At this time I would like to welcome everyone to the Q2 2009 earnings conference call. (Operator Instructions) I would now like to turn the call over to Jeffrey Mathews, Vice President of Corporate Strategies and Investor Relations.

Good morning and thank you. Before we begin, I’d like to point out that the slides for this presentation are available for simultaneous viewing by going to our website, www.scholastic.com, clicking on Investor Relations and following the links on that page. I would also like to note that this presentation contains certain forward-looking statements which are subject to various risks and uncertainties including the condition of the children’s book and educational materials market, the acceptance of the company’s products in those markets and other risks and factors identified from time to time in the company’s filings with the Securities and Exchange Commission. Actual results could differ materially from those currently anticipated. Now I’ll introduce Dick Robinson, the Chairman, CEO, and President of Scholastic to begin our presentation.

Thank you Jeff and good morning and thank you everyone for joining us on our fiscal 2009 second quarter conference call. This morning I am joined by Scholastic’s Chief Administrator, Administrative Officer and CFO, Maureen O’Connell, and members of the executive team are available for Q&A at the end of this call. In a tough three month period for most businesses we are strongly encouraged that we held revenues, reduced costs significantly and maintained a healthy balance sheet last quarter. In the face of cut backs in consumer and education spending, Scholastic had strong support from its customers, has seen an increased order and unit volume in school book clubs, higher participation in revenue per fair in school book fairs and a strong, solid list of best sellers and trade publishing. In educational technology in addition to sustaining our sales levels we had solid sales of consulting services to our installed base of customers who increasingly rely on us to help them raise student achievement. Last quarter we also achieved the top end of the cost savings target we announced in July, eliminating $35 million in annualized expenses including $25 million in salaries. While these cuts will primarily benefit fiscal 2010, we will see some positive effect in the second half of fiscal 2009. We also continued exiting unprofitable businesses. While we continue to be solidly profitable, operating income declined by approximately $30 million last quarter. This reduction was primarily due to $11 million in severance and one-time expenses associated with our cost reduction actions as well as an unfavorable foreign exchange impact of $7 million. We also had higher royalty and bad debt reserves in the U.S. and international trade businesses of $6 million reflecting a more conservative outlook. The remaining year-over-year decline in operating income was due to…

Thank you Maureen. As I mentioned earlier our core business remains solidly based on needs of schools and families. In difficult times this is particularly important. Every day 55 million children attend grades K-12 and many more attend early childhood programs. These children, along with their parents and teachers, use Scholastic clubs and fairs, read Scholastic books and use our educational technology and supplementary materials. This consistent, renewable market place is the foundation for Scholastic’s steady sales and long-term growth as we saw last quarter in a difficult environment. Based on these solid results and our success in reducing costs and managing our balance sheet, we remain confident we will reach the higher end of our guidance in the second half based on our current operating plan and cost reductions. Longer term we will continue to grow our core businesses, serving our loyal customers while improving profitability and maintaining a solid financial foundation. Now I will moderate a question-and-answer period. In addition to Maureen, I am joined this morning by Ellie Berger, President of Scholastic Trade Publishing; Deborah Forte, President of Scholastic Media; Margery Mayer, President of Scholastic Education; Judy Newman, President of Scholastic Book Clubs and Hugh Roome, President of Scholastic International. With that let’s open the call to questions.

(Operator Instructions) The first question comes from the line of Drew Crum - Stifel Nicolaus.

I want to start with the guidance for 2009. Is there a revenue range you are looking at for 2009 now? Maureen O’Connell: In line to our current performance we are looking for a slight increase to flat revenue in the second half of the year excluding Harry Potter.

The $0.65 to $0.95 you mentioned in the second half for 2009 that is excluding the severance charges and one-time items? Maureen O’Connell: Correct. It includes normalized severance. As you know we had severance in the past on a normal basis but we have included that $8 million of normalized severance but this additional severance related to these cost action programs we have put in place such as the voluntary retirement and other cost programs is not included.

What are you assuming as far as the allowance for doubtful accounts which I believe was about $6 million pre-tax in the second quarter in addition to foreign currency? Can you talk about what your assumptions are there for the second half of 2009? Maureen O’Connell: We prudently reserve for our trade receivables in both our domestic and U.K. businesses. So that does include an enhanced reserve for bad debt for those two businesses looking more conservatively at the current outlook.

Anything on foreign currency? Maureen O’Connell: We are assuming a flat foreign currency base in the second half.

I also wanted to ask you about the pricing strategy you implemented at the beginning of the academic year. Can you measure the success of that initiative? Can you quantify the benefit you got or recognized during the second quarter? You mentioned you had seen a transition or flight to lower ticket items. Maureen O’Connell: If we look at our cost of goods sold where the impact of higher pricing will show up, that rate has actually improved before you factor in the increase in royalty reserves and higher amortization associated with our new product development so we are seeing real benefit from the price increases. Even though they are migrating to lower price items there was still a big value gap there and we were able to raise the prices on those lower priced items as well. So we are seeing in all our book businesses the benefit of the price increase.

The Harry Potter contributions in the second quarter I know you released the 10th anniversary book. I just wanted to get a sense of the contributions from Harry Potter in the second quarter and what the comp is there. Maureen O’Connell: Harry Potter box set was worth about $10 million on revenue in Q2.

The next question comes from Catriona Fallon – Citigroup.

I’m just trying to work out the after tax impact of the severance. My estimate tells me it is about $0.17 of severance before tax. Is that about $0.12 after tax? Maureen O’Connell: I believe it is in the press release. $0.17 after tax. Our tax rate has gone up this year so that is affecting that calculation.

Regarding the Puerto Rico and Argentine businesses, can you walk me through the thought process a little bit there? How long have you been thinking about discontinuing these businesses and what other businesses are there similar that you might also look to discontinue?

We have been looking closely at all our businesses overseas. In the case of Argentina, difficulties in the local economic environment meant that we didn’t see that business which had been making losses was going to go into profitability in the next two years or more. In the case of Puerto Rico we have a good Scholastic business in Puerto Rico for book fairs and book clubs and a very sound educational business. This was the door-to-door selling operation where we sell encyclopedias. It was the former Grolier business there. That business in a high unemployment and difficult economic environment also did not look like it would make profits going forward. So these were two examples. On the international side we continue to look at all sides of the portfolio but this will enhance our profitability going forward. I will go back to Maureen regarding our view overall. Maureen O’Connell: At this time we are going through our strategic planning process and we are looking at all of our businesses in light of the current environment and what is the likelihood we will achieve our margin goals in each of these businesses with a very critical eye and that is why we are saying we are looking at our portfolio businesses and if there are businesses that were strategic investments in a better economy that may not pay out in this economy we will look at that and decide whether we should be in this for the long-term.

It seems a lot of companies are taking a look at their operating margins in this type of environment. I’m wondering if there is any change to your 9-10% operating margin goal.

No, we are very committed to that. In fact we are increasing our commitment to cost reduction in the second half this year. We achieved our $35 million first half goal and we are continuing to sharpen our focus on margin. We are holding steadfast to our 9-10% operating margin goal.

On the 39 Clues, there have been two books released so far. Can you give us an update on the print volume and sales volume of those two books?

The second book that released earlier this month we are really excited to see sales actually doubled from what the first book had come out at. Back list sales of the first book continue to grow as do hard sales and in fact the second book will hit number one on the Times Best Seller list this week and we just learned it will be for the following week as well at number one. So we are very excited and look forward to the launch of the third book in March.

But no detail on the print?

We have over a million copies of the three. The first two books and the card pack out in the market right now.

The next question comes from Amy Minella – Cardinal Capital Management. Amy Minella – Cardinal Capital Management: On the fairs and you mentioned in the second quarter some of the fair revenue was pushed to the third quarter. Could you tell us how much that is from a dollar point of view?

Probably around $4-5 million for fair revenue that got pushed to December.

At this time there are no further questions. Are there any closing remarks?

I would like to ask Judy Newman and Marge Mayer to briefly summarize their view of the current businesses in clubs and education and then we will make some final remarks.

Thank you Dick. Going into this market we believed we had really a big opportunity to embrace our customers and really strengthen our relationship with the teachers and students and parents who turn to book clubs and to dependable sources of books and learning products really during all times. As we have been saying through this call we strategically gave teachers more bonus points to reward them for participating in book clubs. We promoted our low price, great value and by the way great margin products. We added some additional catalogs with our Vote for Reading offer which tied into the [inaudible] and we increased our customer service staff to make sure our customers had access to our experts so that they could have their questions about products and service answered immediately with no wait. We had very low abandon rates as we call them. As we said this did yield a little bit of incremental promotion expense but we saw an extraordinary customer response. We have seen it in the second quarter and we are continuing to see it through December. We literally had those trucks lined up at the warehouse until 1:30 a.m. shipping those boxes to make sure that the teachers got their orders before the holiday break. So customers have been purchasing the lower priced, higher margin products and this offset kind of that trend towards the lower priced product they were buying but this was really offset by a 6% increase in orders and a tremendous increase in units. We are really, really excited by this great response to our business. It is just once again a validation of the resiliency of the book clubs in all times as a tremendous partner to teachers, parents and children. We are well positioned for the second half of the year and we are very excited about that. With that I will turn it over to Margery.

Thanks Judy. Good morning everybody. We were really pleased with our quarter. We felt that we had good margin improvement in the quarter. We think we made some really wise decisions about re-engineering our selling costs. We reduced some productivity costs while we invested more in service where our business is growing extremely well. Our technology sales held up in the quarter and overall we feel that there is opportunity in the market place if you follow the money. A lot of our purchasing comes from funds that have not been cut. They come from Title I funds, from Special Ed and we are seeing some good estimates coming from those funds. Going forward we are excited about System 44. We have had an incredible response to it. The program is designed to teach skills that help children do well in Read-180 who are really not ready for 180 and so we have been going back to our devoted customer base for Read-180 and we are getting an incredible reaction to it. We are delighted we got listed in California for the upcoming intervention call and System 44 is a lead product in that adoption so it is submitted with Read-180 but we have a combination product now of 44 and 180. Overall, we believe this can be a good market for us. There are still kids who need achievement. We are excited about the Obama administration and their investment in early childhood. We think they are going to be unrelenting about raising achievement for all kids. So we go into the second half full of hope.

We obviously are proud of the fact we sustained sales in a difficult quarter, that we achieved our operating cost target of $35 million and have added $20 million more to that cost reduction program for the second half and we have a strong balance sheet going forward. Our businesses are rooted in deep need of schools, parents and families. We believe that is what sustains us and sustains them in difficult times. Our staff is very, very committed to achieving the top end of our guidance for the second half and we will do everything we can to reduce costs and achieve the sales we believe we can achieve in this difficult environment. Thank you all for your attention and for your support of Scholastic.

This concludes today’s conference call. You may now disconnect.