0			—		—			2.4		2.0		4.4		2.3		—			0.1		—			2.4		0.6		3.0
Depreciation and amortization⁽³⁾		3.6		0.7			0.2		8.8			13.3		1.5		14.8		3.9		0.8			—		8.5			13.2		1.3		14.5
Amortization⁽⁴⁾		3.0		6.6			2.0		—			11.6		0.6		12.2		3.0		7.0			1.6		—			11.6		0.8		12.4
Asset impairments		—		36.3			—		—			36.3		3.8		40.1		—		—			—		—			—		—		—
Royalty advances expensed		4.5		—			0.3		—			4.8		0.3		5.1		3.2		0.2			0.1		—			3.5		0.8		4.3
Operating income (loss)		107.8		(4.1	)		2.6		(15.5	)		90.8		14.8		105.6
Expenditures for long-lived assets		11.0		7.0			1.5		4.2			23.7		1.6		25.3
Segment operating income (loss)																		97.3		11.0			4.7		(9.6	)		103.4		25.3		128.7
Expenditures for long-lived assets including royalty advances																		7.9		15.6			2.2		31.4			57.1		4.0		61.1

Three months ended November 30, 2009

Revenues																	$	368.8	$	122.6		$	37.8	$	—		$	529.2	$	130.9	$	660.1
Bad debt expense																		1.4		1.0			—		—			2.4		2.0		4.4
Depreciation and amortization⁽³⁾																		3.6		0.7			0.2		8.8			13.3		1.5		14.8
Amortization⁽⁴⁾																		3.0		6.6			2.0		—			11.6		0.6		12.2
Asset impairments																		—		36.3			—		—			36.3		3.8		40.1
Royalty advances expensed																		4.5		—			0.3		—			4.8		0.3		5.1
Segment operating income (loss)																		107.8		(4.1	)		2.6		(15.5	)		90.8		14.8		105.6
Expenditures for long-lived assets including royalty advances																		11.0		7.0			1.5		4.2			23.7		1.6		25.3

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

Three months ended
November 30, 2008

Revenues

$
392.9

$
91.0

$
47.4

$
—

$
531.3

$
122.0

$
653.3

Bad debt expense

4.5

0.6

0.4

—

5.5

1.7

7.2

Depreciation and amortization⁽³⁾

1.9

0.7

0.4

10.5

13.5

1.5

15.0

Amortization⁽⁴⁾

2.9

5.3

2.0

—

10.2

0.5

10.7

Royalty advances expensed

7.6

0.2

0.3

—

8.1

1.1

9.2

Operating income (loss)

105.1

13.8

4.0

(28.9
)

94.0

14.0

108.0

Expenditures for long-lived assets

14.1

9.8

3.2

7.3

34.4

2.8

37.2

Six months ended
November 30, 2009

Revenues

$
445.0

$
271.3

$
52.9

$
—

$
769.2

$
206.5

$
975.7

Bad debt expense

2.4

1.2

—

—

3.6

2.9

6.5

Depreciation and amortization⁽³⁾

6.9

1.6

0.4

17.6

26.5

3.0

29.5

Amortization⁽⁴⁾

5.5

13.4

4.2

—

23.1

1.2

24.3

Asset impairments

—

36.3

—

—

36.3

3.8

40.1

Royalty advances expensed

9.6

0.2

0.4

—

10.2

1.8

12.0

Operating income (loss)

60.3

37.2

(1.1
)

(39.0
)

57.4

12.9

70.3

Segment assets

523.3

314.0

66.7

508.7

1,412.7

270.6

1,683.3

Goodwill

54.3

88.4

5.9

—

148.6

8.4

157.0

Expenditures for long-lived assets

23.7

12.6

3.1

7.1

46.5

4.4

50.9

Long-lived assets⁽⁵⁾

181.5

167.5

25.0

218.1

592.1

72.0

664.1

Six months ended
November 30, 2008

Revenues

$
454.0

$
206.1

$
63.5

$
—

$
723.6

$
206.1

$
929.7

Bad debt expense

4.5

1.1

0.3

—

5.9

2.4

8.3

Depreciation and amortization⁽³⁾

8.1

2.0

0.5

16.8

27.4

3.3

30.7

Amortization⁽⁴⁾

5.5

10.6

3.5

—

19.6

1.1

20.7

Royalty advances expensed

12.2

0.5

0.4

—

13.1

2.1

15.2

Operating income (loss)

50.5

35.3

(0.8
)

(50.0
)

35.0

10.7

45.7

Segment assets

591.9

314.9

83.2

453.0

1,443.0

273.4

1,716.4

Goodwill

38.2

89.1

5.8

—

133.1

26.6

159.7

Expenditures for long-lived assets

24.8

15.4

6.7

12.8

59.7

5.9

65.6

Long-lived assets⁽⁵⁾

190.8

189.5

30.4

228.6

639.3

93.6

732.9

~~SCHOLASTIC CORPORATION~~

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

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


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

Six months ended November 30, 2010

Revenues	$	460.2	$	220.2	$	58.4		$	—		$	738.8	$	227.8	$	966.6
Bad debt expense		4.3		—		0.1			—			4.4		1.5		5.9
Depreciation and amortization⁽³⁾		7.5		1.4		0.5			16.9			26.3		2.6		28.9
Amortization⁽⁴⁾		6.3		13.5		3.3			—			23.1		1.4		24.5
Asset impairments		—		—		—			—			—		—		—
Royalty advances expensed		8.3		0.4		0.2			—			8.9		1.4		10.3
Segment operating income (loss)		45.7		39.5		1.8			(28.2	)		58.8		23.1		81.9
Segment assets		540.0		304.5		56.2			375.5			1,276.2		298.0		1,574.2
Goodwill		54.3		95.3		5.4			—			155.0		8.7		163.7
Expenditures for long-lived assets including royalty advances		20.9		22.5		4.2			36.9			84.5		7.1		91.6
Long-lived assets		182.4		175.6		19.8			249.9			627.7		73.0		700.7

Six months ended November 30, 2009

Revenues	$	445.0	$	271.3	$	52.9		$	—		$	769.2	$	206.5	$	975.7
Bad debt expense		2.4		1.2		—			—			3.6		2.9		6.5
Depreciation and amortization⁽³⁾		6.9		1.6		0.4			17.6			26.5		3.0		29.5
Amortization⁽⁴⁾		5.5		13.4		4.2			—			23.1		1.2		24.3
Asset impairments		—		36.3		—			—			36.3		3.8		40.1
Royalty advances expensed		9.6		0.2		0.4			—			10.2		1.8		12.0
Segment operating income (loss)		60.3		37.2		(1.1	)		(39.0	)		57.4		12.9		70.3
Segment assets		523.3		314.0		66.7			516.2			1,420.2		270.6		1,690.8
Goodwill		54.3		88.4		5.9			—			148.6		8.4		157.0
Expenditures for long-lived assets including royalty advances		23.7		12.6		3.1			7.1			46.5		4.4		50.9
Long-lived assets		181.5		167.5		25.0			225.6			599.6		72.0		671.6


(1)	~~During fiscal 2008, the Company determined to sell or shut down its domestic, Canadian~~Includes assets and ~~UK continuities businesses, and intends to sell the Maumelle Facility and the Danbury Facility. During fiscal 2009, the Company also ceased its~~results of operations acquired in ~~Argentina and Mexico, its door-to-door selling operations in Puerto Rico,~~a business combination as well as its continuities business in Australia and New Zealand, 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. In fiscal 2010, the Company sold a previously discontinued non-core book distribution business. All of ~~the above businesses are classified as discontinued operations in the Company’s financial statements and, as such, are not reflected in this table.~~September 9, 2010.

(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.~~Missouri and the Danbury facility.

(3)	Includes depreciation of property, plant and equipment and amortization of intangible assets.

(4)	Includes amortization of prepublication ~~costs~~ and production 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)

4.5. Debt

The following table summarizes debt as of the dates indicated:



	November 30, 2009				May 31, 2009				November 30, 2008				Carrying Value			Fair Value			Carrying Value			Fair Value			Carrying Value			Fair Value

Lines of Credit (weighted average interest rates of 3.0%, 3.3% and 4.5%, respectively)		$	13.0			$	10.9			$	27.4
Loan Agreement:
Revolving Loan (interest rate of 2.1% as of November 30, 2008)			—				—				45.0
Term Loan (interest rates of 1.1%, 1.2% and 4.7%, respectively)			114.4				135.8				157.2
5% Notes due 2013, net of discount			152.2				157.0				159.4
													*November 30, 2010*						*May 31, 2010*						*November 30, 2009*


Lines of Credit (weighted average interest rates of 4.0%, 3.9% and 3.0%, respectively)													$	7.2		$	7.2		$	7.5		$	7.5		$	13.0		$	13.0
Loan Agreement:
Revolving Loan														—			—			—			—			—			—
Term Loan (interest rates of 1.0%, 1.1% and 1.1%, respectively)														71.6			71.6			93.0			93.0			114.4			114.4
5% Notes due 2013, net of discount														152.4			154.8			152.3			151.3			152.2			143.8

Total debt			279.6				303.7				389.0			231.2			233.6			252.8			251.8			279.6			271.2


Less lines of credit, short-term debt and current portion of long-term debt			(55.8	)			(53.7	)			(70.2	)		(50.0	)		(50.0	)		(50.3	)		(50.3	)		(55.8	)		(55.8	)


Total long-term debt		$	223.8			$	250.0			$	318.8		$	181.2		$	183.6		$	202.5		$	201.5		$	223.8		$	215.4

Short-term debt’s carrying value approximates fair value. Fair value of the Loan Agreement approximates its carrying value due to its variable interest rate and stable credit rating. Fair values of the Notes were estimated based on market quotes, where available, or dealer quotes.

The following table sets forth the maturities of the Company’s debt obligations as of November 30, ~~2009~~2010, for the remainder of fiscal 2011 and thereafter:




Six-month period ending May 31:
2011	$	28.6
Fiscal years ending May 31:
2012		42.8
2013		159.8
2014		—
2015		—
Thereafter		—


Total debt	$	231.2

Lines of Credit

As of November 30, 2010, the Company’s domestic credit lines available under unsecured money market bid rate credit lines totaled $20.0. There were no outstanding borrowings under these credit lines at November 30, 2010, May 31, 2010 and ~~thereafter:~~November 30, 2009. All loans made under these credit lines are at the sole discretion of the lender and at an interest rate and term agreed to at the time each loan is made, but not to exceed 365 days. These credit lines may be renewed, if requested by the Company, at the option of the lender.

Six-month period ending May 31:

2010

$
34.4

Fiscal years ending May 31:

2011

42.8

2012

42.8

2013

159.6

2014

—

Thereafter

—

Total debt

$
279.6

As of November 30, 2010, the Company had various local currency credit lines, with maximum available borrowings in amounts equivalent to $33.8, 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. Borrowings and weighted average interest rates for these lines of credit are presented in the table above.

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”) entered into a $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 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.

On August 16, 2010, the Borrowers entered into an amendment to the Loan Agreement, which added certain provisions related to covenants and interest.

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, as amended, is based on (1) a rate equal to the higher of ~~(a)~~(i) the prime rate, ~~or (b)~~(ii) the prevailing ~~federal funds~~Federal Funds rate plus 0.500% or (iii) the Eurodollar Rate for a one month interest period plus 1%; or (2) an adjusted LIBOR rate plus an applicable margin, ranging from 0.500% to 1.250% based onupon the Company’s prevailing consolidated debt to total capital ratio. As of November 30, ~~2009,~~2010, there were no borrowings outstanding under the Revolving Loan.

As of November 30, 2010, the applicable margin ofon the Term Loan was ~~0.875%~~0.750% and the applicable margin on the Revolving Loan was ~~0.700%~~0.600%. 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 November 30, ~~2009~~2010, was ~~0.175%~~0.150%.

~~The fair value~~ As of November 30, 2010, $71.6 was outstanding under the Term Loan ~~Agreement approximates its carrying value due to its variable~~at an interest rate ~~and the Company’s stable credit rating.~~of 1.01%.

As of November 30, ~~2009, there was $0.5 of outstanding~~2010, standby letters of credit ~~issued~~outstanding under the Loan ~~Agreement.~~Agreement totaled $1.4. 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 November 30, ~~2009~~2010, 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.

The fair value of the 5% notes was $143.8 as of November 30, 2009, $129.6 as of May 31, 2009 and $135.6 as of November 30, 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~~$5.0 of the 5% Notes on the open market in fiscal ~~2009 and 2008, respectively. For~~2010. The Company did not make any additional purchases during the ~~six months~~six-month period ended November 30, ~~2009, the Company repurchased an additional $5.0 of the 5% notes on the open market for $4.1.~~

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

~~Lines of Credit~~

As of November 30, 2009, the Company’s domestic credit line available under unsecured money market bid rate credit lines totaled $20.0. There were no outstanding borrowings under the credit line at November 30, 2009, May 31, 2009 and November 30, 2008. All loans made under the credit line are at the sole discretion of the lender and at an interest rate and term, not to exceed 365 days, agreed to at the time each loan is made.

As of November 30, 2009, the Company’s foreign operations had various local currency credit lines, with maximum available borrowings in amounts equivalent to $51.8, 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 $13.0 at November 30, 2009 at a weighted average interest rate of 3.0%; $10.9 at May 31, 2009 at a weighted average interest rate of 3.3%; and $27.4 at November 30, 2008 at a weighted average interest rate of 4.5%.

~~The Company’s lines of credit carrying value approximated fair value as of November 30, 2009, May 31, 2009 and November 30, 2008, respectively.~~

As of November 30, 2009 and May 31, 2009, the Company had open standby letters of credit of $7.4 issued under certain credit lines, compared to $8.1 as of November 30, 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.

~~5. Comprehensive Income (Loss)~~

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

Three months ended November 30,

Six months ended November 30,

2009

2008

2009

2008

Net income (loss)

$
55.5

$
43.1

$
32.5

$
(6.0
)

Other comprehensive income (loss)

Foreign currency translation adjustments

2.2

(21.2
)

5.5

(33.4
)
Retirement plans and post-retirement healthcare, net of tax

0.7

1.5

1.2

2.2

Comprehensive income (loss)

$
58.4

$
23.4

$
39.2

$
(37.2
)

~~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 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 the accounting standard addressing 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 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 November 30,

Six months ended November 30,

2009

2008

2009

2008

Earnings from continuing operations

$
56.8

$
58.5

$
32.2

$
15.6

(Loss) earnings from discontinued operations, net of tax

(1.3
)

(15.4
)

0.3

(21.6
)
Net income (loss)

55.5

43.1

32.5

(6.0
)
Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings per share (in millions)

36.4

37.6

36.4

37.7

Dilutive effect of Class A Stock and Common Stock potentially issuable pursuant to stock-based compensation plans (in millions)

0.4

0.1

0.3

0.2

Adjusted weighted average Shares of Class A Stock and Common Stock outstanding for diluted earnings per share (in millions)

36.8

37.7

36.7

37.9

Earnings (loss) per share of Class A Stock and Common Stock:

Basic earnings (loss) per share:

Earnings from continuing operations

$
1.56

$
1.56

$
0.88

$
0.41

(Loss) earnings from discontinued operations, net of tax

$
(0.04
)
$
(0.41
)
$
0.01

$
(0.57
)
Net earnings (loss)

$
1.52

$
1.15

$
0.89

$
(0.16
)

Diluted earnings (loss) per share:

Earnings from continuing operations

$
1.54

$
1.55

$
0.88

$
0.41

Loss from discontinued operations, net of tax

$
(0.03
)
$
(0.40
)
$
0.00

$
(0.57
)
Net earnings (loss)

$
1.51

$
1.15

$
0.88

$
(0.16
)

Shares outstanding pursuant to compensation plans total 6.4 million as of November 30, 2009. Anti-dilutive options outstanding were 5.4 million and 6.2 million, as of November 30, 2009 and 2008, respectively.

~~During the six months ended November 30, 2009, the Company repurchased 54,000 common shares for approximately $1.0 pursuant to share buy-back programs authorized by the Board of Directors.~~2010.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

6. Comprehensive Income

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


	*Three months ended November 30,*				*Six months ended November 30,*

	2010		2009		2010		2009

Net income	$	74.9	$	55.5	$	39.7	$	32.5

Other comprehensive income, net:
Foreign currency translation adjustment		4.8		2.2		8.2		5.5
Pension and post-retirement adjustments		4.0		0.7		4.6		1.2

Total other comprehensive income, net:		8.8		2.9		12.8		6.7

Total comprehensive income	$	83.7	$	58.4	$	52.5	$	39.2

7. Earnings (Loss) Per Share

A portion of the Company’s restricted stock units (“RSUs”) granted to employees participate in earnings through cumulative non-forfeitable dividends payable to the employees upon vesting of the RSUs. For periods in which the Company has Net income, basic earnings per Common and Class A shares outstanding (the “Issued Shares”) is calculated as the lesser of:


	•	Net earnings divided by the weighted average shares outstanding of the Issued Shares during the period (the “Treasury Stock Method”); or

	•	The sum of earnings distributed in the period to the Issued Shares and undistributed earnings available to the Issued Shares (excluding earnings attributable to the participating RSUs) divided by the weighted average shares outstanding of the Issued Shares during the period (the “Two Class Method”).

Diluted earnings per share for periods in which the Company has Net income is calculated as the lesser of:

	•	The Treasury Stock Method incorporating the effect of dilutive shares; or

	•	The Two Class Method incorporating the effect of dilutive shares.

In periods of Net loss, dilutive earnings per share are not reported as the effect of the potentially dilutive shares becomes anti-dilutive.

In the three and six months ended November 30, 2009, the Treasury Stock Method and the Two Class Method did not produce different earnings per share values. In the three and six month periods ended November 30, 2010, the Treasury Stock Method produced higher earnings per share values of $0.01; accordingly, the Two Class method was used to calculate earnings per share for the three and six month periods ended November 30, 2010.

In a period in which the Company reports a discontinued operation, Earnings (loss) from continuing operations is used as the “control number” in determining whether potentially dilutive common shares are dilutive or anti-dilutive.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The following table summarizes the reconciliation of the numerators and denominators for the basic and diluted earnings (loss) per share computation for the three and six month periods ended November 30, 2010:



	Three months ended November 30, 2010			Six months ended November 30, 2010

Earnings from continuing operations attributable to Class A and Common Shares	$	76.6		$	42.5

(Loss) from discontinued operations attributable to Class A and Common Shares, net of tax		(2.0	)		(3.0	)

Net income attributable to Class A and Common Shares		74.6			39.5
Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings per share (in millions)		34.4			35.3

Dilutive effect of Class A Stock and Common Stock potentially issuable pursuant to stock-based compensation plans (in millions)		0.5			0.4

Adjusted weighted average Shares of Class A Stock and Common Stock outstanding for diluted earnings per share (in millions)		34.9			35.7

Earnings (loss) per share of Class A Stock and Common Stock:
Basic earnings (loss) per share:
Earnings from continuing operations	$	2.23		$	1.20
Loss from discontinued operations, net of tax	$	(0.06	)	$	(0.08	)
Net earnings	$	2.17		$	1.12

Diluted earnings (loss) per share:
Earnings from continuing operations	$	2.19		$	1.19
Loss from discontinued operations, net of tax	$	(0.05	)	$	(0.08	)
Net earnings	$	2.14		$	1.11

Earnings from continuing operations exclude earnings of $0.3 and $0.2 for the three and six months ended November 30, 2010, respectively, in respect of earnings attributable to participating RSUs.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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 three and six month periods ended November 30, 2009:



	Three months ended November 30, 2009			Six months ended November 30, 2009


Earnings from continuing operations	$	56.8		$	32.2
(Loss) earnings from discontinued operations, net of tax		(1.3	)		0.3
Net income		55.5			32.5
Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings per share (in millions)		36.4			36.4

Dilutive effect of Class A Stock and Common Stock potentially issuable pursuant to stock-based compensation plans (in millions)		0.4			0.3

Adjusted weighted average Shares of Class A Stock and Common Stock outstanding for diluted earnings per share (in millions)		36.8			36.7

Earnings (loss) per share of Class A Stock and Common Stock:
Basic earnings (loss) per share:
Earnings from continuing operations	$	1.56		$	0.88
(Loss) earnings from discontinued operations, net of tax	$	(0.04	)	$	0.01
Net earnings	$	1.52		$	0.89

Diluted earnings (loss) per share:
Earnings from continuing operations	$	1.54		$	0.88
Loss from discontinued operations, net of tax	$	(0.03	)	$	0.00
Net earnings	$	1.51		$	0.88

Potentially dilutive shares outstanding pursuant to compensation plans that were not included in the diluted earnings per share calculation because they were anti-dilutive were 4.4 million and 5.3 million for the three months ended November 30, 2010 and 2009, and 4.8 million and 5.5 million for the six months ended November 30, 2010 and 2009, respectively.

During the six months ended November 30, 2010, the Company repurchased 388,426 common shares on the open market for approximately $9.7 pursuant to a share buy-back program authorized by the Board of Directors.

In addition, on November 3, 2010, the Company announced the final results of a modified Dutch auction tender offer which expired on October 28, 2010. The Company accepted for purchase 5,199,699 of its common shares at a price of $30.00 per share for a total cost of $156.0, excluding related fees and expenses. The common shares purchased pursuant to the tender offer represented approximately 15.1% of the common shares outstanding as of October 27, 2010. The Company funded the purchase of the shares in the tender offer using cash on hand and short term borrowings under its existing credit facility, which borrowings were repaid prior to November 30, 2010.

As of November 30, 2010, $44.5 remains available for future purchases of common shares under the current repurchase authorization of the Board of Directors. See Note 13, “Treasury Stock,” for a more complete description of the Company’s share buy-back program.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

7.8. Goodwill and Other Intangibles

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

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



	Six months ended November 30, 2009		Twelve months ended May 31, 2009			Six months ended November 30, 2008			Six months ended November 30, 2010			Twelve months ended May 31, 2010			Six months ended November 30, 2009

Gross beginning balance									$	174.0		$	174.0		$	174.0
Accumulated impairment										(17.4	)		(17.0	)		(17.0	)


Beginning balance	$	157.0	$	164.4		$	164.4		$	156.6		$	157.0		$	157.0
Additions										7.1			—			—
Impairment charge		—		(17.0	)		—			—			(0.4	)		—
Deferred tax adjustment		—		16.1			—
Purchase adjustment		—		(0.7	)		—
Translation adjustment		—		(5.8	)		(4.7	)

Ending balance	$	157.0	$	157.0		$	159.7		$	163.7		$	156.6		$	157.0

~~At February 28, 2009,~~On September 9, 2010, the ~~total market value~~Company purchased the assets of Math Solutions, an education resources and professional development company focusing on K-12 math instruction, for $8.0, net of cash. The Company intends to integrate this business with its existing educational technology businesses. As a result of this acquisition the ~~Company’s outstanding Common~~Company recognized $6.9 of goodwill in the second quarter of fiscal 2011. The Company is currently reviewing its purchase accounting for the acquisition of Math Solutions, and, ~~Class A shares was less than~~upon completion of such review, expects to recognize other intangible assets apart from goodwill. The Company also recognized $0.2 of goodwill associated with an international acquisition in the second quarter.

As of May 31, 2010, the Company determined that the carrying value of its direct-to-home catalog business specializing in toys exceeded the ~~Company’s net assets. Due to the reduced total market~~fair value of ~~the Company’s Common Stock, the Company evaluated the goodwill for its~~this reporting ~~units for impairment as of February 28, 2009.~~unit. The Company employed internally developed discounted cash flow forecasts and market comparisons to determine the fair ~~values~~value of ~~its~~the reporting ~~units, based upon~~unit and the ~~best available financial data. The~~implied fair value of the reporting unit’s assets and liabilities. Accordingly, the Company ~~concluded that goodwill associated with the Company’s United Kingdom operations was impaired as~~recognized an impairment charge of ~~February 28, 2009, and recognized a goodwill impairment of $17.0. Operating results in the United Kingdom have declined in recent periods.~~$0.4 at May 31, 2010.

The purchase adjustments in fiscal 2009 are related to the acquisition of a school consulting and professional development services company in fiscal 2007. The deferred tax adjustment relates to a prior acquisition included in the Children’s Book Publishing and Distribution segment.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The following table summarizes ~~Other~~the activity in Total other intangibles subject to ~~amortization:~~amortization for the periods indicated:



	Six months ended November 30, 2009			Twelve months ended May 31, 2009			Six months ended November 30, 2008
										Six months ended November 30, 2010			Twelve months ended May 31, 2010			Six months ended November 30, 2009

Beginning balance	$	0.1		$	0.2		$	0.2		$	0.8		$	0.1		$	0.1
Additions		5.1			—			—			—			5.1			5.1
Impairment charge		(3.8	)		—			—			—			(3.8	)		(3.8	)
Other adjustments		(0.3	)		—			—			—			(0.3	)		(0.3	)
Amortization expense		—			(0.1	)		—			(0.1	)		(0.2	)		—
Foreign currency translation											0.1			(0.1	)		—


Net customer lists	$	1.1		$	0.1		$	0.2
Customer lists, net of accumulated amortization of $1.0, $0.9 and $0.7, respectively										$	0.8		$	0.8		$	1.1


Beginning balance	$	2.8		$	3.3		$	3.3		$	2.2		$	2.8		$	2.8
Reclassified from indefinite-lived intangible assets											10.7			—			—
Amortization expense		(0.2	)		(0.5	)		(0.4	)		(0.5	)		(0.6	)		(0.2	)

Other intangibles, net of accumulated amortization of $3.5, $3.0 and $2.7, respectively										$	12.4		$	2.2		$	2.6

Net other intangibles	$	2.6		$	2.8		$	2.9


Total other intangibles subject to amortization	$	3.7		$	2.9		$	3.1		$	13.2		$	3.0		$	3.7

Amortization expense for Total other intangibles totaled $0.6 for the six months ended November 30, 2010, $0.8 for the twelve months ended May 31, 2010 and $0.2 for the six months ended November 30, 2009.

During the first quarter of ~~the current~~ fiscal ~~year,~~2010, the Company and its joint venture partner terminated a book distribution joint venture in the United Kingdom. As a result of this transaction, the Company received a portion of the business and a related customer list previously held by the joint venture in exchange for the partial forgiveness of amounts owed to the Company by the joint venture and related entities. The Company recognized this customer list in the first quarter of fiscal 2010 with a carrying value of $5.1, which the Company intended to operate apart from its existing customer list. In the second quarter of fiscal 2010, the Company determined that, to maximize profitability, the acquired customer list should ultimately be combined with its existing customer list.

~~SCHOLASTIC CORPORATION~~

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

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

~~The~~ As a result, the Company assessed this customer list for impairment and determined that the customer list iswas impaired based upon the highest and best use for this asset. This assessment incorporated internally developed cash flow projections to measure fair value, as market data for this asset is not readily available. Accordingly, the Company recognized an impairment charge in the ~~current period~~second quarter of fiscal 2010 related to this asset of $3.8.

~~Also in the period, the~~The Company implemented certain strategic initiatives during fiscal 2010 to centralize publishing efforts within theChildren’s Book Publishing and Distribution segment. These initiatives included the elimination of the front list for certain library-specific titles. The Company will continue to serve the library market through other channels, notably the ~~Trade~~trade channel within theChildren’s Book Publishing and Distribution ~~segment.~~segment and various digital initiatives. As a result of these initiatives, and in tandem with reduced expectations in certainEducational Publishing print businesses, the Company determined that ~~the titles and~~ intangible assets of $28.7 and prepublication costs of $7.6 associated with such businesses, totaling $36.3, were impaired. The Company employed qualitative and internally developed quantitative methods, including discounted cash flow models, to determine the fair value of the ~~assets~~asset to a market ~~participant would receive upon sale of the assets.~~participant. Significant inputs included a best use analysis of the existing market for the ~~assets,~~asset, including uses for the ~~assets~~asset other than ~~their~~its current usage, resulting in a determination that the market for the ~~assets~~asset had declined significantly.

~~Amortization expense for Other intangibles totaled $0.2~~In the fourth quarter of fiscal 2010, the Company determined that the fair value of the trademark associated with the Company’s direct-to-home catalog business specializing in toys was less than the carrying value of the trademark. The Company used historical and ~~$0.4 for~~projected results while applying a residual income fair value method to make this determination and recognized an impairment of this trademark of $2.6.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

In the ~~six months~~three month period ended November 30, ~~2009~~2010, the Company determined that certain intangible assets associated with publishing and ~~2008, respectively,~~trademark rights, which were previously accounted for as indefinite-lived assets, were no longer indefinite-lived. Accordingly, the Company assessed these assets for impairment as of September 1, 2010, and ~~$0.6 for~~subsequently commenced amortization of the ~~twelve months ended May 31, 2009.~~assets. The Company determined that the fair value of the assets exceeded their carrying value as of September 1, 2010, and therefore no impairment was recognized. The Company employed Level 3 fair value measurement techniques to determine the fair value of these assets as of September 1, 2010, including primarily the relief from royalty method.

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



	Six months ended November 30, 2009		Twelve months ended May 31, 2009		Six months ended November 30, 2008		*November 30, 2010*		*May 31, 2010*		*November 30, 2009*


Net carrying value by major class:
Titles	$	—	$	28.7	$	28.7	$	—	$	—	$	—
Trademarks and other		15.1		15.2		15.3

Trademarks and Other								1.8		12.5		15.1

Total	$	15.1	$	43.9	$	44.0	$	1.8	$	12.5	$	15.1

8.9. Investments

Included in “Other assets and deferred charges” on the Company’s condensed consolidated balance sheets were investments of $22.5, $20.6 and $23.8 at November 30, 2010, May 31, 2010 and November 30, 2009, respectively.

The Company owns a non-controlling ~~interests~~interest in a book distribution business located in the United Kingdom. Results of these operations have been negatively impacted by overall market conditions, and in fiscal 2009 the Company determined that these assets were other than temporarily impaired. In the three-month period ended February 28, 2009, the Company recorded impairments on investments related to these operations of $13.5. The carrying value of ~~these assets is~~this cost-method investment was $9.1 as of November 30, ~~2009.~~ 2010.

The ~~United Kingdom~~Company’s investment in Usborne, which consists of a 26.2% non controlling interest in a children’s book publishing ~~and distribution market continues to experience difficulties, and~~business located in the ~~Company~~UK, is ~~monitoring~~accounted for using the equity method of accounting. The net value of this investment at November 30, 2010 was $12.8.

The Company maintains a 12.25% equity interest in an entity that produces and distributes educational children’s television programming which is accounted for ~~future indicators~~using the equity method of ~~impairment.~~accounting. The ~~Company’s aggregate carrying amount~~net value of ~~all cost method investments is $10.6, $10.6~~this investment at November 30, 2010 was $0.6. The Company does not have a contractual commitment to fund this entity prospectively, and ~~$19.9~~has not guaranteed any liabilities of the entity.

Income from equity joint ventures totaled $1.1 for the ~~periods~~six months ended November 30, ~~2009, May 31, 2009~~2010 and $0.6 for the six months ended November 30, ~~2008, respectively.~~2009.

In the fourth quarter of fiscal 2010, the Company determined that a cost-method investment in a U.S. based internet company was other than temporarily impaired. Accordingly, the Company recognized a loss of $1.5.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The following table summarizes the Company’s investments as of the dates indicated:



	*November 30, 2010*		*May 31, 2010*		*November 30, 2009*

Cost method investments:
The Book People, Ltd.	$	9.1	$	9.1	$	9.1
KIDZUI		—		—		1.5

Total cost method investments	$	9.1	$	9.1	$	10.6


Equity method investments:
Usborne	$	12.8	$	10.8	$	12.5
Other		0.6		0.7		0.7

Total equity method investments		13.4		11.5		13.2



Total	$	22.5	$	20.6	$	23.8

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

9.10. Employee Benefit Plans

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


	Pension Plans Three months ended November 30,						Post-Retirement Benefits Three months ended November 30,
													Pension Plans Three months ended November 30,						Post-Retirement Benefits Three months ended November 30,
	2009			2008			2009			2008
													2010			2009			2010			2009

Components of net periodic benefit costs:
Service cost	$	—		$	1.9		$	—		$	—		$	0.1		$	—		$	—		$	—
Interest cost		2.5			2.4			0.4			0.4			2.2			2.5			0.4			0.4
Expected return on assets		(2.0	)		(2.7	)		—			—			(2.3	)		(2.0	)		—			—
Net amortization of prior service credit		—			—			(0.2	)		(0.2	)		—			—			(0.2	)		(0.2	)
Amortization of loss		0.2			0.5			0.2			0.2			0.4			0.2			0.6			0.2
Settlement of Canadian plan														3.4

Net periodic benefit costs	$	0.7		$	2.1		$	0.4		$	0.4		$	3.8		$	0.7		$	0.8		$	0.4


	Pension Plans Six months ended November 30,						Post-Retirement Benefits Six months ended November 30,
													Pension Plans Six months ended November 30,						Post-Retirement Benefits Six months ended November 30,
	2009			2008			2009			2008
													2010			2009			2010			2009

Components of net periodic benefit costs:
Service cost	$	0.1		$	4.0		$	—		$	0.1		$	0.2		$	0.1		$	—		$	—
Interest cost		4.9			5.1			0.7			0.7			4.4			4.9			0.9			0.7
Expected return on assets		(4.1	)		(5.6	)		—			—			(4.7	)		(4.1	)		—			—
Net amortization of prior service credit		—			(0.1	)		(0.3	)		(0.4	)		—			—			(0.3	)		(0.3	)
Amortization of loss		1.4			1.0			0.3			0.3			0.9			1.4			1.1			0.3
Settlement of Canadian plan														3.4			—			—			—

Net periodic benefit costs	$	2.3		$	4.4		$	0.7		$	0.7		$	4.2		$	2.3		$	1.7		$	0.7

Effective June 1, 2009, the Company modified the ~~U.S.~~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. As the plan no longer has any active participants, the Company has determined that actuarial losses, previously recognized as a component of Other Comprehensive Income should now be amortized over the remaining expected lives of participants, rather than the remaining expected service period.

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.

In the three months ended November 30, 2010, the Company settled the majority of its outstanding liabilities of the Canadian Pension Plan by purchasing annuities to service these liabilities prospectively. Accordingly, net liabilities of $1.3 were settled with $1.2 of contributions above plan assets and the Company recognized ~~a $3.0 curtailment gain associated with this action in fiscal 2009, resulting from recognition~~pension expense through other comprehensive income of ~~an unamortized prior service credit. This action was taken by the Company as a cost reduction measure.~~$3.4.

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. For the six months ended November 30, ~~2009,~~2010, the Company contributed ~~$6.5~~$2.3 to the U.S. Pension Plan, $0.3 to the UK Pension Plan and ~~$0.6~~$1.2 to the Canadian Pension Plan.

The Company expects, based on actuarial calculations, to contribute cash of approximately ~~$13.6 in the aggregate~~$6.0 to the ~~U.S.~~ Pension ~~Plan, the UK Pension Plan and the Canadian Pension Plan~~Plans for the fiscal year ending May 31, ~~2010.~~2011.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

~~10. Share-Based Payments~~11. Stock-Based Compensation

The Company provides for equity-based incentives to be awarded to key employees and non-employee directors. These incentives are administered through various plans, and currently consist of stock options and restricted stock units. The Company also provides a management and an employee stock purchase plan. The following table summarizes stock-based compensation ~~expense for share-based awards~~ included in Selling, general and administrative expenses for the periods indicated:


	Three months ended November 30,				Six months ended November 30,				*Three months ended November 30,*				*Six months ended November 30,*

	2009		2008		2009		2008		2010		2009		2010		2009

Stock option expense	$	2.1	$	1.3	$	5.1	$	2.8	$	1.6	$	2.1	$	5.4	$	5.1
Restricted stock unit expense		0.9		3.0		2.8		3.7		0.9		0.9		2.3		2.8
Management stock purchase plan		0.4		—		0.4		—		0.5		0.4		0.5		0.4
Employee stock purchase plan		0.1		0.3		0.1		0.3		0.1		0.1		0.2		0.1

Total stock-based compensation	$	3.5	$	4.6	$	8.4	$	6.8	$	3.1	$	3.5	$	8.4	$	8.4

During each of the three and six ~~months~~month periods ended November 30, ~~2009~~2010 and ~~2008,~~2009, shares of Common Stock issued by the Corporation pursuant to its stock-based compensation plans were not material.

~~11. Accrued~~12. Severance ~~and Other Restructuring Costs~~

~~In the second quarter of fiscal 2010, the Company initiated restructuring activities in the United Kingdom operations within the Company’s~~~~International~~ segment, which resulted in severance expense of $0.8 and general and administrative expenses of $1.1. Future costs associated with this restructuring are anticipated to result in additional expense of approximately $4.0. The prior year period includes amounts associated with cost reduction measures, including employee headcount reductions associated with a voluntary retirement program and other actions totaling $14.4.

The table below provides information regarding the severance ~~costs~~cost appearing on the Company’s ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Operations~~operations associated with ~~these~~certain cost reduction measures.

Accrued severance of $0.9, $3.4 and $1.5 as of November 30, 2010, May 31, 2010 and November 30, 2009, respectively, is included in ~~Other~~“Other accrued ~~expenses~~expenses” on the Company’s ~~Condensed Consolidated Balance Sheets.~~condensed consolidated balance sheets.


	Six months ended November 30, 2009				Twelve months ended May 31, 2009				Six months ended November 30, 2008				Six months ended November 30, 2010				Twelve months ended May 31, 2010				Six months ended November 30, 2009

Beginning balance		$	3.4			$	0.4			$	0.4			$	3.4			$	3.4			$	3.4
Accruals			5.4				23.9				14.4				3.1				9.2				5.4
Payments			(7.3	)			(20.9	)			(9.1	)			(5.6	)			(9.2	)			(7.3	)

Ending balance		$	1.5			$	3.4			$	5.7			$	0.9			$	3.4			$	1.5

~~12.~~13. Treasury Stock

On ~~May 28, 2008,~~December 16, 2009, the Company announced that its Board of Directors had authorized a ~~new~~further program to ~~repurchase~~purchase up to $20.0 of its Common Stock, from time to time as conditions allow, on the open market or through negotiated private transactions. OnDuring the six months ended November ~~20, 2008,~~30, 2010, the Company repurchased 388,426 shares on the open market for approximately $9.7 at an average cost of $24.98 per share pursuant to this program.

In addition, pursuant to a subsequent Board of Directors ~~authorized~~authorization, the Company commenced a ~~further program~~modified Dutch auction tender offer on September 28, 2010, which expired on October 28, 2010. Pursuant to ~~repurchase up to an additional $10.0~~this offer, the Company purchased 5,199,699 of its ~~Common Stock~~common shares at a price of $30.00 per share for a total cost of $156.0, excluding related fees and expenses. The common shares purchased represented approximately 15.1% of the common shares outstanding as of October 27, 2010. The Company funded the purchase of the shares in the tender offer using cash on ~~February 4, 2009,~~hand and short term borrowings under its existing credit facility, which borrowings were repaid prior to November 30, 2010.

As of November 30, 2010, $44.5 remains available for future purchases under the current Board of Directors ~~authorized an additional program to repurchase up to another $5.0 of its Common Stock, to~~authorization, which purchases may be ~~funded with available cash, pursuant to which the Company could purchase shares,~~made from time to time as conditions allow, on the open ~~market. During the six months ended November 30, 2009, the Company repurchased 54,000 shares on the open~~ market ~~for approximately $1.0~~or in negotiated private transactions.

The repurchase program may be suspended at an average cost of $19.42 per share. As of November 30, 2009, the program is virtually completed. See Part II – Other Information, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” and Note 15, “Subsequent Events” for additional details on the share buy back program.any time without prior notice.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

~~13.~~14. Fair Value Measurements

~~On June 1, 2008, the Company adopted a new~~The accounting standard regarding fair value measurements for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis in the Company’s financial statements. The Financial Accounting Standards Board issued a one year deferral of the fair value measurement requirements for non financial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis at the time of issuance. The Company adopted the remainder of the new standard on June 1, 2009. The accounting standard requires that the Company determine the appropriate level in the fair value hierarchy for each fair value measurement. The fair value hierarchy prioritizes the inputs, which refer to assumptions that market participants would use in pricing an asset or liability, based upon the highest and best use, into three levels as follows:


•	Level 1Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

•	Level 2Observable inputs other than unadjusted quoted prices in active markets for identical assets or liabilities such as

	o	Quoted prices for similar assets or liabilities in active markets
	o	Quoted prices for identical or similar assets or liabilities in inactive markets
	o	Inputs other than quoted prices that are observable for the asset or liability
	o	Inputs that are derived principally from or corroborated by observable market data by correlation or other means

•	Level 3Unobservable inputs in which there is little or no market data available, which are significant to the fair value measurement and require the Company to develop its own assumptions.

The Company’s financial assets and liabilities measured at fair value consisted of cash and cash equivalents, debt and foreign currency forward contracts, 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 Company employs Level 2 fair value measurements for the disclosure of the fair value of its 5% Notes and its various lines of credit. See Note 5, “Debt,” for a more complete description of fair value measurements employed. 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. ~~For~~See Note 16, “Derivatives and Hedging,” for a more complete description ~~please see Note 4, “Debt.”~~of fair value measurements employed.

~~Non financial~~Non-financial assets and liabilities for which the Company employs fair value measures on a non-recurring basis include:


	•	long-lived assets ~~when impaired,~~
	•	assets acquired in a business combination
	•	goodwill and indefinite-lived intangible assets ~~when impaired, and~~
	•	long-lived assets held for sale

Level 2 and ~~level~~Level 3 inputs are employed by the Company in the fair value measurement of these assets and liabilities. In ~~the current period,~~fiscal 2010, the Company recognized impairments of indefinite-lived and long-lived assets totaling ~~$40.1.~~$43.1. In fiscal 2011, the Company acquired certain assets in a business combination for $8.0, net of cash acquired. The Company ~~used level 3 inputs in~~has not yet completed its ~~determination of the fair value of these impaired assets.~~purchase price allocation for this acquisition. See Note 7,8, “Goodwill and Other Intangibles,” for a discussion of the fair value measures employed in these asset impairment and acquisition analyses.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

~~14.~~15. Income Taxes

The Company calculates its interim income tax provision in accordance with ~~the~~current authoritative accounting ~~standards covering interim financial reporting and accounting for income taxes in interim periods.~~guidance. 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 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’s annual effective tax rate for the fiscal year ending May 31, ~~2010~~2011 is currently expected to be approximately ~~46%~~43%. The Company’s expected full year effective tax rate exceeds statutory rates primarily as a result of net operating losses in foreign jurisdictions, mainly in the ~~UK,~~United Kingdom, where the Company does not expect to realize future tax benefits. As a result, valuation allowances are provided for the net operating loss carry forwards in these jurisdictions.

The Company recognizes tax benefits of uncertain tax positions in accordance with the current accounting guidance pertaining to uncertainty in income taxes. The Company does not currently anticipate a material change to its unrecognized tax benefits within twelve months of November 30, ~~2009; however,~~2010, notwithstanding changes expected to result from the settlement of the IRS examination for fiscal years ended May 31, 2003 through 2006. However, actual developments can change these expectations, including the final terms of settlement of ~~audits.~~such audit.

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 is currently ~~engaged in an IRS examination for the 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 31, 2002 ~~2003 and~~through 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 settled within that period, the Company will make any necessary adjustments to its unrecognized tax benefits.

~~15.~~16. Derivatives and Hedging

The Company enters into foreign currency derivative contracts to economically hedge the exposure to foreign currency fluctuations associated with the forecasted purchase of inventory. These derivative contracts are economic hedges and are not designated as cash flow hedges. The Company marks-to-market these instruments and records the changes in the fair value of these items in current earnings, and recognizes the unrealized gain or loss in other current liabilities. Unrealized gains of $0.1 were recognized at November 30, 2010 and unrealized losses of $1.0 were recognized at November 30, 2009.

The Company also enters into foreign currency derivative contracts to hedge the foreign exchange risk associated with certain receivables denominated in foreign currencies. The Company marks-to-market these instruments and records the changes in the fair value of these items in current earnings offsetting the foreign exchange gains and losses arising from the effect of changes in exchange rates used to measure the related assets. Unrealized gains related to these derivatives were $0.2 and $0.0 at November 30, 2010 and 2009, respectively.

17. Subsequent ~~Events~~Event

On December ~~16, 2009,~~15, 2010, the Company announced that the Board of Directors ~~had~~ declared a ~~quarterly~~ cash dividend of ~~$0.075~~$0.10 per ~~share~~Class A and Common share. The dividend is payable on March 15, ~~2010~~2011 to shareholders of record ~~of the Corporation’s Class A Stock and Common Stock~~ as of January ~~29, 2010.~~

On December 16, 2009, the Company also announced that its Board of Directors had authorized a further program to repurchase up to $20.0 of its Common Stock, from time to time as conditions allow, on the open market or in negotiated private transactions.

~~Subsequent events have been evaluated through December 21, 2009, which is the filing date of the Company’s report with the SEC for the quarter ended November 30, 2009.~~31, 2011.

SCHOLASTIC CORPORATION

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

Overview and Outlook

During the second quarter of fiscal 2010, the Company delivered strong results, with a nearly 100% increase in higher margin educational technology sales, as well as margin benefit from targeted price increases and Company-wide cost reductions. On a continuing operations basis, revenue for the quarter was $660.1 million, up 1% from $653.3 million in the prior period, and earnings per diluted share were $1.54, compared to $1.55 a year ago. Revenue in the Educational Publishing segment in the quarter rose 35% driven by an almost 100%, or over $25 million, increase in sales of educational technology and related services. This was partially offset by a decline in revenues in the School Book Clubs business as a result of fewer orders related to planned cuts in promotion spending and the late start of the school year. Teacher layoffs and reassignments in some districts also disrupted book club ordering, primarily in September

~~Earnings from continuing operations, net of tax,~~Revenues for the quarter ended November 30, ~~2009~~2010 were ~~$56.8~~$675.7 million, ~~compared to earnings~~up 2.4% from ~~continuing operations, net of tax, of $58.5~~$660.1 million in the prior fiscal year period. Net income for the quarter ended November 30, ~~2008. During~~2010 was $74.9 million, up $19.4 million from $55.5 million in the ~~second~~prior fiscal year period. Consolidated earnings per diluted share were $2.14 versus $1.51 in the prior fiscal year quarter. The prior year fiscal quarter ~~the Company consolidated supplemental non-fiction~~includes non-cash asset write-downs of $40.1 million. The current fiscal quarter results include higher revenues in Trade, School Book Fairs and ~~library print publishing activities into the~~ International, partially offset by lower sales of educational technology relative to a year ago, as well as higher promotion spending in School Book Clubs and increased investments in digital initiatives.

TheChildren’s Book Publishing and Distributionsegment ~~resulting~~reflected increased revenue in ~~a non-cash charge~~School Book Fairs and Trade, with School Book Clubs maintaining last year’s sales and teacher participation levels. The Company continued to execute its long-term strategic plan and move forward with key digital initiatives and achieved continued growth in on-line ordering, following full implementation of ~~$36.3 million.~~the new Clubs ordering platform. In addition, the Company ~~recorded~~began testing its children’s eBook offering with children and families, as well as previewing it with publishers, in preparation for a ~~non-cash charge~~spring beta launch and full rollout next fall.

Sales of ~~$5.7 million related~~educational technology did not reach last year’s record levels, when the Company benefited from the 2009 federal stimulus program. However, sales were up over 50% compared to restructuring efforts and asset impairments in the United Kingdom. The results in the current period reflect these one-time charges totaling $42.0 million. The prior year period included one-time expenses, primarily severance, of $10.9 million related to the Company’s cost reduction plans.pre-stimulus levels two years ago, driven by a larger customer base.

During the second quarter the Company ~~completed~~repurchased approximately 5.2 million shares of its Common Stock at $30.00 per share, returning approximately $156 million to shareholders, funded with cash and a temporary draw-down under its credit facility, which was repaid by quarter end. The Company had total debt of $231.2 million at the ~~sale~~end of ~~a previously discontinued non-core book distribution business. The results of this business have been included in discontinued operations through the date of the sale.~~

~~During~~ the second quarter, ~~the Company~~down from $279.6 million a year ago and continued to maintain a strong balance sheet. In addition, improved earnings and working capital improvements, specifically in accounts payable and inventory management, resulted in strong cash flow, increased the Company’s cash by $148.5 million and decreased debt balances by $109.4 million compared to November 30, 2008.

~~These results position the Company well to achieve its fiscal 2010 plan, reaching 9% operating margins if the Company attains the upper end of such plan, while continuing~~ to maintain a strong balance sheet and ~~achieving increased~~free cash flow. ~~This is based on~~

While positive, these results were below the ~~following factors:~~


	•	~~The year-to-date expansion of sales~~Company’s fiscal 2011 plan, reflecting lower spending by school districts and lower than expected revenue in Clubs. For the remainder of the fiscal year, the~~Educational Publishing~~ ~~segment should position the Company to continue to benefit from incremental sales in this segment associated with the federal stimulus funding for this fiscal year~~

	•	~~Planned investments in new educational technology products and a strategic expansion of the sales and service organization in Scholastic Education~~

	•	~~Continued investment in the Book Clubs business to expand COOL and PCOOL (PARENT COOL) enabling the Company to reach a broader audience and provide a streamlined customer purchase experience~~

	•	~~Planned restructuring of the UK business where the Company expects this restructuring to result in reduced losses in the second half of fiscal 2010~~

~~The~~ Company ~~anticipates~~expects that ~~the strong first half profit improvement~~sustained higher service revenue and new product launches will ~~continue at a lower rate~~enable it to hold sales in Scholastic Education level with those in the ~~second half~~prior year period, in spite of ~~fiscal 2010 due to an increase in employee benefits including~~a continued challenging funding environment. In addition, the ~~reinstatement of the incentive compensation plan as a result of higher educational technology sales,~~Company believes that increased on-line ordering, as well as ~~higher employee medical expenses. Educational technology~~this fall’s increased promotional spending, will generate modest growth ~~is expected~~in clubs during the remainder of the year.

Based on the factors referred to ~~slow in~~above and its year-to-date results, the ~~second half~~Company expects fiscal 2011 revenue of ~~fiscal 2010, as~~$1.9 to $1.95 billion and earnings per diluted share from continuing operations of $1.80 to $2.05, before the ~~first half benefited from~~impact of any one-time items. The foregoing includes a benefit of approximately $0.15 per diluted share associated with the ~~California adoption~~Company’s share repurchase pursuant to the tender offer. The Company continues to expect free cash flow of ~~READ180~~^® ~~and System 44~~^TM~~, which are not expected~~$90 million to be significant in the second half, and a larger percentage of service business is anticipated in the second half, as well as higher prepublication amortization and selling expenses, which will have an impact on Scholastic Education’s margins$100 million.

Results of Continuing Operations

and Discontinued Operations

Revenues for the quarter ended November 30, ~~2009~~2010 increased by ~~$6.8~~$15.6 million, or ~~1.0%~~2.4%, to ~~$660.1~~$675.7 million, compared to ~~$653.3~~$660.1 million in the prior fiscal year ~~quarter. This was due to~~quarter, driven by higher ~~revenues in the~~~~Educational Publishing~~ ~~and~~~~International~~ ~~segments of $31.6 million and $8.9 million, respectively, partially offset by lower~~ revenues in theChildren’s Book Publishing and Distributionsegment of $18.5 million, theInternationalsegment of $15.0 million and theMedia, Licensing and Advertising ~~segments~~segment of ~~$24.1~~$3.1 million, ~~and $9.6 million, respectively. For~~partially offset by lower revenues in theEducational Publishing segment of $21.0 million. Revenues for the six months ended November 30, ~~2009, revenues increased $46.0~~2010 decreased by $9.1 million ~~or 4.9%,~~ to ~~$975.7~~$966.6 million, compared to ~~$929.7~~$975.7 million in the prior year fiscal ~~year~~ period primarily due to ~~higher~~the lower revenues of $51.1 million in theEducational Publishing segment, partially offset by ~~lower~~higher revenues ~~from~~in the~~Media, Licensing and Advertising~~ ~~and~~Children’s Book Publishing and Distribution, ~~segments.~~

Cost of goods sold decreased to $269.7 million, or 40.9% of revenues, for the quarter ended November 30, 2009, as compared to $281.2 million, or 43.0% of revenues, in the prior fiscal year quarter, primarily due to growth in higher margin educational technology sales and

~~SCHOLASTIC CORPORATION~~

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

improved pricing. For the six months ended November 30, 2009, cost of goods sold decreased to $425.8 million, or 43.6% of revenues, compared to $427.2 million, or 46.0% of revenues, in the prior fiscal year period, primarily due to the growth in higher margin educational technology sales, improved pricing Media, Licensing and ~~reduced editorial costs.~~

~~Selling, general~~ Advertisingand administrative expenses (“SG&A”), excluding severance expense, for the quarter were $224.4 million, or 34.0% of revenue, as compared to $230.5 million, or 35.3% of revenue, in the prior fiscal year quarter, primarily resulting from reduced promotion spending and higher revenues as well as reduced spending due to the implementation of cost cutting measures, partially offset by the inclusion of incentive compensation expense related to the higher educational technology sales and higher sales tax expense. For the six months ended November 30, 2009, SG&A, excluding severance expense, was $398.1 million, or 40.8% of revenues, as compared to $403.4 million, or 43.4% of revenues, in the prior year fiscal period. The decrease is primarily related to higher revenue and reduced promotion spending, partially offset by the incentive compensation expense related to the higher educational technology sales and higher sales tax expense.

Bad debt expense decreased to $4.4 million for the quarter ended November 30, 2009, compared to $7.2 million in the prior fiscal year quarter. For the six months ended November 30, 2009, bad debt expense decreased by $1.8 million to $6.5 million from $8.3 million in the prior fiscal year period. The decrease in both periods was primarily in the~~Children’s~~ International~~Book Publishing and Distribution~~ ~~segment, as the prior year periods reflected accruals for increased credit risk for certain customers.~~

Severance expense decreased by $10.3 million to $1.1 million for the quarter ended November 30, 2009, compared to $11.4 million for the prior fiscal year quarter. The Company initiated restructuring activities in the United Kingdom in the second quarter, which resulted in severance expense of $0.8 million. For the six months ended November 30, 2009, severance expense decreased by $9.0 million to $5.4 million, compared to $14.4 million in the prior year.

~~In the current quarter, the Company recognized $40.1 million in asset impairments primarily in the~~~~Educational Publishing~~ ~~segment. As part of the Company’s ongoing plan to reduce costs and consolidated publishing activities, the~~~~Educational Publishing~~ segment’s supplemental print non-fiction and reference publishing for library titles has been consolidated into the Children’s Book segment. In connection with this consolidation, the Company recorded a non-cash charge for impairment of intangible and prepublication costs associated with print publishing for libraries totaling $36.3 million during the quarter ended November 30, 2009. Also included in the quarter is an impairment charge of $3.8 million related to a customer list acquired in connection with the dissolution of a joint venture in the United Kingdom. The Company commenced restructuring activities in the United Kingdom, including the integration of this customer list, resulting in the impairment.segments.

SCHOLASTIC CORPORATION

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

~~The resulting operating income~~Cost of goods sold as a percentage of revenue for the quarter ended November 30, ~~2009 was $105.6 million,~~2010 increased to 43.8%, compared to ~~$108.0~~41.4% in the prior fiscal year quarter. Cost of goods sold as a percentage of revenue for the six months ended November 30, 2010 increased to 45.9%, compared to 44.3% in the prior fiscal year. The increase in both periods is primarily related to product, fulfillment and postage costs attributable to increased promotional activities in the Company’sChildren’s Book Publishing and Distribution segment. Components of Cost of goods sold for the three and six months ended November 30, 2010 and 2009 are as follows:



	*Three months ended November 30,*				*Six months ended November 30,*

	2010		2009		2010		2009

Product, service and production costs	$	180.1	$	167.6	$	257.4	$	255.7
Royalty costs		27.4		30.2		46.7		50.6
Prepublication and production amortization		12.4		12.2		24.5		24.3
Postage, freight, shipping, fulfillment and all other costs		76.3		63.6		115.3		101.3

Total	$	296.2	$	273.6	$	443.9	$	431.9

Selling, general and administrative expenses increased to $232.3 million in the quarter, or 34.4% of revenue, compared to $220.5 million, or 33.4% of revenue, in the prior fiscal year quarter. Selling, general and administrative expenses for the six months ended November 30, 2010 were $402.9 million, or 41.7% or revenue, compared to $392.0 million, or 40.2% of revenue, in the prior fiscal year period. The increases over the prior periods are primarily due to increased technology spending on digital growth initiatives, as well as higher promotional expenses.

Bad debt expense decreased by $1.4 million, to $3.0 million, for the quarter ended November 30, 2010, compared to $4.4 million in the prior fiscal year quarter. Bad debt expense decreased by $0.6 million to $5.9 million for the six months ended November 30, 2010, compared to $6.5 million in the prior fiscal year period.

The prior year fiscal quarter reflects a non-cash charge of $36.3 million in theEducational Publishing segment for impairment of intangible and prepublication costs associated with print publishing for libraries, as well as a non-cash impairment charge of $3.8 million in theInternational segment related to a customer list acquired in connection with the dissolution of a joint venture.

Severance expense decreased slightly to $1.0 million for the quarter ended November 30, 2010, compared to $1.1 million in the prior fiscal year quarter. For the six months ended November 30, ~~2009, operating income increased~~2010, severance expense decreased by $2.3 million, to ~~$70.3~~$3.1 million, compared to ~~$45.7~~$5.4 million in the prior ~~year.~~year fiscal period when the Company was implementing its cost reduction plans.

~~Net interest expense decreased to $4.3 million in~~The resulting operating income for the quarter ended November 30, ~~2009,~~2010 was $128.7 million, compared to ~~$7.0~~$105.6 million in the prior fiscal year quarter. For the six months ended November 30, ~~2009, net interest expense decreased by $4.7 million to $8.2~~2010, the resulting operating income was $81.9 million, compared to ~~$12.9~~$70.3 million in the prior fiscal year period. Both reductions in net interest expense were driven by lower borrowing levels and lower interest rates. The lower borrowings were driven by improved cash from operations, as the Company significantly reduced its working capital requirements.

The Company’s provision for income taxes with respect to continuing operations resulted in an effective tax rate of 43.9% and 42.0% for the quarters ended November 30, 2009 and November 30, 2008, respectively. Effective tax rates for the six months ended November 30, 2009 and November 30, 2008 were 48.9% and 52.5%, respectively. The effective tax rates for all periods exceed statutory rates primarily due to losses in certain foreign subsidiaries for which the Company does not expect to realize corresponding income tax benefits. Due to the seasonality of the Company’s operations and discrete items, current period effective tax rates are not meaningful.

Earnings from continuing operations were $56.8 million, or $1.54 per diluted share, for the quarter ended November 30, 2009, compared to $58.5 million, or $1.55 per diluted share, in the prior fiscal year quarter. For the six months ended November 30, 2009, earnings from continuing operations were $32.2 million, or $0.88 per diluted share, compared to $15.6 million, or $0.41 per diluted share, in the prior fiscal year period.

The loss from discontinued operations, net of tax, was $1.3 million, or $0.03 per diluted share, for the quarter ended November 30, 2009, compared to $15.4 million, or $0.40 per diluted share, in the prior fiscal year quarter. For the six months ended November 30, 2009, earnings from discontinued operations, net of tax, was $0.3 million, or less than $0.01 per diluted share, compared to a loss of $21.6 million, or $0.57 per diluted share, in the prior fiscal year period.

Net ~~income was $55.5~~interest expense decreased by $0.3 million ~~or $1.51 per diluted share, for~~to $4.0 million in the quarter ended November 30, ~~2009,~~2010, compared to ~~$43.1~~$4.3 million ~~or $1.15 per diluted share,~~ in the prior fiscal year ~~quarter.~~quarter, due to lower average borrowings. For the six months ended November 30, ~~2009,~~2010, net ~~income was $32.5~~interest expense decreased by $0.4 million ~~or $0.88 per diluted share,~~to $7.8 million, compared to ~~a net loss of $6.0~~$8.2 million ~~or $0.16 per diluted share,~~ in the prior fiscal year ~~period.~~period, also due to lower average borrowings.

The Company’s effective tax rates were 38.1% and 43.9% for the fiscal quarters ended November 30, 2010 and 2009, respectively. Significant factors that impact the effective tax rate include changes in the Company’s assessment of certain tax contingencies and the mix of earnings among the Company’s U.S. and international operations.

SCHOLASTIC CORPORATION

Item 2. MD&A

Earnings from continuing operations were $76.9 million or $2.19 per diluted share, for the quarter ended November 30, 2010, compared to earnings of $56.8 million, or $1.54 per diluted share, for the prior year fiscal quarter. For the six months ended November 30, 2010, earnings from continuing operations were $42.7 million, or $1.19 per diluted share, compared to $32.2 million, or $0.88 per diluted share, in the prior fiscal year period.

The Loss from discontinued operations, net of tax, was $2.0 million, or $0.05 per share, for the quarter ended November 30, 2010, compared to a loss of $1.3 million, or $0.03 per share, for the prior year fiscal quarter. The Loss from discontinued operations for the six months ended November 30, 2010 was $3.0 million, or $0.08 per share, compared to Earnings from discontinued operations of $0.3 million, or less than $0.01 per share, for the prior fiscal year period. The six months ended November 30, 2010 includes a charge associated with the partial settlement of the pension plan of Grolier Limited, a Canadian entity in the continuities business.

The Net income was $74.9 million or $2.14 per diluted share, for the quarter ended November 30, 2010, compared to $55.5 million, or $1.51 per diluted share, in the prior fiscal year quarter. Net income was $39.7 million, or $1.11 per diluted share, for the six months ended November 30, 2010, compared to $32.5 million, or $0.88 per diluted share, in the prior fiscal year period.

Results of Continuing Operations ~~– Segments~~

Children’s Book Publishing and Distribution


($ amounts in millions)	Three months ended November 30,						Six months ended November 30,						Three months ended November 30,						Six months ended November 30,

	2009			2008			2009			2008			2010			2009			2010			2009


Revenues	$	368.8		$	392.9		$	445.0		$	454.0		$	387.3		$	368.8		$	460.2		$	445.0

Operating income		107.8			105.1			60.3			50.5			97.3			107.8			45.7			60.3


Operating margin		29.2	%		26.7	%		13.6	%		11.1	%		25.1	%		29.2	%		9.9	%		13.6	%

Revenues in theChildren’s Book Publishing and Distribution segment for the quarter ended November 30, ~~2009 decreased~~2010 increased by ~~$24.1~~$18.5 million, or ~~6.1%~~5.0%, to ~~$368.8~~$387.3 million, compared to ~~$392.9~~$368.8 million in the prior fiscal year quarter. ~~This decline was due primarily~~The increase is principally related to ~~lower~~increased revenues in the Company’s book ~~club~~fairs business, ~~resulting from fewer orders~~ driven primarily by an increase in ~~part by~~revenue per fair and, to a ~~planned reduction~~lesser extent, an increase in ~~promotion spending and~~ the ~~late start~~number of fairs held as compared to the ~~school~~prior fiscal year ~~as well as disruptions to book club ordering due to teacher layoffs and reassignments in some districts, particularly in September.~~quarter. Revenues for the six months ended November 30, ~~2009 decreased~~2010 increased by ~~$9.0~~$15.2 million to ~~$445.0~~$460.2 million, compared to ~~$454.0~~$445.0 million in the prior fiscal year period. This ~~decrease was due~~increase is related to ~~lower~~higher revenues in the Company’s trade business, driven by a strong frontlist that includedMockingjay by Suzanne Collins, which completedThe Hunger Gamestrilogy, andThe 39 Cluesseries, as well as by the increased revenues in the Company’s book ~~clubs~~fairs business as noted above, partially offset by improved performance in the Company’s trade business over the same prior year period related to revenues generated from the Harry Potter series and The 39 Clues ® series, as well as improved performance in the Company’s book fairs business.discussed above.

Segment operating income for the quarter ended November 30, ~~2009 increased~~2010 decreased by ~~$2.7~~$10.5 million, or ~~2.6%~~9.7%, to ~~$107.8~~$97.3 million, compared to ~~$105.1~~$107.8 million in the prior fiscal year quarter, ~~principally due~~primarily related to ~~improved results in the Trade business compared to the prior fiscal year period, as well as reduced~~increased promotional spending ~~in the book fairs business, resulting from initiatives executed earlier in the year to consolidate distribution facilities. These improvements were partially offset by lower results~~ in the Company’s book club business and increased expenditures related to the ~~lower revenues, partially offset by reduced promotion expenses.~~Company’s children’s book digital format. Segment operating income for the six months ended November 30, ~~2009 increased~~2010, decreased by ~~$9.8~~$14.6 million, or ~~19.4%~~24.2%, to ~~$60.3~~$45.7 million, compared to ~~$50.5~~$60.3 million in the prior fiscal year period, principally due to ~~lower promotion costs~~increased expenditures related to the Company’s children’s books digital format, e-commerce and eBook initiatives, as well as higher promotional spending in ~~the current fiscal year period and higher bad debt expense recognized in the prior fiscal year period.~~book clubs.

SCHOLASTIC CORPORATION

Item 2. MD&A

Educational Publishing


($ amounts in millions)	Three months ended November 30,						Six months ended November 30,						Three months ended November 30,						Six months ended November 30,

	2009			2008			2009			2008			2010			2009			2010			2009


Revenues	$	122.6		$	91.0		$	271.3		$	206.1		$	101.6		$	122.6		$	220.2		$	271.3
Operating (loss) income		(4.1	)		13.8			37.2			35.3

Operating income (loss)														11.0			(4.1	)		39.5			37.2


Operating margin			*		15.2	%		13.7	%		17.1	%		10.8	%		*			17.9	%		13.7	%

* Not meaningful

Revenues in theEducational Publishingsegment for the quarter ended November 30, ~~2009 increased~~2010 decreased by ~~$31.6~~$21.0 million, or ~~34.7%~~17.1%, to ~~$122.6~~$101.6 million, compared to ~~$91.0~~$122.6 million in the prior fiscal year quarter. This ~~increase~~decrease was principally driven by ~~higher~~the strong growth in sales of educational technology products ~~of approximately $28 million~~ in the ~~second~~prior year period, which have experienced a significant change in the funding environment for these programs in fiscal 2011 and the absence of a large library sale to New York City in the current period. This was partially offset by incremental revenues of $2.2 million from the Math Solutions business in the current fiscal quarter. ~~Segment revenues~~Revenues for the six months ended November 30, ~~2009 increased~~2010 decreased by ~~$65.2~~$51.1 million, or ~~31.6%~~18.8%, to ~~$271.3~~$220.2 million, compared to ~~$206.1~~$271.3 million in the prior fiscal year period. The decrease was primarily due to the strong level of sales in the prior year period as referred to above, as well as lower school classroom and library revenues in the current period.

Segment operating income for the quarter ended November 30, 2010 increased by $15.1 million to $11.0 million, from an operating loss of $4.1 million in the prior fiscal year quarter, when the Company recognized an asset impairment charge of $36.3 million in connection with its decision to consolidate supplemental non-fiction and library publishing activities into theChildren’s Book Publishing and Distribution segment. This increase was ~~principally driven~~partially offset by the unfavorable results in educational technology products and services noted above. Segment operating income for the six months ended November 30, 2010, increased by $2.3 million, or 6.2%, to $39.5 million, from $37.2 million in the prior fiscal year period, related to the prior year’s impairment charge noted above, partially offset by declines in revenue.

International


($ amounts in millions)	Three months ended November 30,						Six months ended November 30,

	2010			2009			2010			2009


Revenues	$	145.9		$	130.9		$	227.8		$	206.5

Operating income		25.3			14.8			23.1			12.9


Operating margin		17.3	%		11.3	%		10.1	%		6.2	%

Revenues in the Internationalsegment for the quarter ended November 30, 2010 increased by $15.0 million, or 11.5%, to $145.9 million, compared to $130.9 million in the prior fiscal year quarter, primarily due to the favorable impact of foreign currency exchange rates of $5.8 million, in addition to an increase in revenue of $6.2 million in the Company’s Canadian and Australian operations. Revenues for the six months ended November 30, 2010 increased $21.3 million, or 10.3%, to $227.8 million, compared to $206.5 million during the prior fiscal year period, primarily due to higher revenues of ~~approximately $63~~$10.5 million ~~from sales of READ180, System 44~~in the Company’s Australian and ~~other technology products~~Canadian operations and ~~new adoptions, in particular~~ the ~~California adoption of READ180 and System 44, as well as the~~favorable impact of ~~the federal economic stimulus funding for education, which began to reach school districts in the first quarter.~~foreign currency exchange rates of $9.0 million.

SCHOLASTIC CORPORATION

Item 2. MD&A

Segment operating loss for the quarter ended November 30, 2009 was $4.1 million, as compared to operating income in the prior year fiscal quarter of $13.8 million. This $17.9 million decline is attributable to a $36.3 million impairment charge recorded in connection with the Company’s decision to consolidate supplemental non-fiction and library publishing activities into the~~Children’s Book Publishing and Distribution~~ segment. This was partially offset by the increased educational technology revenues in the quarter. Segment operating income for the six months ended November 30, 2009 increased by $1.9 million, or 5.4%, to $37.2 million, compared to $35.3 million in the prior fiscal year period. This increase is primarily due to the increase in revenues from education technology sales, partially offset by the asset impairment charge of $36.3 million described above.

~~International~~

($ amounts in millions)

Three months ended
November 30,

Six months ended
November 30,

2009

2008

2009

2008

Revenues

$
130.9

$
122.0

$
206.5

$
206.1

Operating income

14.8

14.0

12.9

10.7

Operating margin

11.3
%

11.5
%

6.2
%

5.2
%

~~Revenues in the~~ ~~International~~segment for the quarter ended November 30, 2009 increased by $8.9 million, or 7.3%, to $130.9 million, compared to $122.0 million in the prior fiscal year quarter, primarily due to a favorable impact of foreign currency exchange rates of $8.9 million, as well as increased local currency revenues in the Company’s Canadian operation of $2.8 million, partially offset by lower revenues in the Company’s export business of $3.4 million. Segment revenues for the six months ended November 30, 2009 increased by $0.4 million to $206.5 million, compared to $206.1 million in the prior fiscal year period, primarily due to the favorable impact of foreign currency exchange rates.

Segment operating income for the quarter ended November 30, ~~2009~~2010 increased by ~~$0.8~~$10.5 million, or ~~5.7%~~70.9%, to ~~$14.8~~$25.3 million, compared to ~~$14.0~~$14.8 million in the prior fiscal year quarter, ~~primarily due to a favorable impact of foreign currency exchange rates of $6.5 million, partially offset by lower results in the United Kingdom,~~ which included an impairment charge of $3.8 million related to customer lists acquired in connection with the dissolution of a joint venture, ~~and~~as well as restructuring costs of $1.9 million related to the consolidation of distribution ~~facilities.~~facilities in the UK, as well as favorable results in the current fiscal quarter in the foreign rights business of $1.6 million. Segment operating income for the six months ended November 30, ~~2009~~2010 increased by ~~$2.2~~$10.2 million, or ~~20.6%~~79.1%, to ~~$12.9~~$23.1 million, compared to ~~$10.7~~$12.9 million in the prior fiscal year ~~period. This increase was~~period, primarily due to the reasons noted above, as well as the favorable ~~impact of foreign currency exchange rates of $6.6 million, partially offset by lower~~ results in the ~~United Kingdom.~~current period in the Company’s Australian and Canadian operations.

Media, Licensing and Advertising


($ amounts in millions)	Three months ended November 30,						Six months ended November 30,						Three months ended November 30,						Six months ended November 30,

	2009			2008			2009			2008			2010			2009			2010			2009


Revenues	$	37.8		$	47.4		$	52.9		$	63.5		$	40.9		$	37.8		$	58.4		$	52.9

Operating income (loss)		2.6			4.0			(1.1	)		(0.8	)		4.7			2.6			1.8			(1.1	)


Operating margin		6.9	%		8.4	%			*			*		11.5	%		6.9	%		3.1	%		*

* Not meaningful

Revenues in the Media, Licensing and Advertising segment for the quarter ended November 30, ~~2009 decreased~~2010 increased by ~~$9.6~~$3.1 million, or ~~20.3%~~8.2%, to ~~$37.8~~$40.9 million, compared to ~~$47.4~~$37.8 million in the prior fiscal year quarter, primarily due to ~~lower~~increased revenues ~~from third party~~related to magazine advertising, partially offset by lower sales of software and interactive ~~products, as well as lower advertising revenues. Segment revenues~~products. Revenues for the six months ended November 30, ~~2009 decreased~~2010 increased by ~~$10.6~~$5.5 million, or ~~16.7%~~10.4%, to $58.4 million, compared to $52.9 million in the prior year fiscal period, primarily due to higher advertising and production revenues partially offset by lower sales of software and interactive products.

Segment operating income for the quarter ended November 30, 2010 increased by $2.1 million to $4.7 million, compared to ~~$63.5~~$2.6 million in the prior fiscal year quarter primarily due to higher magazine advertising revenues. Segment operating income for the six months ended November 30, 2010 increased by $2.9 million to $1.8 million, compared to a segment operating loss of $1.1 million in the prior fiscal year period, primarily due to the ~~lower revenues from third party sales of software and interactive products.~~

~~SCHOLASTIC CORPORATION~~

~~Item 2. MD&A~~

Segment operating income for the quarter ended November 30, 2009 decreased to $2.6 million, compared to $4.0 million in the prior fiscal year quarter, primarily due to the lower software and interactive revenues. Segment operating loss for the six months ended November 30, 2009 was $1.1 million, compared to a loss in the same prior year period of $0.8 million.

~~Results of Discontinued Operations~~

The loss from discontinued operations, net of tax, was $1.3 million for the quarter ended November 30, 2009, compared to $15.4 million in the prior fiscal year quarter. Prior period losses reflect impairment charges, while the current period includes the loss on the sale of a previously discontinued non-core book distribution business, partially offset by favorable accounts receivable collections. Income from discontinued operations, net of tax, was $0.3 million for the six months ended November 30, 2009, compared to a loss of $21.6 million in the prior fiscal year.higher magazine advertising results.

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~~typically experiences losses 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 $54.4 million at November 30, 2010, compared to $244.1 million at May 31, 2010 and $178.3 million at November 30, ~~2009, compared to $143.6 million at May 31, 2009 and $31.8 million at November 30, 2008.~~2009.

Cash provided by operating activities ~~improved~~decreased by ~~$166.3~~$22.3 million to ~~$103.0~~$83.5 million for the six months ended November 30, ~~2009,~~2010, compared to $105.8 million of cash ~~used~~provided by operating activities ~~of $63.3 million~~ in the prior fiscal year period. ~~In addition to the increase in net income, adjusted for non-cash items of $54.4 million, the $166.3 million improvement was primarily related to favorable working capital changes which included:~~


	•	a $51.2 million increase in accounts payable and other accrued expenses compared to a $14.1 million increase in the prior year period, yielding an improvement of $37.1 million in cash provided by operating activities;

	•	~~a $39.1 million increase in inventory in the current period compared to a $97.6 million increase in the prior period, yielding an improvement of $58.5 million in cash provided by operating activities;~~

	•	partially offset by increased accounts receivable of $90.5 million in the current period compared to an increase of $82.4 million in the prior year period, yielding $8.1 million less in cash provided by operating activities in the current fiscal year.

Current fiscal year accounts payable increases were primarily due to the timing of payments driven by improved terms with key vendors. Current fiscal year inventory reductions resulted from the timing of purchases and Company initiatives designed to reduce inventory levels. Increased accounts receivable balances during the current fiscal year resulted from higher sales of educational technology products.

Cash used in investing activities decreased by $3.9 million to $39.1 million for the six months ended November 30, 2009, compared to $43.0 million in the prior fiscal year period. This change is primarily related to a reduction in spending in property, plant and equipment and prepublication expenditures. This was partially offset by the prior fiscal year’s repayment of an investee loan.

SCHOLASTIC CORPORATION

Item 2. MD&A

While Net income in the current period increased from $32.5 million to $39.7 million, the prior period included $40.1 million of non-cash impairment charges. Accordingly, Net income adjusted for non-cash items yielded cash from operations of $122.1 million in the current year, compared to $155.6 million in the prior period, as a result of lower cash from operations of $33.5 million in the current year.

The Company’s working capital and other operating accounts increased by $43.1 million in the six months ended November 30, 2010, compared to an increase of $51.9 million in the prior period. The decrease in net cash provided by operations of $8.8 million in the current period compared to the prior period was attributable to:


	•	a $75.7 million increase in accounts receivable in the current period compared to a $90.5 million increase in accounts receivable in the prior year period. Higher prior period sales of education technology products drove higher receivables in the first six months of fiscal 2010, and

	•	an increase in accounts payable in the current period of $59.2 million compared to an increase in the prior period of $4.6 million. Higher accounts payable resulted from inventory purchases and the timing of payments.

Partially offsetting these items were:

	•	a $62.8 million increase in inventories in the current period compared to an increase of $39.1 million in the prior year period driven by higher inventory purchases in the current period to re-stock following significant inventory reductions during the second half of fiscal 2010;

	•	a greater increase of prepaid expenses and other current assets in the current period than in the prior year period;

	•	higher accruals in the prior year period than in the current period for employee-related and other costs, some of which were paid in fiscal 2011; and

	•	higher income tax payments in the current period of $8.8 million.

Cash used in investing activities increased by $42.0 million to $81.1 million for the six months ended November 30, 2010, compared to $39.1 million in the prior fiscal year period. This change was primarily related to:

	•	investment in property, plant and equipment, and prepublication and production costs in the current period of $47.6 million, compared to $39.3 million in the prior period, largely related to increased spending on digital initiatives;

	•	acquisitions and related payments of $9.2 million in the current period; and

	•	the purchase of the land upon which the Company’s corporate headquarters are located for $24.3 million in the current period.

Cash used in financing activities was ~~$26.4~~$195.4 million for the six months ended November 30, ~~2009,~~2010, compared to ~~cash provided by financing activities of $19.4~~$29.2 million for the prior fiscal year period. The ~~$45.8 million use of cash is~~change was primarily due to ~~reduced net borrowings (borrowings and repayments) under~~ the ~~Company’s Revolver~~completion of ~~$45.0 million~~a modified Dutch tender offer in the current ~~fiscal year period~~period. The Company accepted for purchase 5,199,699 of its common shares at a price of $30.00 per share, for a total cost of $156.0 million, exclusive of related fees and expenses. The common shares purchased pursuant to the ~~Company’s reduced~~tender offer represented approximately 15.1 % of the common shares outstanding as of October 27, 2010. The Company funded the purchase of the shares in the tender offer using cash on hand and short term borrowings under ~~lines of~~its existing credit ~~(borrowings and repayments) of $14.3 million. In addition, the Company repurchased $4.1 million of the 5% Notes during the current fiscal period. These~~facility, which, borrowings were ~~partially offset by repurchases of Common Stock of $1.0 million, compared~~repaid prior to ~~$20.1 million in the prior year fiscal period.~~November 30, 2010.

Due to the seasonal nature of its business as discussed under “Seasonality” above, the Company usually experiences negative ~~operating~~ 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. However, due to substantial working capital improvements and increased revenues from sales of educational technology products, the Company experienced positive cash from operations in the current six month period.

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 ~~current cash balances~~ and funds available under its current credit facilities will be sufficient to finance its short-and long-term capital requirements for the foreseeable future.

SCHOLASTIC CORPORATION

Item 2. MD&A

~~Despite the current economic conditions, the~~The Company has maintained sufficient liquidity to fund ongoing operations, dividends, authorized common share repurchases (including its recently-completed tender offer), debt service, planned capital expenditures and other investments. As of November 30, ~~2009,~~2010, the Company’s primary sources of liquidity consisted of cash and cash equivalents of ~~$178.3~~$54.4 million, cash from operations, and borrowings remaining available under the Revolving Loan (as described under “Financing” below) totaling $325.0 million. Approximately ~~57%~~69% of the Company’s outstanding debt is not due until fiscal 2013, ~~and the remaining 43%~~28% is spread ratably over each preceding ~~period.~~period and the remaining 3% represents borrowings under the Company’s lines of credit. 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, as well as its financing and investing activities.

The Company’s credit rating from Standard & Poor’s Rating Services is “BB-” and its credit rating from Moody’s Investors Service is “Ba2.” ~~Both agencies have~~Moody’s Investors Service has rated the outlook for the Company as “Positive,” and Standard and Poor’s Rating Services has rated the outlook for the Company as “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 or decrease in interest costs under the Company’s Loan Agreement.

Financing

Lines of Credit

As of November 30, 2010, the Company’s credit lines available under unsecured money market bid rate credit lines totaled $20.0 million. There were no outstanding borrowings under these credit lines at November 30, 2010, May 31, 2010 and November 30, 2009. All loans made under these credit lines are at the sole discretion of the lender and at an interest rate and term agreed to at the time each loan is made, but not to exceed 365 days. These credit lines may be renewed, if requested by the Company, at the option of the lender.

As of November 30, 2010, the Company had various local currency credit lines, with maximum available borrowings in amounts equivalent to $33.8 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 $7.2 million at November 30, 2010 at a weighted average interest rate of 4.0%; $7.5 million at May 31, 2010 at a weighted average interest rate of 3.9%; and $13.0 million at November 30, 2009 at a weighted average interest rate of 3.0%.

Loan Agreement

On June 1, 2007, Scholastic Corporation and Scholastic Inc. (each, a “Borrower” and together, the “Borrowers”) entered into a $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 Term Loan, which may be prepaid at any time without penalty, requires quarterly principal payments of $10.7 million, with the first payment on December 31, 2007, and a final payment of $7.4 million due on June 1, 2012.

On August 16, 2010, the Borrowers entered into an amendment to the Loan Agreement, which added certain provisions related to covenants and interest.

~~SCHOLASTIC CORPORATION~~

~~Item 2. MD&A~~

SCHOLASTIC CORPORATION

Item 2. MD&A

As of November 30, 2010, the applicable margin of the Term Loan was ~~0.875%~~0.750% and the applicable margin on the Revolving Loan was ~~0.700%~~0.600%. 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 November 30, ~~2009~~2010, was ~~0.175%~~0.150%. Effective on or about December 29, 2009, the Company’s applicable borrowing rate will contractually decrease due to the Company’s improved consolidated debt ratio, as defined in the Loan Agreement. The applicable margin onAs of November 30, 2010, $71.6 million was outstanding under the Term Loan ~~will decrease to 0.750% and the applicable margin on the Revolving Loan will decrease to 0.600%. The applicable~~at an interest rate ~~for the facility fee payment will decrease to 0.150%~~of 1.01%.

As of November 30, ~~2009, there was $0.5 million of outstanding~~2010, standby letters of credit outstanding issued under the Loan ~~Agreement.~~Agreement totaled $1.4 million. 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 November 30, ~~2009~~2010, the Company was in compliance with these covenants. ~~Please see~~See Note ~~4, “Debt”,~~5 of Notes to ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements – ~~Unaudited~~unaudited in Item 1, “Financial Statements,” for outstanding balances and interest rates for these notes.

5% Notes due 2013

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 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~~$5.0 million and ~~$14.5~~$2.5 million of the 5% Notes on the open market in fiscal 2010 and 2009, ~~and 2008,~~ respectively. ~~For~~The Company did not make any additional repurchases during the ~~six months~~six-month period ended November 30, ~~2009, the Company repurchased an additional $5.0 million of the 5% notes on the open market, for $4.1 million.~~

~~Lines of Credit~~

As of November 30, 2009, the Company’s credit line available under unsecured money market bid rate credit lines totaled $20.0 million. There were no outstanding borrowings under the credit line at November 30, 2009, at May 31, 2009 and at November 30, 2008. All loans made under the credit line are at the sole discretion of the lender and at an interest rate and term, not to exceed 365 days, agreed to at the time each loan is made.

As of November 30, 2009, the Company had various local currency credit lines, with maximum available borrowings in amounts equivalent to $51.8 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 $13.0 million at November 30, 2009 at a weighted average interest rate of 3.0%; $10.9 million at May 31, 2009 at a weighted average interest rate of 3.3%; and $27.4 million at November 30, 2008 at a weighted average interest rate of 4.5%.

As of November 30, 2009 and May 31, 2009, the Company had open standby letters of credit of $7.4 million issued under certain credit lines, as compared to $8.1 million as of November 30, 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.2010.

The Company’s total debt obligations were $231.2 million at November 30, 2010, $252.8 million at May 31, 2010 and $279.6 million at November 30, ~~2009, $303.7 million at May 31, 2009 and $389.0 million at November 30, 2008.~~2009. The lower level of debt at November 30, ~~2009~~2010 as compared to May 31, ~~2009~~2010 and November 30, ~~2008~~2009 was primarily due to repayments made on the Term Loan, ~~and a repurchase~~repurchases of the Company’s 5% Notes on the open ~~market. In addition, the lower debt level at November 30, 2009 as compared to November 30, 2008 was due to~~market in fiscal 2010 and reduced borrowings resulting from lower debt requirements.

For a more complete description of the Company’s debt obligations, see Note ~~4, “Debt,”~~5 of Notes to ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements – ~~Unaudited~~unaudited in Item 1, “Financial Statements.”

SCHOLASTIC CORPORATION

Item 2. MD&A

New ~~and Recently Adopted~~ Accounting Pronouncements

Reference is made to Note 1 ~~“Basis of Presentation,”~~ of Notes to ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements in Item 1, “Financial ~~Statements”~~Statements,” for information concerning recent accounting pronouncements since the filing of the Company’s Annual ~~Report on Form 10-K for the fiscal year ended May 31, 2009 (the “Annual Report”).~~Report.

SCHOLASTIC CORPORATION

Item 2. MD&A

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. ~~These~~Additional written and oral forward-looking statements ~~are subject~~may be made by the Company from time to ~~various risks~~time in Securities and ~~uncertainties,~~Exchange Commission (“SEC”) filings and otherwise. The Company cautions readers that results or expectations expressed by forward-looking statements, including, without limitation, those relating to the Company’s future business prospects, plans, conditions ofin the children’s book and educational ~~materials~~material markets and acceptance of the Company’s products ~~within~~in those markets, earnings per share, levels of government spending for educational programs, e-commerce and digital initiatives strategies, goals, revenues, improved efficiencies, general costs, manufacturing costs, medical costs, merit pay, operating margins, working capital, liquidity, capital needs, expected investing activity, interest costs and income, are subject to risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements, due to factors including those noted in the Annual Report 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.~~SEC.

The Company disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

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. As of November 30, ~~2009,~~2010, these transactions 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 ~~45%~~34% of the Company’s debt at November 30, ~~2009~~2010 bore interest at a variable rate and was sensitive to changes in interest rates, compared to approximately ~~48%~~40% at May 31, ~~2009~~2010 and ~~59%~~45% at November 30, ~~2008.~~2009. The decrease in variable-rate debt as of November 30, ~~2009 and~~2010 compared to May 31, ~~2009, compared to~~2010 and November 30, ~~2008,~~2009, was primarily due to repayments made on the Term ~~Loan, a repurchase of the 5% Notes on the open market and reduced borrowings as a result of lower debt requirements.~~Loan. 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 November 30, ~~2009~~2010 (see Note 45 of Notes to ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements - unaudited in Item 1, “Financial Statements”):


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

	2010⁽¹⁾			2011			2012			2013			2014		Thereafter		Total
																			2011⁽¹⁾			2012			2013			2014		2015		Thereafter		Total

Debt Obligations
Lines of Credit	$	13.0		$	—		$	—		$	—		$	—	$	—	$	13.0	$	7.2		$	—		$	—		$	—	$	—	$	—	$	7.2
Average interest rate		3.0	%																	4.0	%

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

Variable rate debt	$	21.4		$	42.8		$	42.8		$	7.4	⁽²⁾	$	—	$	—	$	114.4	$	21.4		$	42.8		$	7.4	⁽³⁾	$	—	$	—	$	—	$	71.6
Interest rate⁽³⁾		1.1	%		1.1	%		1.1	%		1.1	%
Interest rate⁽²⁾																				1.0	%		1.0	%		1.0	%


(1)	~~2010~~Fiscal 2011 includes the remaining six months of the current fiscal ~~year.~~year, ending May 31, 2011.

(2)	Represents the interest rate under the Term Loan at November 30, 2010; the interest rate is subject to change over the life of the Term Loan.

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

~~(3)~~	~~Represents the interest rate under the Term Loan at November 30, 2009; the interest rate is subject to change over the life of the Term Loan.~~

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 November 30, ~~2009,~~2010, 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 November 30, ~~2009~~2010 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 1. Legal Proceedings

As previously reported, the Company is party to certain actions originally filed by each of Alaska Laborer Employers Retirement Fund and Paul Baicu, which were consolidated on November 8, 2007. On September 26, 2008, the plaintiff sought leave of the Court to file a second amended class action complaint, in order to add allegations relating to the Company’s restatement announced in the Company’s Annual Report on Form 10-K filed on July 30, 2008. The Court thereafter dismissed the Company’s pending motion to dismiss as moot. On October 20, 2008, the plaintiff filed the second amended complaint, and on October 31, 2008, the Company filed a motion to dismiss the second amended complaint. On September 30, 2010, the Court granted the Company’s motion to dismiss the second amended complaint for failure to state a cause of action, while also granting leave to the plaintiff to move to file a new proposed amended complaint. On December 1, 2010, the plaintiff filed a motion for leave to file a proposed third amended class action complaint, as well as a motion to replace Alaska Laborer Employers Retirement Fund with City of Sterling Heights Police and Fire Retirement System as lead plaintiff. The proposed third amended class action complaint shortens the original class action period to end on December 16, 2005 rather than on March 23, 2006, but otherwise continues to allege securities fraud relating to statements made by the Company concerning its operations and financial results, now for the period between March 18, 2005 and December 16, 2005, and seeks unspecified compensatory damages. The Company continues to believe that the allegations in such complaint are without merit and is vigorously defending the lawsuit.

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 ~~six~~three months ended November 30, ~~2009:~~2010:

~~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, 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

September 1, 2009 through
September 30, 2009

850

$
23.14

850

$
—

October 1, 2009 through
October 31, 2009

—

$
—

—

$
—

November 1, 2009 through
November 30, 2009

—

$
—

—

$
—

Total

54,000

$
19.42

54,000


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⁽¹⁾

September 1, 2010 through September 30, 2010	—		$	—				$	0.5
October 1, 2010 through October 31, 2010	5,199,699		$	30.00		5,199,699		$	44.5
November 1, 2010 through November 30, 2010	—		$	—		—		$	44.5

Total	5,199,699		$	30.00		5,199,699

(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, to be funded with available cash and pursuant to which the Company could purchase shares from time to time as conditions allow on the open market. As of November 30, 2009, these programs were virtually completed. On December 16, 2009, 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.

As of September 30, 2010 approximately $0.5 million remained of such authorization.

~~SCHOLASTIC CORPORATION~~

~~Item 4. Submission of Matters to a Vote of Security Holders~~

The Annual Meeting of Stockholders of the Corporation was held on September 23, 2009 (the “Annual Meeting”). The following sets forth the results of the proposals presented at the Annual Meeting voted upon by the stockholders of the Corporation entitled to vote thereon:

Holders of the 1,656,200 outstanding shares of the Class A Stock (the “Class A Stockholders”) voted unanimously in favor of electing Richard Robinson, Ramon C. Cortines, John L. Davies, Andrew S. Hedden, Mae C. Jamison, Peter M. Mayer, Augustus K. Oliver and Richard M. Spaulding as directors to serve until the next annual meeting of the Corporation’s stockholders and until their respective successors are duly elected and qualified.

Holders of the Common Stock elected the following nominees as directors to serve until the next annual meeting of the Corporation’s stockholders and until their respective successors are duly elected and qualified. Votes cast by holders of the Common Stock were:

SCHOLASTIC CORPORATION

Item 6. Exhibits


Exhibits:

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.

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Document

101.DEF

XBRL Taxonomy Extension Definitions Document

101.LAB

XBRL Taxonomy Extension Labels Document

101.PRE

XBRL Taxonomy Extension Presentation Document

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
		(Registrant)

Date: December ~~21, 2009~~22, 2010	By:	/s/ Richard Robinson


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


Date: December ~~21, 2009~~22, 2010	~~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 NOVEMBER 30, ~~2009~~2010

Exhibits Index


Exhibit Number		Description of Document


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.

101.INS		XBRL Instance Document *

101.SCH		XBRL Taxonomy Extension Schema Document *

101.CAL		XBRL Taxonomy Extension Calculation Document *

101.DEF		XBRL Taxonomy Extension Definitions Document *

101.LAB		XBRL Taxonomy Extension Labels Document *

101.PRE		XBRL Taxonomy Extension Presentation Document *

37* In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”

~~Nominee~~

~~Withheld~~

~~James W. Barge~~

~~30,014,597~~On September 28, 2010, the Company announced the commencement of a modified Dutch auction tender offer to purchase up to $150 million of its common stock at a price not less than $27.00 per share and not more than $33.00 per share. On November 3, 2010, the Company announced that it had purchased the shares

~~946,697 shares~~

~~John G. McDonald~~

~~30,390,015 shares~~

~~571,269 shares~~

indicated in the table above at a purchase price of $30.00 per share, for an aggregate purchase price of approximately $156 million, and that approximately $44.5 million remained for the repurchase of common stock under the current Board authorizations, which amount includes the $0.5 million remaining from the prior Board authorization. These purchases may be made from time to time on the open market or through negotiated private transactions. Accordingly, as of November 30, 2010, approximately $44.5 million remained of the current Board authorizations.