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Without Harry Potter, Scholastic Reports Seasonal Losses

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October 1-15, 2004 Edition

Without Harry Potter,

Scholastic Reports

Seasonal Losses

NEW YORK, NY/09/21/04—Scholastic Corporation (NASDAQ:SCHL) has announced results for the first fiscal quarter ended August 31, 2004. Scholastic’s first quarter is its smallest revenue period, as most schools are not in session, resulting in a seasonal loss. But the latest figures also were affected by the fact that there were no new Harry Potter titles released. Last year’s first quarter loss was unusually low due to the benefit of approximately $170 million in revenues for the release of record-setting best seller, Harry Potter and The Order of The Phoenix.

Net loss for the quarter ended August 31, 2004 was $50.3 million, or $1.27 per share, which included $3.6 million pre-tax, or $0.06 per diluted share, in severance costs relating to the previously announced fiscal 2004 reorganization of the Continuities business. This compares to the year-ago net loss of $24.8 million, or $0.63 per share, which included Special severance charges of $2.0 million pre-tax, or $0.03 per diluted share. Revenues were $323.7 million in the quarter, as compared to $475.4 million in the year-ago quarter.

“We are off to a good start to achieve Scholastic’s fiscal 2005 financial goals,” said Richard Robinson, Chairman, President and Chief Executive Officer. “Strong performance in Educational Publishing, driven by technology sales, and improved results in International helped us achieve a smaller than expected loss for the first quarter. Our Continuities business met expectations as we successfully executed our plan. Non-Harry Potter trade revenue resumed growth, reflecting improved sales of front list titles. Cash use was approximately flat with the year-ago quarter, and debt at August 31st was down $82 million versus last year.”

Scholastic’s fiscal 2005 goals include revenue of $2.1 to $2.2 billion, earnings per diluted share of $1.50 to $1.70, excluding severance charges, and free cash flow of $40 to $50 million.

First Quarter Segment Analysis

Children’s Book Publishing & Distribution: Segment revenue was $121.8 million, as compared to $287.9 million in the year-ago quarter, and operating loss was $65.0 million, as compared to $16.6 million. Trade revenue declined in comparison to the year-ago period, due to last year’s release of Harry Potter and The Order of The Phoenix, partially offset by an 8% increase in other trade revenues in the fiscal 2005 first quarter. As planned, Continuities results improved on lower revenue as a result of reduced bad debt and fewer returns.

Educational Publishing: Segment revenue was $118.2 million, as compared to $105.8 million in the year-ago quarter, and operating income was $22.2 million, as compared to $15.5 million. A more than 50% increase in sales of the READ 180(R) technology program fueled a 25% increase in Curriculum revenue compared to the year ago quarter. Library Publishing results improved, with revenue up 18%, while sales of collections of children’s books to schools declined modestly.

International: Segment revenue was $71.8 million, as compared to $65.3 million in the year-ago quarter, and the operating loss was $3.0 million, as compared to $3.9 million. Segment results reflected improved revenues and profits in the Company’s Australian operations. Revenue also benefited from $4 million in foreign currency translation.

Media, Licensing & Advertising: Segment revenue was $11.9 million, as compared to $16.4 million in the year-ago quarter, and operating loss was $6.7 million, as compared to $4.9 million. The revenue decline primarily reflects different production delivery schedules of animated television series in fiscal 2004 and fiscal 2005. Maya & Miguel(TM), Scholastic’s new media, licensing and publishing franchise, with a focus on the adventures of a Latino family, will debut on PBS on October 11th.

About Scholastic

Scholastic 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.