<p align= justify >Specifically, the complaint alleges that during the Class Period, defendants issued materially false and misleading statements that misrepresented and failed to disclose: (i) that the Company’s Educational Publishing division was suffering from a variety of adverse factors which were causing it to experience declining results and it was not performing according to internal expectations; (ii) that the Company’s operations in the United Kingdom were not performing well and would have to be reorganized; (iii) that the Company’s financial results were materially overstated as it was failing to timely write-down the value of certain print reference assets and it was failing to properly reserve for certain bad debts; and (iv) as a result of the foregoing, Defendants’ lacked a reasonable basis for their positive statements about the Company and its prospects.</p> <p align= justify >On December 16, 2005, Scholastic issued a press release announcing its financial results for the fiscal second quarter of 2006, the period ending November 30, 2005. For the quarter, the Company reported net income of $66.9 million. In response to the disappointing earnings announcement, the price of Scholastic common stock declined from $33.10 per share to $29.30 per share on heavy trading volume. The complaint further alleges that Defendants, however, continued to conceal the scope of the problems at the Company and maintained earnings guidance that they knew could not be met.</p>
<p align= justify >Then, on March 23, 2006, Scholastic issued a press release announcing its financial results for the third quarter of 2006, the period ending February 28, 2006. The Company reported a net loss of $15.5 million or ($0.37) per share. In response to the Company’s announcement, the price of Scholastic common stock declined from $29.42 per share to $26.04 per share on heavy trading volume.</p>