John Wiley & Sons Inc (WLY) 2007 Q4 法說會逐字稿

Welcome to the John Wiley & Sons conference call.

Today's call is being recorded.

Before I introduce Will Pesce, President and Chief Executive Officer, I would like to remind you that this discussion will contain forward-looking statements.

You should not rely on such statements as actual results may differ materially and are subject to factors that are discussed in detail in the Company's 10-K and 10-Q filings with the SEC.

The Company does not undertake any obligation to update or revise forward-looking statements to provide subsequent events or circumstances.

Mr.

Pesce, please go ahead, sir.

Welcome to Wiley's year-end conference call.

I am with Ellis Cousens.

I will provide an overview then Ellis and I will respond to your questions.

Wiley finished an extraordinary year on a positive note.

Revenue reached a new record.

Our global businesses, Professional/Trade, Scientific, Technical, and Medical and Higher Education contributed to the growth and outpaced industry performance.

We acquired Blackwell, the largest acquisition in Wiley's history.

The acquisition exceeded our financial projections for the fourth quarter, mainly due to acquisition-related accounting.

The integration process is progressing well.

It pleases me greatly that Wiley and Blackwell colleagues are collaborating effectively around the world to realize our aspirations for this acquisition.

We're confident we will provide high-quality products and services to our authors, society partners and customers while generating the financial results required to make this a sound strategic investment for our Company and our shareholders.

Unless I state otherwise, all of the numbers that I mention during this overview exclude Blackwell.

As noted in the press release, Wiley's full-year revenue grew 8% to $1.1 billion, which is a record high.

Revenue for the fourth quarter of $284 million increased 7%.

Excluding the effect of favorable foreign exchange, revenue increased 7% in the full year and 4% in the quarter.

Wiley's gross margin in fiscal year 2007 of 67.6% was better than prior year, reflecting the combined effect of product mix, lower provisions and cost savings initiatives.

Fiscal year 2007 reported results include incremental stock option costs associated with the adoption of SFAS 123R of $11 million or $0.12 per share and a bad debt provision related to the Advanced Marketing Services bankruptcy of $4 million or $0.05 per share.

On a comparable basis to last year, excluding SFAS 123R and various tax benefits, EPS increased 9%.

In fiscal year 2007, excluding Blackwell, the Company generated free cash flow of $146 million, which was down from prior year by 3% due to the timing of vendor and author payments and the effect of the AMS bankruptcy.

During the year, we repurchased $7 million of Wiley's shares, acquired publishing assets in several transactions, excluding Blackwell, of $20 million and paid $23 million in dividends to shareholders.

Receivables of $168 million were 6% higher than prior year, reflecting the effect of top-line growth, partially offset by a reduction in days sales outstanding from 93 to 87 days.

Inventories of $100 million increased 13% due to new publications and reprints of best sellers.

The $10 million year-on-year increase in property, equipment and technology reflects the combined effect of computer hardware and software purchases and planned investment in our UK facility.

Return on investment, return on equity and various productivity measures compared favorably with prior year.

Full-time staff increased 3% from prior year while employee turnover was flat.

I'd like to provide some highlights regarding the performance of our core businesses.

It noteworthy that direct contribution to profit includes the effect of SFAS 123R in fiscal year 2007 but not in the prior year.

Professional trade revenue in fiscal year 2007 increased from the previous year by 5% to $399 million or 7% after adjusting for the change in interest segment product prices that was noted in the press release.

Growth was more than double that of the industry.

Acquisitions contributed about $2 million to the year-on-year growth.

Fourth-quarter revenue of $106 million increased 1% while 3% adjusted for the change inter segment product prices.

As a reminder, last year's fourth quarter was particularly strong for our PT business.

Results were driven by the cooking, travel, business and technology programs as well as strong global rights in advertising revenue.

Globally, PT sales increased 9% for the full year and 5% for the quarter.

Direct contribution to profit increased 1% for the full year and 5% in the fourth quarter.

Adjusted for the effect of the change in inter segment product prices, direct contribution to profit improved 6% for the full year and 11% in the fourth quarter.

Revenue growth and favorable product mix were partially offset by a provision for the AMS bankruptcy.

In fiscal year 2007, sell through was strong at Amazon.

Ingram and Baker & Taylor, two leading wholesalers, had banner years.

Mass market grew nicely over prior year.

Consumer publishing grew 13% over last year, led by our cooking and travel programs.

PT's cooking program had an exceptional year, as previously published titles continued to build momentum.

PT's online business had an excellent year, driven by strong advertising sales.

We acquired What'sOnWhen.com, a UK-based provider of travel-related online content, technology and related services.

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In March, we acquired the assets of Anchor Publishing, which complements our professional development publishing programs for faculty and administrators in higher education.

The business program followed a strong fiscal year 2006 with 9% growth in the past year, led by finance and leadership books and a solid year in accounting.

Scientific, Technical, and Medical revenue in fiscal year 2007 increased from the previous year by 8% to $222 million, outpacing industry growth.

Fourth-quarter revenue advanced 6% for the same period of the prior year.

Results were driven by journals and STM reference books.

New businesses and publication rights recently acquired contributed $5 million to the top-line growth for the full year.

Globally, STM increased 8% for the quarter and full year.

Direct contribution to profit increased from prior year by 5% in fiscal year 2007 and by 8% in the quarter.

The positive effect of top-line growth was partially offset by the cost of imported products and higher royalties due to product mix.

Journal revenue finished the year up 8% from prior year.

Back files continue to perform well as has our pay-per-view and article select services.

Customers continue to take advantage of Wiley InterSciences content.

The number of visits grew by nearly 24% in fiscal year 2007 compared to the previous year.

STM books finished a challenging year strongly with global revenue increasing 8% or 5% excluding the favorable effect of currency.

The Company has embarked on a program to digitize landmark STM books.

Consequently, the number of online books downloaded from Wiley InterSciences grew by 30% during the year.

With most of the series going back to Volume 1, users can now access valuable content that is no longer in print.

With the addition of these volumes, total online book content will comprise over one million pages.

During the quarter, a multi-year agreement was signed with the American Society of Transplant Surgeons and the American Society of Transplantation to publish their journal.

Wiley was selected by the Society of Academic Emergency Medicine to publish its journal.

And we announced an agreement to launch Anatomical Sciences Education, a new international journal.

Higher education revenue in fiscal year 2007 increased 4% to $162 million, or 7% after adjusting for the effect of the change in inter segment product prices.

The year-on-year growth was more than double that of the industry.

For the fourth quarter, revenue grew 10% or 14% adjusted for inter segment prices.

Strong growth in accounting driven by new additions sold through WileyPLUS, the social sciences and the Microsoft official academic course titles, was partially offset by softness in math, science and engineering.

Globally, higher education revenue increased 6% for both the quarter and fiscal year.

Direct contribution to profit in fiscal year 2007 improved 3% or 12% adjusted for the effect of the change in inter segment product prices.

Direct contribution to profit in the fourth quarter increased 8% over the same period or 25% after excluding the effect of inter segment product prices.

The improvement was due to revenue growth and reduced costs driven by offshoring composition, improved vendor terms and lower costs associated with the delivery of electronic product.

WileyPLUS sales in the fiscal year were nearly double the prior-year amount.

Business for the quarter approached $1 million.

Digital only sales, that is not accompanied by a textbook, accounted for 20% of total WileyPLUS sales.

WileyPLUS is currently being used in 13 countries around the world as marketing programs in Europe and Asia are helping to establish a presence in those regions.

WileyPLUS assignment editions were officially launched in Australia and in New Zealand.

The Microsoft alliance is exceeding the expectations of both companies.

Revenue for the seven months since the agreement was implemented was more than 40% higher than the level achieved by a major competitor when it had a similar relationship with Microsoft.

Our higher education team hosted a meeting with California State University regarding its digital marketplace initiative.

This program would create standards that enable access to content from a wide range of sources, including digital textbooks.

Another CSU initiative, the Task Force on Textbook Affordability, is seeking lower-cost alternatives to traditional textbooks.

With that objective in mind, Wiley submitted a proposal for several WileyPLUS courses.

We also presented a proposal to another state university.

That proposal provides incentives for adopting WileyPLUS courses, including access to Wiley's STM content.

Commitments have been made for six courses beginning in the fall.

Wiley Europe's revenue in fiscal year 2007 increased 8% to $316 million or 5%, after adjusting for the change in inter segment product prices and foreign exchange.

Favorable foreign exchange contributed approximately 4% to the growth.

Revenue in the fourth quarter increased 11% or 6% after adjusting for the change in inter segment product prices and foreign exchange.

The top-line growth was principally driven by journals and STM reference books.

Direct contribution to profit for the full year increased 12% over the prior year or 4% after adjusting for the change in inter segment product prices and foreign exchange, and direct contribution to profit for the fourth quarter increased 8% over the prior year or 1% after adjusting for the change in inter segment product prices and foreign exchange.

The year ended on a positive note with indigenous books exhibiting strength, PT sales gaining momentum in continental Europe during the fourth quarter, with much of that growth coming from technology books.

STM journals continued to increase in all disciplines, particularly chemistry, which includes the Angewandte Chemie journals published on behalf of the German Chemical Society.

Angewandte Chemie International Edition is the most downloaded journal in Wiley InterSciences, generating more than 3 million full text accesses.

Advertising-related businesses in the UK and Germany fell short of expectations.

Wiley's fiscal year 2007 revenue in Asia, Australia and Canada advanced 7% to $133 million or 5% excluding favorable foreign currency exchange.

Wiley Asia reported year-on-year growth of 9% in fiscal year 2007 while our businesses in Australia and Canada had sluggish top-line growth of 2% to 3% excluding favorable foreign exchange.

Direct contribution to profit for the full year increased 2% to $27 million but decreased 15% after adjusting for the change in inter segment product prices and favorable foreign exchange.

The decline in direct contribution was partially due to product mix and also investments in the development of indigenous publishing programs.

Strong performances in many markets bolstered sales in Asia.

India, which is Wiley's largest book market in Asia, reported a 7% increase in revenue.

Malaysia was up 59% while book sales in China increased 34%.

School revenue in Australia fell below expectations do to back list attrition and shortfalls in the front list.

Wiley Canada delivered mixed results throughout the year, showing strength in its PT business but falling short of expectations in higher education.

Blackwell revenue and operating income for the fourth quarter of fiscal 2007 were $106 million and $6 million, respectively, exceeding our expectations.

Included in the fourth-quarter results is nearly $6 million of amortization charges for intangible assets related to the acquisition.

Financing costs for the acquisition were approximately $17 million in the quarter and the acquisition was dilutive to Wiley's EPS by approximately $0.02 per share.

Since completing the acquisition, we have made significant progress integrating Blackwell with Wiley's global STM business.

We have renewed society journal contracts and announced the launch of new journals and partnerships.

We have validated many of the key assumptions that underlie our acquisition plan.

During the fourth quarter, we announced a global organization structure for the merged business, which will include Blackwell and Wiley colleagues on the leadership team.

Plans have been approved to merge global sales, marketing and content management.

As planned, we are capitalizing on Blackwell's successful offshoring and outsourcing of various content management, manufacturing and shared support services.

Our current priorities are to finalize plans for the implementation of a single Web platform, complete the integration of technology infrastructure resources and complete the transition to a common financial reporting, distribution and customer service infrastructure.

By the end of fiscal year 2008, we expect to implement the action plans and initiatives that will deliver the synergies that underpin our acquisition plan.

At this point, we anticipate generating revenue and cost synergies that are at least as much as we projected in our acquisition plan.

In conclusion, fiscal year 2007 was a memorable year.

We generated record results.

Our three core businesses outpaced the industry.

We consummated the largest acquisition in Wiley's 200-year industry and made significant progress with the integration.

And Wiley's share price recently reached a record high.

All of these accomplishments were achieved in Wiley's bicentennial year, a year in which I have personally witnessed during events around the world that Wiley is indeed the place to be.

I'm proud of our accomplishments and inspired to reach higher as we embark on Wiley's third century.

I am confident that we will make this special place an even better place for the next generation of Wiley authors, customers, partners, shareholders and colleagues.

Based on leading indicators and market conditions, we anticipate fiscal year 2008 revenue growth in the mid to high single digits and EPS growth in the low double digits, excluding the Blackwell acquisition.

We expect Blackwell's revenue to be approximately $450 million in fiscal year 2008 and the acquisition is expected to be dilutive to EPS in fiscal year 2008 by less than $0.10 per share.

With that as background, we welcome your comments and questions.

(OPERATOR INSTRUCTIONS).

Drew Crum, Stifel Nicolaus.

Good afternoon, everyone.

It's Stifel Nicolaus.

Will, I just want to ask you about one final comment you made, and that pertains to the revenue and cost synergies.

You indicated you expected that to be as much as you had originally anticipated.

Is that the $90 million in revenue and $140 million for costs?

I just want to clarify that.

Drew, this is Ellis.

What we have said sort of said a different way is by the end of the third year, third fiscal year, the acquisition will generate $20 million per year, so annually, in incremental revenue from revenue synergies and $40 million a year in cost savings on an annualized basis.

So if you accumulate that some how over three years you get to those numbers.

But on a running basis in the third year we expect $20 million in revenue synergies and $40 million in cost synergies.

Got it.

I want to ask you guys about the dilution in the fourth quarter from Blackwell.

Coming off your third quarter, the guidance was $0.40 to $0.40 and it came in at $0.02.

I just wondered if you could reconcile or explain why the difference or variance there?

It is the same thing that drove the various in the fourth quarter is driving our guidance in the full year FY '08, which we have said is going to be no more than $0.10 a share.

Originally, we used our acquisition plan to generate and develop what our dilution would be in the quarter and for the year and for the years forward.

I think originally we said that the acquisition would be dilutive up to three years.

So what we found is that when we look through this -- by the way, we had an independent consultant do a valuation of the assets and liabilities that were [acquired assigned] the $572 million purchase price to those asset and liability categories, and found that they had deviated somewhat, certainly because of the valuation consultant at that point in time having much more granular information regarding individual assets and liabilities, particularly with respect to the publishing programs around the society journals and the proprietary journals within Blackwell.

That being the case, we found that the key element of that is that whereas we had a certain distribution of purchase price amongst goodwill and acquired pub rights and a specific life that we had expected with respect to those acquired pub rights, we found that whereas the distribution amongst goodwill and acquired pub rights was roughly right.

It was a little bit more went to goodwill, a little bit less to acquired publication rights.

The real difference was driven by the economic life or the expected life of the acquired pub rights, which was quite a bit longer than our original assumption.

That being derived from the fact that at that point in time, the valuation consultant was able to look at individual society contracts and relationships on a one by one very granular level, which we did not have access to when in fact we generated our original guidance and our acquisition plan.

So that was the key contributor.

Also, we had anticipated that there may be a need to write up the inventory so as to not overstate gross margin on the acquired business.

And found that when we analyzed gross margins at those inventory prices as acquired or inventory values as acquired that in fact a write up was not necessary.

So the combination of those two things drove the difference between the dilution that you saw in the fourth quarter and what it is that we provided guidance for, and in fact drives also the difference between what you may have -- could infer from the guidance we provided regarding the forward years and what we're now providing.

So right now the guidance that we're providing in fact reflects what we believe is -- what are the final allocations of purchase price.

However, there still is a possibility of some changes, although likely if they were they would be quite minor because the acquisition and the valuation is open until one year following the close of the acquisition, which would be February 2 of next year.

But we are relatively confident that things will not move around in a meaningful way.

Ellis, the $6 million in amortization costs you incurred because of Blackwell in the quarter, is that a fair run rate going forward?

Yes, it is.

The only difference between the quarter, well two differences.

One is in the quarter, the subscription revenue would suffer -- I would use the word suffer -- the full effect of the reduction in the amount of revenue that we could recognize because all of that sell was in calendar year 2007, with respect to the effect of what I refer to as this revenue haircut related to revenue recognition, inasmuch as these are principally calendar-year subscriptions.

Within fiscal year 2008 it would only effect calendar year 2007 revenue.

And of course there are four months of 2008, which would not have any effect of that.

And then also the inventory write up would have effected both the fourth quarter and a portion, a small portion of the year, but that is completely out of the equation, both the quarter and the year.

Two more quick ones.

As far as the tax rate is concerned, you guys did 25% in the quarter.

Is that what we should be modeling for going forward?

No.

I didn't think so but --

Nice try, Drew!

I would use the following.

And again this is a projected tax rate.

So use it with all of the health warnings that such things come with.

But I think a reasonable rate to use on a book basis is about 28%.

And a reasonable rate to use on a cash tax basis is about 35%.

Now that is different than what you would typically hear from us and that is because of course we acquired stock, the stock of Blackwell, not the individual assets.

So we have carryover basis in the assets and liabilities of what we acquired.

And as you might imagine, this is a company that is 75 plus years old.

Of course they've made lots of investments over 75 years.

But carryover tax basis is not anything near like what the purchase price was.

Of course that was reflected in the economics in terms of what our actual cash taxes paid would be over the life of the expected performance of the assets we bought.

But it's just a little bit different than you might have -- well than you certainly -- we have experienced in the past, is where the cash tax rate is about 7 points higher in the case of 2008.

That may shift from time to time.

But for '08 I would use 28 for book and 35 for cash.

Okay.

And then one final question.

Your guidance for fiscal year '08, EPS guidance of low double-digits growth ex Blackwell.

What is the comparison in '07?

Is that a GAAP number excluding Blackwell or is that a fully loaded number?

It is a number that includes the effect of 123R, but excludes the effect of those unusual tax items that were reported but includes also the effect of the AMS bankruptcy.

Dave Lewis, J.P.

Morgan.

Hi, good afternoon, guys, [good] quarter.

First question is, can you guys give a little more color on what you're hearing from your customers about the larger priority across the combined Blackwell Wiley platform?

It was one of the revenue synergies that was discussed back in December, and I just wanted to get a little more color about what you guys are hearing or if it is too early to really make an assessment of that.

Clearly, you guys are reiterating your revenue synergy guidance so it is positive but just a little more color?

Sure, this is Will.

It is admittedly a bit early.

But I will make a couple of points about that.

First, is, as most of you know, Blackwell has many society relationships.

In fact, by several multiples, more than Wiley and have been considered an industry leader in that regard.

I would like to state clearly that during this transition period, meaning since we did the acquisition in February, we have not lost any society relationships.

And some people could speculate that when you're going through a transition like this that something like that could happen.

In fact, it has not.

And in fact we have signed up some additional societies since the acquisition.

I take both of those to be very positive statements at this stage, 4.5 to five months into the merger of the two businesses.

Customer feedback has really been quite positive.

The revenue synergies that we have projected going forward come from many different places.

But if we can just for the moment focus on two major formats or components of our business.

We believe on a combined basis that combined sales and marketing capabilities of our companies around the world will generate incremental revenue from our book publishing program.

So that is not a matter of just publishing more books.

It's increasing the revenue per title, which is a great measure of productivity improvement and reaching more customers with more material.

On the journal side of things, it is still very, very early days.

We have two separate platforms, Wiley's InterSciences platform and Blackwell's synergy platform and it is critically important for us to merge those two into a new and enhanced platform.

The planning is underway for that, and I will ask Ellis in a moment to provide a little bit of information about the timing because he has those dates clearer in his mind than I do.

But what we anticipate once we're able to do that is that we will be able to serve our customers better by having just more access to more content through one particular platform.

And it will be an enhanced platform.

Both companies pre acquisition were beginning to look into enhancements to the delivery of this content.

What we're doing now is working together to provide more services to our customers.

I should also point out to you that even though there is a tremendous amount of overlap as you would expect in the customer bases between Blackwell and Wiley, there are a number of situations with consortia, for example, in North America where Wiley has existing licenses and where Blackwell did not.

And we anticipate sooner rather than later getting some value out of that.

So, the kind of summary of all of that is we are at least as optimistic, at least as optimistic, as we were about the revenue synergies.

And some of that will come sooner rather than later on the book side.

Some of it will come a little bit later when we start putting the platforms together.

And Ellis, maybe you could just --?

Yes, in terms of customers are looking for ultimately and we're looking to be able to sell to generate some of these revenue synergies, essentially a single offering to customers.

Essentially the journals program and on the Wiley side the online book program is supported through Wiley InterSciences Access License; in the case of Blackwell, a synergy access license for journals and other content.

And we have sort of laid out plans and have put together a time horizon to allow us to merge both of those programs onto a single platform in the middle of calendar 2008.

So about 12 months from where we sit now we will be on a single platform.

So we will be able to then in the 2009 calendar year renewal cycle be able to offer a single license for customers who are either new or renewing with Wiley in 2009.

And again, these are principally calendar-year subscriptions is what drives that business.

We will, however, despite the fact of having merged all of the content onto a single platform, both platforms will remain active for the balance of calendar 2008 because we do have customers who have multi-year licenses.

So we need to keep both services active throughout 2008.

So again, the plan is to merge platforms by 2009, excuse me, middle of 2008, to have a single offer to customers, what they're looking for and what we would like to get to because essentially then you have a single business model.

It's less -- it is the most straightforward way to present your business to the customer as a single business, single offering.

And then from the middle of 2008 when the platforms are merged, we will begin immediately to work on enhancing and developing a next generation platform, which will migrate over the course of 2009 and onward.

So that will be sort of an evolutionary process to a new, much, greatly enhanced platform, that quite frankly neither business individually could have afforded in a real economic sense on its own, but together we're capable of doing and, therefore, able to have essentially a world-class platform second to none on a combined basis.

That's great.

Thanks.

A couple more quick once.

WileyPLUS, are you guys seeing accelerating quarterly growth with the progress you're seeing there?

Well we have seen a doubling of that over the course of the year.

So our experience there has roughly doubled from the prior year.

So we're continuing to see fairly high growth.

In terms of acceleration, I think the rate of growth is substantial.

I could not really speak to it on a quarterly basis, since that is principally sold on a semester basis or a full-year basis.

It is pretty difficult to break it out on a quarterly basis.

And as you know we amortize that over either a semester or a year, based upon how the student purchased the access to WileyPLUS.

But certainly, a doubling is healthy growth.

We're happy with that.

It is progressing the way we'd hoped to.

In May, we relaunched or launched our fifth-generation or E5 platform to support WileyPLUS or WileyPLUS 5, which is a significantly enhanced platform.

We will be talking about what that will do over the course of the coming year as we approach the fall semester and the spring semester later in the fiscal year.

Great.

Last one.

Can you give us a little color on working capital and how we should think about modeling that this coming year (multiple speakers) for cash?

Yes.

We ourselves are sorting through that a bit as you can imagine.

The acquisition was completed back in February.

There is as you would imagine a lot of working capital tied up in Blackwell.

However, there is a little bit of noise if you're kind of sorting your way through the free cash flow numbers and the cash flow numbers related to Blackwell.

There's probably couple of things that I need to point out that would be helpful in terms of how you think about that.

The first is -- and it is an issue of timing and unique with respect to when the acquisition closed and the timing of cash flow into the business.

I know you asked a working capital question but I think it is important to understand this.

Is that when we closed the acquisition on February 2nd, by and large, as in Wiley's business pre acquisition, our journal business, most enhanced access licenses and the revenue and the cash that is derived from that business has been collected by the time you get to February.

So collections begin somewhere around November.

They accelerate into December, January and then they taper off dramatically after January into February.

So if you were looking at sort of our cash flow -- what our cash flow looked like over the course of the four quarters of 2007 and you're looking at it including Blackwell, you might have been under enthused by the amount of free cash flow.

And there I can tell you that has only to do with the timing of the acquisition.

The cash that is associated with the revenue that was realized in the fourth quarter of 2007 was in fact cash we acquired.

It was part of $189 million of cash that we bought as part of the business.

So it was in the economics.

So in fact, we were able to not borrow some of that and pay down other aspects of it as we were able to access that cash.

So that is the first part.

The second part is Blackwell, as Will alluded to, they have about 850 society relationships versus about 100 or so that we had pre acquisition.

And those societies, as you know for the most part, all receive a royalty of some sort, whether it be based on revenue or a profit share or whatever it happens to be.

Those are paid not like in Wiley on a quarterly basis but on a semi-annual basis.

And that royalty payment went out in March, within that quarter.

Now, again, we knew about that so that was part of the economic analysis, but it was a big cash flow hit, as it were, that you would have seen.

So just to say that we are not unhappy or surprised in any way by the numbers that we see in terms of free cash flow.

Getting back to question in terms of working capital effect, again it's principally a journals program.

There are -- I would not allude to it as working capital or as negative working capital.

Again as we go through the normal cycle of selling journal subscriptions for Blackwell and Wiley, there's negative working capital.

We will collect that cash in exactly the same sequence and roughly the same proportions as we typically would for Wiley.

It becomes part of the same cash flow.

Their book programs are not inconsequential but they're not as significant proportionately to Blackwell as they are to Wiley overall.

So I can give you more color on that as we move forward over the coming year.

But as of now, I would just say there aren't substantial and significant impacts with respect to working capital.

And those are generally sort of negative, which is a positive, and meaning that we get the cash before we actually have to deliver service.

Great, thanks, guys.

(OPERATOR INSTRUCTIONS).

Allen Zwickler, First Manhattan.

Hi, good day.

Have you disclosed what Blackwell's revenues were in the year that just ended?

We know what they were for the period you own them, but could you give us a sense for -- you gave us what you thought next year would be but what was the year that just ended?

Yes, I mean obviously you saw in the segment reporting for the quarter it was $106 million.

I guess if you go back to the 8-K -- I don't have the numbers handy -- you might be able to derive something like a 12-month run rate projected.

Allen, I don't have that handy with me, so I can't give you that.

Okay, but well, I could do that.

But the number you're projecting, would that imply growth, flat, down?

Could you tell us that just to get, put some meat on that number?

Yes, that $450 million would imply growth not dissimilar from our global STM business.

When you talk about dilution of $0.10 --

Allen, can I just -- excluding the effect of the haircut that I spoke of just before, which is the fact that a portion of the calendar year 2000 journal revenue will not be realized, even though we got the cash for it, we will not be recognizing that as revenue on a reported basis.

So I'm sorry to interrupt you.

Okay.

And when you talk about the $0.10 dilution, is that inclusive of the cost of borrowing, just to be clear?

That is inclusive of everything, including the cost of borrowing, any kind of tax effects related to the deductibility or nondeductibility of the intangible assets we're writing off, any tax planning strategies that were included in there, the revenue haircut I just spoke of.

It's inclusive of everything, including obviously the EBITDA contribution of the business itself.

Okay, that was all I had.

Thank you.

You're welcome.

(OPERATOR INSTRUCTIONS).

At this time, there no further questions from our audience.

I would like to turn the conference back to Mr.

Will Pesce for any closing or additional remarks.

Thank you very much for your continued interest and support and we look forward to speaking with you again after the first quarter.

Thank you.

Thank you, everyone.

That does conclude our conference for today.

Thank you all for your participation and have a great day.