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Scholastic Reports Strong Q1 Results, Helped by Harry Potter

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October 1-15, 2005 Edition

Scholastic Reports

Strong Q1 Results,

Helped by Harry Potter

New York, NY/9/22/05—Scholastic Corporation (NASDAQ: SCHL) has reported its results for the fiscal 2006 first quarter ended August 31, 2005, and affirmed its outlook for fiscal 2006.

Revenues in the first quarter were $498.4 million versus $323.7 million in the prior year period. Net loss for the quarter was $21.2 million, or $0.52 per share. This compares to a net loss of $50.5 million, or $1.28 per share, in the prior year period, which included a pre-tax charge of $3.6 million, or $0.06 per share, in severance costs relating to the reorganization of the Continuities business. Scholastic typically records a seasonal loss in its first quarter of the fiscal year, as most schools are not in session resulting in minimal revenues from school-based Book Fairs and Book Clubs.

Richard Robinson, Chairman, President and CEO of Scholastic, commented: “Record-breaking sales of Harry Potter and the Half-Blood Prince drove significantly higher results in Children’s Book Publishing and Distribution and for the Company overall. Scholastic Education’s strongest quarter ever also contributed to last quarter’s improved results, with sales of educational technology demonstrating the continued success of our reading solutions strategy. These achievements reinforce Scholastic’s leading position as a partner with families and teachers, helping develop children’s reading skills and love of books.”

The Company also affirmed its fiscal 2006 outlook for revenues of $2.3 to $2.4 billion, earnings per diluted share of $2.30 to $2.50, and free cash flow of $85 to $95 million.

First Quarter Segment Analysis

Children’s Book Publishing and Distribution. Segment revenues in the quarter were $275.3 million, compared to $121.8 million in the prior year period. Harry Potter revenue increased to approximately $185 million from about $10 million in last year’s first quarter, reflecting the successful launch of Harry Potter and the Half-Blood Prince, as well as higher sales of Harry Potter backlist titles. Partially offsetting this increase was a decline in Continuities revenue resulting from the Company’s strategy to focus on its most productive customers. The resulting operating loss for the segment was $19.7 million, compared to an operating loss of $64.0 million in the prior year period.

Educational Publishing. In the first quarter, segment revenues increased 9% to $128.3 million from $118.2 million in the prior year period. Operating profits rose 23% to $27.5 million relative to the prior year period. Higher revenues and profits primarily reflected a 32% increase in sales of educational technology over the prior year, benefiting from the launch of the Enterprise Edition of the READ 180® reading intervention program.

International. Segment revenues in the first quarter rose 7% (3% in local currencies) to $76.7 million from $71.8 million in the prior year period, primarily as a result of growth in the Company’s export business and in the Australia market. The operating loss in the segment was $5.5 million in the first quarter, as compared to a loss of $3.0 million in the year ago period, primarily due to lower results in the United Kingdom, where Scholastic is rebuilding its Trade and Continuities businesses. The first quarter is also typically the smallest for the International segment, with schools out of session in the United Kingdom and Canada, two of our largest operations, resulting in a loss.

Media, Licensing and Advertising. Segment revenues rose 52% to $18.1 million in the first quarter, compared to the prior year period, primarily due to increased production revenue for Maya & Miguel™ and Time Warp Trio™. Operating loss improved to $5.7 million for the quarter compared with $6.2 million in the year ago period.

About Scholastic

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