Good day, and welcome to the Scholastic 2009 earnings conference call. Today’s call is being recorded. For opening remarks and introductions, I would like to turn the conference over to Mr. Jeff Matthews. Please go ahead, sir.

Thank you, Lory. Good morning, everyone. First, I would like to apologize for the technical delays. Then, I’d like to say that before we begin, the slides of this presentation are available for simultaneous viewing by going to our Web site, scholastic.com, clicking on Investor Relations, and following the link from that page. I’d also like to note that this presentation contains certain forward-looking statements, which are subject to various risks and uncertainties, including the conditions 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.

Thanks, Jeff. Good morning, and thank you everyone for joining us on our fiscal 2009 year-end conference call. I’m joined by Scholastic’s CAO and CFO, Maureen O’Connell, and by Margery Myer, President of Scholastic Education. Other members of the executive team will be available for Q&A at the end of this call. This morning we will present our plan to grow profit and free cash flow substantially, which if realized will enable us to reach our long stated goal of 9% operating margins in fiscal 2010. Before that, we will review our solid fiscal 2009 results. First, Scholastic held revenue approximately even with prior year, excluding fiscal 2008’s extraordinary benefit from the final book in the Harry Potter series and the negative impact of foreign exchange. Solid sales demonstrated the continued support of our customers in a difficult economic environment. And children’s book sales declined just 2%, compared to larger declines for the major booksellers. We achieved these results by driving strong customer participation and engagement, which mostly offset lower order in transaction sizes in clubs and fairs. This pattern held in the fourth quarter. In education, our successful strategy of partnering with schools to raise student achievement helped us significantly outperform a challenged market, where industry-wide sales declined by double digit percentages in the quarter due to continued pressure on state and local education funding. After a weak start last summer when we concluded a major reorganization of our sales force, revenue from educational technology held even for the remainder of the year, with strong sales of services and the successful launch of System 44 and other programs such as Do The Math. In the fourth quarter, Ed Tech and Services continue to outperform the market. As we’ll discuss in a moment, we did not see any material benefit…

Thanks, Dick, and good morning, everyone. The passage of the American Recovery and Reinvestment Act in February was cause for great excitement in the education community, and among those, like Scholastic, can serve that community. Although there are some companies who worry about just how much of the almost $100 billion is going to flow in the districts for new products and services, we are not among them. ARRA basically doubles available funding for our key products through increases to IBA and Title-1. Additionally, the fact that schools know they will be receiving stabilization money and other additional funds has led them to loosen the purse strings, which they held so tightly at this time last summer. We are tracking sales that we believe are tied to ARRA and have already seen good results. Between June 1st and July 17th, the first seven weeks of fiscal 2010, sales of educational technology in classroom books, which are the key areas we expect to benefit from ARRA, increased more than 40%, compared to last year. We can link much of this increase to stimulus funding and the further improvements in our sales capability. In fact, we are seeing particular growth among larger contracts as our sales force expands existing opportunities with stimulus funding. Because of this, we believe we are well positioned to take advantage of the direction laid out by the Obama administration. They have told schools to use stimulus funding for programs and services that support innovation, that encourage data-driven instruction, and help develop human capital. All of which matches the business we have established with Read 180 at the center. Our research-based products, including Read 180, System 44, and FASTT Math, and our ability to partner with school districts have already made us the market leader in curriculum technology. Traditional programs have difficulty moving the needle at scale, and the educators largely recognize this. They realize that technology based on research and implemented well is essential for providing students with the individualized learning that meets their needs and engages them. And our programs, proven to work in numerous third party studies, are recognized for their effectiveness. Early on, we’ve realized that technology cannot be sold the same way text books are. To use technology effectively, school districts require extensive service, technical support, and professional development. And we have evolved a unique solutions selling approach to support districts. Hence, the new administration’s guidelines are things we’ve been promoting for some time, and we firmly believe that our new products, services, and enhanced selling strategy should enable us to achieve our goal of $100 million in sales from the stimulus funds over the next two years, and approximately $50 million of that will come in fiscal 2010.

Well, thanks. As Margery’s described, we already have a strong start in the first seven weeks of this year with 40% gains over last year. This gives us confidence we can achieve our $50 million goal in fiscal '10 for incremental sales of higher margin educational technology, consulting services, and classroom books. This is the second key element of our plan to improve operating income by $30 million to $70 million. The third component of our fiscal 2010 plan is further operating improvements and costs reductions. We began this year with salary expense reduced by $30 million from a year ago. Approximately half of this was realized last year, giving the staging of headcount reductions, but offset by severance and one time expenses. In fiscal 2010, we expect the full year benefit of these savings. In addition, we have taken further steps to improve efficiencies. In school book fairs, we've reduced the number of regions from 14 to 7, and are moving to a hub-and-spoke model, where hubs will handle centralized activities including re-stocking, labor planning, and scheduling and inventory management. Branches will focus on sending and receiving fair cases to schools. This has already resulted in headcount and salary savings, and over time, will improve labor efficiencies and reduce inventory levels. In clubs we are reducing promotions spending relative to higher fiscal 2009 levels, when we increased investment in customer retention. Fiscal 2010 promotion spending should be approximately in line with two years ago, fiscal 2008. In the UK, we will expand revenues in clubs and reduce operating costs in fairs, in response to a soft market in that country and disappointing fiscal 2009 results. Further consolidation of facilities and staff will result in additional savings that we expect will involve a one-time charge in fiscal 2010. We've also…

Thanks, Maureen. We have a solid fiscal 2010 plan which we expect to execute well, delivering $30 million to $70 million in incremental operating income and reaching our long-term goal of nine percent margins, while significantly growing free cash flow. Now I will moderate a question-and-answer period. In addition to Maureen and Marjery, I’m joined this morning by Ellie Berger, president of Scholastic Trade; Deborah Forte, president of Scholastic Media; Judith Newman, president of Scholastic Book Clubs; and Hugh Roome, president of Consumer Magazines export in Asia. With that, let’s open the call for questions.

Thank you. (Operator instructions) And we’ll go first to Drew Crum with Stifel Nicolaus. Please go ahead, sir.

Great. Good morning, everyone. I wanted to start with those fourth quarter earnings number. Just want to get some clarification on the $0.82 you reported. Does that not or does it include the $0.17 tax benefit that was noted in the press release?

Maureen? You’ll take that one from Drew? Maureen O’Connell: Sure. When we estimated our UK -- when we rode off the Goodwill and the UK and the investments in the UK, we estimated tax benefits in the third quarter. It turned out we can deduct more of that and so we took that as a deduction to our EPS this quarter. So it’s actually a reduction of our benefit in this quarter. So we had higher earnings from continuing operations before that tax adjustment.

Okay. And Maureen, looking to 2010, which would we be using for an effective tax rate? Maureen O’Connell: I’d say between 43% and 45%.

Okay. And it looks like you guys are really getting some traction with the federal stimulus year-to-date, some encouraging result. I wanted to ask you what your assumptions are outside of revenue from a federal government. There’s some concern at the state in local level and I know that’s a piece of your business as well. How do you factor that in to your outlook for fiscal 10?

Well, it’s a good question, Drew. I’ll ask Margery to answer it more detailed. Our plan here was always to have a level of growth in our core business in fiscal 2010. On top of which, the incremental $50 million that we discussed for ARRA and aid stimulus. However, Margery can give you a little more color on that particular issue which you raised, the local budget’s weakening.

So Drew, good morning. How are you?

Good morning. Good.

Well, I’d have to tell you that I have to contain myself because we’re pretty excited about what we’re seeing in the education market right now. We are tracking our opportunities by whether or not we feel that there’s stimulus or whether we feel that they’re what we call our core based business and both of those categories are up. And what we’re seeing, I think, is that even if school districts don’t have their stimulus money already, they see it coming. And so they’ve loosened up their money and they are spending. So with every indicator we’re looking at right now is in a positive direction. We’re seeing more large orders. Our large orders are larger than they were last year. We’re just really, really honestly excited about the opportunities out there. Now, a lot of this reflects the work that we’ve been doing in terms of building our businesses, a technology business with a complete set of services that come with it. Many of our large orders have a large percentage coming from services and we have a lot of renewals of services. We just -- we’re thrilled, so far. But we’re always got our fingers crossed that it keeps going.

Okay. And somewhat related to that, what is your exposure to California, is there a way to quantify that?

Actually, one of the good things going on for us right now is California. We’ve got a lot of large orders from California in the last few weeks. Read 180 is listed in their intervention adoption, which puts it in the category of categorical funding that isolates it somewhat from the budget woes. And we see more business coming in from California this summer than we’ve seen in a long time.

Okay. And given the budget crisis there and the cuts to education, would that in any way impact the book fair events that you hold in the state?

Well, actually, in some ways it’s counter -- it goes counter to the funding trends. If the school gets cut back, often the parents will come in and want to spend a little bit more of their own money to help support the school, which is a book fair of course, where it helps the child to get more reading through the clubs and our fairs. So there really is no direct correlation between school spending and revenues from clubs and fairs. Although, there is probably a positive correlation in that we do better often when schools are having more difficulty because they seek more opportunities for fund raising to develop school-based funds and the parents want to contribute a little bit more to their child’s education.

Okay, great. And then just one more question, the margin target for 2010 looks to be a range of 7% to 9%, previously it was 9% to 10% which obviously, 7% to 9% would be a significant increase over the fiscal year 9. But just want to get a sense as to what the change agent is there driving what seems to be a lower EBIT range for you guys?

Well, we laid out our three-point plan, Drew, which shows three buckets of profit improvement which at the top end of the range would lead us to 9%. So it’s a difficult economic time and we don’t see any great change in parent purchasing capability this fall from last year. So we’re obviously being conservative in the range. Our goal remains to hit the top end of the range but the economics are not altogether favorable and we’re -- we believe that there could be some shortfall on that. But our goal remains at 9%.

Okay. Thanks, guys.

Thank you.

(Operator instructions) And that does conclude our question and answer session. At this time I’d like to turn the conference back over to Mr. Dick Robinson for any additional or closing comments.

Well, we thank you all for your support during fiscal 2009 which we believe we did some very good things to position the company for our 2010 plan. We outlined the ways that we are expect to add $30 million to $70 million of operating income and we’re on the way to executing that plan. We appreciate your continued support and interest in Scholastic, and we will be working for you for this school year. Thanks so much.

And that does conclude today’s conference. Thank you for your participation.