CAPITAL STOCK AND STOCK-BASED AWARDS

12 Months Ended

May 31, 2011

Capital Stock And Stock Based Awards [Text Block]

10. CAPITAL STOCK AND STOCK-BASED AWARDS

Scholastic Corporation has authorized capital stock of: 4,000,000 shares of Class A Stock; 70,000,000 shares of Common Stock; and 2,000,000 shares of Preferred Stock.

Class A Stock and Common Stock

The only voting rights vested in the holders of Common Stock, except as required by law, are the election of such number of directors as shall equal at least one-fifth of the members of the Board. The Class A Stockholders are entitled to elect all other directors and to vote on all other matters. The Class A Stockholders and the holders of Common Stock are entitled to one vote per share on matters on which they are entitled to vote. The Class A Stockholders have the right, at their option, to convert shares of Class A Stock into shares of Common Stock on a share-for-share basis.

With the exception of voting rights and conversion rights, and as to the rights of holders of Preferred Stock if issued, the Class A Stock and the Common Stock are equal in rank and are entitled to dividends and distributions, when and if declared by the Board.

At May 31, 2011, there were 1,656,200 shares of Class A Stock and 29,316,691 shares of Common Stock outstanding. At May 31, 2011, there were 1,499,000 shares of Class A stock authorized for issuance under the Company’s stock-based compensation plans. At May 31, 2011, Scholastic Corporation had reserved for issuance 8,385,923 shares of Common Stock, which includes both shares of Common Stock that were reserved for issuance under the Company’s stock-based compensation plans and 3,155,200 shares of Common Stock that were reserved for the potential issuance of Common Stock upon conversion of the outstanding shares of Class A Stock and shares of Class A Stock reserved for issuance under the Company’s stock-based compensation plans.

Preferred Stock

The Preferred Stock may be issued in one or more series, with the rights of each series, including voting rights, to be determined by the Board before each issuance. To date, no shares of Preferred Stock have been issued.

Stock-based awards

At May 31, 2011, the Company maintained two stockholder-approved employee stock-based compensation plans with regard to the Common Stock: the Scholastic Corporation 1995 Stock Option Plan (the “1995 Plan”), under which no further awards can be made; and the Scholastic Corporation 2001 Stock Incentive Plan (the “2001 Plan”). The 2001 Plan provides for the issuance of: incentive stock options, which qualify for favorable treatment under the Internal Revenue Code; options that are not so qualified, called non-qualified stock options; restricted stock; and other stock-based awards.

The Company’s stock-based compensation vests over periods not exceeding four years. Provisions in the Company’s stock-based compensation plans allow for the acceleration of vesting for certain retirement eligible employees, as well as in certain other events.

Stock Options – At May 31, 2011, non-qualified stock options to purchase 316,740 shares and 3,289,126 shares of Common Stock were outstanding under the 1995 Plan and 2001 Plan, respectively. During fiscal 2011, Mr. Robinson was granted 250,000 options at an exercise price of $22.81 under the 2001 Plan, and an additional 303,200 options were granted under the 2001 Plan to other employees at a weighted average exercise price of $23.59.

At May 31, 2011, 409,189 shares of Common Stock were available for additional awards under the 2001 Plan.

The Company also maintains the 1997 Outside Directors’ Stock Option Plan (the “1997 Directors’ Plan”), a stockholder-approved stock option plan for outside directors under which no further awards may be made. The 1997 Directors’ Plan, as amended, provided for the automatic grant to each non-employee director on the date of each annual stockholders’ meeting of non-qualified stock options to purchase 6,000 shares of Common Stock.

At May 31, 2011, options to purchase 210,000 shares of Common Stock were outstanding under the 1997 Directors’ Plan.

In September 2007, the Corporation adopted the Scholastic Corporation 2007 Outside Directors’ Stock Option Plan (the “2007 Directors’ Plan”). The 2007 Directors’ Plan provides for the automatic grant to each non-employee director on the date of each annual stockholders’ meeting of non-qualified stock options to purchase 3,000 shares of Common Stock at a purchase price per share equal to the fair market value of a share of Common Stock on the date of grant and 1,200 restricted stock units. In September 2010, 27,000 options at an exercise price of $25.61 per share and 10,800 restricted stock units were granted under the 2007 Directors’ Plan. As of May 31, 2011, 90,000 options were outstanding under the 2007 Directors’ Plan and 371,600 shares of Common Stock remained available for additional awards under the 2007 Directors’ Plan.

The Scholastic Corporation 2004 Class A Stock Incentive Plan (the “Class A Plan”) provided for the grant to Richard Robinson, the Chief Executive Officer of the Corporation as of the effective date of the Class A Plan, of options to purchase Class A Stock (the “Class A Options”). In fiscal 2011, there were no awards granted under the Class A Plan. At May 31, 2011, there were 1,499,000 Class A Options granted to Mr. Robinson outstanding, and no shares of Class A Stock remained available for additional awards under the Class A Plan.

Generally, options granted under the various plans may not be exercised for a minimum of one year after the date of grant and expire approximately ten years after the date of grant. The total intrinsic value of stock options exercised during the years ended May 31, 2011, 2010 and 2009 was $0.4, $0.3 and $0.0, respectively. The intrinsic value of these stock options is deductible by the Company for tax purposes upon exercise. The total pretax compensation cost for stock-based payment arrangements recognized in income for fiscal 2011, 2010 and 2009 was $13.7, $14.0 and $11.6, respectively. The Company amortizes the fair value of stock options as stock-based compensation expense over the requisite service period on a straight-line basis, or sooner if the employee effectively vests by meeting certain retirement provisions. The total tax benefit related to stock-based compensation expense for fiscal 2011, 2010 and 2009 was $1.8, $2.1 and $1.9, respectively.

As of May 31, 2011, the total pretax compensation cost not yet recognized by the Company with regard to outstanding unvested stock options was $5.1. The weighted average period over which this compensation cost is expected to be recognized is 1.6 years.

The following table sets forth the stock option activity for the Class A Stock and Common Stock plans for the fiscal year ended May 31, 2011:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at May 31, 2010		5,589,156		$	31.26
Granted		580,200			23.59
Exercised		(104,100	)		26.52
Expired		(519,250	)		33.27
Cancellations and forfeitures		(141,140	)		33.27
Outstanding at May 31, 2011		5,404,866		$	30.28		5.3		5.8
Exercisable at May 31, 2011		3,924,015			32.20		4.3		1.3

Restricted Stock Units – In addition to stock options, the Company has issued restricted stock units to certain officers and key executives under the 2001 Plan (“Stock Units”). During fiscal 2011 and 2010, the Company granted 141,600 and 401,541 Stock Units, respectively, with weighted average grant date prices of $25.03 and $20.11 per share, respectively. The Stock Units automatically convert to shares of Common Stock on a one-for-one basis as the award vests, which is typically over a four-year period beginning thirteen months from the grant date and thereafter annually on the anniversary of the grant date. There were 166,553 shares of Common Stock issued upon conversion of Stock Units during fiscal 2011. The Company measures the value of Stock Units at fair value based on the number of Stock Units granted and the price of the underlying Common Stock on the grant date. The Company amortizes the fair value of outstanding Stock Units as stock-based compensation expense over the requisite service period on a straight-line basis, or sooner if the employee effectively vests by meeting certain retirement eligibility requirements. As of May 31, 2011, the total pretax compensation cost not yet recognized by the Company with regard to unvested Stock Units was $6.0. The weighted average period over which this compensation cost is expected to be recognized is 2.4 years.

Management Stock Purchase Plan - The Company maintains a Management Stock Purchase Plan (“MSPP”), which allows certain members of senior management to defer up to 100% of their annual cash bonus payments in the form of restricted stock units (“RSUs”). The RSUs are purchased by the employee at a 25% discount from the lowest closing price of the Common Stock on NASDAQ on any day during the fiscal quarter in which such bonuses are payable and are converted into shares of Common Stock on a one-for-one basis at the end of the applicable deferral period. During fiscal 2011 and 2010, the Company allocated 121,550 RSUs and 17,191 RSUs, respectively, to participants under the MSPP at a price of $16.90 and $13.90 per RSU, respectively. At May 31, 2011, there were 201,128 shares of Common Stock remaining authorized for issuance under the MSPP. The Company measures the value of RSUs at fair value based on the number of RSUs granted and the price of the underlying Common Stock on the grant date, giving effect to the 25% discount. The Company amortizes this discount as stock-based compensation expense over the vesting term on a straight-line basis, or sooner if the employee effectively vests by meeting certain retirement provisions. As of May 31, 2011, the total pretax compensation cost not yet recognized by the Company with regard to unvested RSUs was $0.2. The weighted average period over which this compensation cost is expected to be recognized is 2.0 years.

The following table sets forth Stock Unit and RSU activity for the year ended May 31, 2011:

	Stock Units/RSUs			Weighted Average grant date fair value
Nonvested as of May 31, 2010		663,430		$	9.22
Granted		273,950			21.43
Vested		(166,553	)		24.37
Forfeited		(18,423	)		21.74
Nonvested as of May 31, 2011		752,404		$	21.51

The total fair value of shares vested during the fiscal years ended May 31, 2011, 2010 and 2009 was $4.1, $2.6 and $3.7, respectively.

Employee Stock Purchase Plan

The Company maintains an Employee Stock Purchase Plan (the “ESPP”), which is offered to eligible United States employees. The ESPP permits participating employees to purchase Common Stock, with after-tax payroll deductions, on a quarterly basis at a 15% discount from the closing price of the Common Stock on NASDAQ on the last business day of the fiscal quarter. The Company recognizes the fair value of the Common Stock issued under the ESPP as stock-based compensation expense in the quarter in which the employees participated in the plan. During fiscal 2011 and 2010, the Company issued 88,370 shares and 73,021 shares of Common Stock under the ESPP at a weighted average price of $22.75 and $20.82 per share, respectively. At May 31, 2011, there were 342,940 shares of Common Stock remaining authorized for issuance under the ESPP.