John Wiley & Sons Inc (WLY) 2009 Q3 法說會逐字稿

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  • Operator

  • Good day and welcome to the John Wiley & Sons conference call.

  • Today's conference is being recorded.

  • Before introducing Will Pesce, President and Chief Executive Officer, I would like to remind 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 reflect subsequent events or circumstances.

  • Mr.

  • Pesce, please go ahead, sir.

  • - President, CEO

  • Good afternoon and welcome to Wiley's third quarter conference call.

  • I'm with Ellis Cousens, Executive Vice President and Chief Financial and Operations Officer; and Brian Campbell, Director Investor Relations.

  • As anticipated earlier in the year, the effect of foreign exchange on Wiley's reported financial results is significant and unprecedented.

  • In the third quarter alone foreign exchange reduced reported revenue by $47 million.

  • On a currency neutral basis third quarter revenue declined from prior year by 2%.

  • Reflecting the effect of the worst retail market conditions in the history of Wiley's professional trade business as well as a delay in general renewal processing and STMS.

  • Higher education continues to perform well including the effect of foreign exchange, EPS is $0.57 a share for the quarter declined 15% from prior year, but increased 20%, on a currency neutral basis, reflecting the combined effect of reduced incentive compensation accruals, prudent expense management and lower interest expense.

  • Year to date revenue of $1.2 billion increased 2% over prior year excluding an unfavorable foreign exchange impact of $56 million.

  • Excluding an unusual prior year tax benefit and foreign exchange, EPS of $1.74 exceeded last year by 21%, but only 3% on a reported basis.

  • Operating and administrative expenses for the 9 months decreased from prior year by 3%, and were flat excluding the favorable effects of foreign exchange.

  • Lower than planned staffing continue to see expense saving in sales, marketing and advertising, reduced incentive compensation accruals and blackwell integration savings contributed to the favorable comparison to last year.

  • In shared services, the only significant year-on-year increases were technology related in support of the Wiley online library, Wiley plus and various online and content management initiatives.

  • Free cash flow for the nine months decreased from prior year by $37 million, reflecting the delay in billing journal renewals and increased royalty advances mainly related to New Society journals, partially offset by lower pension contributions and trade receivables, improved cash collections and increased payables due to timing.

  • At the end of the third quarter, accounts receivable decreased by $30 million and inventories were $2 million lower than prior year both mainly due to foreign exchange.

  • The significant decline in intangible assets and goodwill was also due to foreign exchange.

  • The decrease in the deferred revenue reflects the effect of the journal renewal processing delay and foreign exchange.

  • Global STMS revenue for the third quarter declined 13% to $202 million due to an unfavorable foreign exchange impact of $35 million.

  • On a currency neutral basis, revenue advanced 2% in the quarter.

  • Journal revenue was on par with prior year, as the addition of new journals was partially offset by the journal renewal processing delay and lower back file sales, STMS book sales improved in markets outside the US.

  • Direct contribution to profit for the quarter fell 13% from prior year to $75 million but on a currency neutral basis it advanced 2%.

  • The increase on performance basis reflects top line results, lower incentive compensation accruals, and prudent expense management partially offset by increased costs associated with new journals, and a sales return adjustment.

  • Year to date revenue was flat with prior year at $696 million but up 6% excluding unfavorable foreign exchange.

  • Contributing to the year on year growth was a acquisition accounting adjustment that reduced revenue in the comparable prior year period as well as increased journal revenue.

  • All regions exhibited growth.

  • Direct contribution to profit for the nine months rose 4% to $277 million or 10% excluding unfavorable foreign exchange.

  • The increase reflects top line results, prudent expense management, partially offset by editorial costs, associated with new journals.

  • The journal renewal processing delay is related to consolidation of Wiley and Blackwell fulfillment systems and licensing practices which is the last significant integration project and one of the most complex undertakings in the overall process.

  • We encountered challenges related to the harmonization of Wiley and Blackwell licensing models, the migration of Blackwell customer data and the complexity of systems related requirements.

  • While the problems that caused the delay were substantially resolved by the end of the third quarter, some of the backlog remained.

  • Approximately $7 million of revenue on yet to be processed journal licenses will be earned in the fourth quarter.

  • The delay also affected cash collections through January.

  • Several key institutional licenses were signed during the quarter including the Korean electronic site license initiative, the Japanese Medical Library and Pharmaceutical Library Consortium, the Council of Australia University Libraries, the Canadian Research Knowledge Network, Ohio Link and the California Digital Library.

  • For the nine months of fiscal 2009 we signed contracts for 28 STMS journals and renewed or extended contracts for 74 journals while not renewing only five journals.

  • Global professional trade revenue declined 19% to $100 million in the quarter or a 14% decrease excluding unfavorable foreign exchange.

  • The decrease is due to a very weak retail environment particularly in the US where we experienced disappointing sell through and tight inventory management by major accounts.

  • It is encouraging that we increase market share in key publishing categories.

  • Growth was recorded in Canada, Germany and the UK.

  • Sales in Asia were adversely effected by results in India.

  • cook books weathered the storm better than other areas.

  • Three Weight Watchers books published by Wiley's were on Bookscans list of best selling cook books in 2008.

  • Direct contribution to profit for the quarter was $25 million compared to last year's $38 million reflecting the revenue shortfall which was partially mitigated by lower incentive compensation accruals and contingency plans.

  • Excluding unfavorable foreign exchange, direct contribution to profit declined 25% from prior year.

  • Year to date revenue declined 12% to $316 million, or a 10% decrease excluding unfavorable foreign exchange.

  • Direct contribution to profit for the nine months fell 26% to $77 million or 23% decrease on a currency neutral basis.

  • The decline is due to lower revenue, increased provisions for inventory and author advances and .

  • a bad debt recovery in the prior year, partially offset by lower incentive compensation accruals and contingency plans.

  • We signed a significant copublishing agreement with Meredith under which Wiley will become the exclusive global book publisher for Meredith's Better Homes & Gardens brand.

  • The partnership encompasses other brands as well.

  • Wiley is also the exclusive distributor of existing books.

  • Dummys.com was relaunched in November with new content in videos, page views, visits and unique visitors are all up from prior year by double digits.

  • An agreement was signed with a UK company, Road Tour to create a location based destination and event service, that will provide a wide selection of Fullmer's Points of Interest and What's On When Events.

  • Global higher education revenue declined 2% to $72 million in the third quarter, due to unfavorable foreign exchange.

  • Revenue advanced 7%, on a currency neutral basis driven by strong growth in nearly every subject category, higher than expected revenue from recently acquired textbooks, new additions and Wiley Plus.

  • With the exception of Asia which continues to be impacted by the devaluation of the Indian rupee, all regions exhibited growth.

  • In the US, higher educations top line growth in calendar year 2008 was more than double that of the industry.

  • Direct contribution to profit rose 2% to $29 million or 15%, excluding unfavorable foreign exchange.

  • The increase reflects top line results and favorable product mix.

  • Year to date revenue grew 4% to $196 million or 8%, excluding unfavorable foreign exchange.

  • Direct contribution to profit for the nine month period rose 7% to $69 million, or 13%, on a currency neutral basis.

  • The increase reflects top line results, lower inventory provisions, and favorable product mix.

  • Wiley Plus 4.6 was released from December, this version facilitates the creation and management of course assignments and provides enhanced diagnostic and reporting tools.

  • Year to date Wiley Plus revenue was up globally by 41%.

  • The number of registered users in the US jumped 38% with Asia, Australia and Canada all exhibiting solid growth.

  • Deferred revenue was $7 million, compared to $5 million at the end of last year's third quarter.

  • Textbooks acquired from Send Gauge and Key College Press continue to exceed expectations, generating over $6 million of revenue for the nine months.

  • On a currency neutral basis, year to date revenue was up strongly in the sciences, mathematics and statistics, the social sciences and engineering and computer science.

  • Microsoft books continue to perform well.

  • In summary, with one quarter to go in fiscal year 2009, we are reaffirming full year EPS guidance of approximately 20% growth, on a currency neutral basis and excluding an unusual prior year tax benefit.

  • That will be achieved through a combination of reduced incentive compensation, contingency plans and lower interest expense.

  • We are lowering revenue guidance from mid single digits to low single digit growth on a currency neutral basis.

  • Foreign exchange will continue top have a significant negative effect on revenue and EPS, in the fourth quarter.

  • I would like to take a few moments to provide some context and perspective.

  • While economic conditions have worsened considerably, our current guidance for EPS is the same.

  • We've only lowered our revenue guidance a bit due to market conditions that are affecting our professional trade business.

  • At the beginning of the year, we thought all of our businesses would grow in the mid single digits.

  • Despite the turmoil in markets around the world on a currency neutral basis we still believe that STMS and higher education will accomplish that top line growth objective.

  • While professional trade will miss that target, we are gaining market share which bodes well for the future.

  • We still believe Wiley's earnings growth in fiscal year 2009 will be among the best in the publishing industry on a performance basis.

  • We manage our business in the manner to which I hope you've become accustomed.

  • That is, we are making difficult tradeoff decisions regarding expenses and investments.

  • All staff changes are discussed with members of Wiley's leadership team.

  • Travel has been curtailed.

  • Driven by a continuous improvement mindset, we are constantly striving to perform our responsibilities more efficiently, and effectively.

  • As we approach the end of one fiscal year and the beginning of another, we are painfully aware of the effect the economy is having on our professional trade business.

  • We know our colleagues and STMS must navigate through some choppy waters as a result of tightening library budgets.

  • We realize students and professors are focused on the price, value, and effectiveness of teaching and learning materials.

  • And of course, we know that our stock price has decreased significantly.

  • As I stated many times, I don't manage our stock price, but I'm responsible for leading Wiley's business through these challenging times, leading a business today is not for the weak kneed or the faint hearted.

  • I suspect many of you would say the same thing about investing.

  • As a leader and a stockholder I would like to share my reasons for being confident in Wiley's future.

  • Our collection of businesses, STMS, professional trade and higher education is unique in our industry.

  • Each of these businesses is connected by a common mission to promote knowledge and understanding and goodness knows we certainly need more of that in this troubled world.

  • A wonderful example of the way in which our colleagues collaborate to deliver value to customers while creating competitive advantage is the recent publication in record time of a professional trade book restoring financial stability, an executive summary of this book was also published in a Wiley Blackwell journal, financial markets, institutions and instruments.

  • Both publications were completed in association with the faculty at NYU's Stern School of Business.

  • And our higher education sales force will almost certainly secure adoptions of this book for finance and economics courses, no other Company in our industry could have done that.

  • While we are managing expenses and cash very carefully, we are investing millions of dollars in our future WileyPLUS, Wiley Online Library, Content Management Technology, new partnerships, and new society relationships.

  • We will not compromise our future to alleviate short term pain or to realize short-term gain.

  • We've introduced more new business models in the past few years than in any other period in our Company's history which spans two centuries.

  • We are providing more access to more content by more people than ever before.

  • We are doing it in varied ways, in print and online and we've only just begun.

  • Are we concerned about the effect of economy on calendar year 2010 journal renewals and STMS?

  • Of course we are.

  • But we have a vast reservoir of must have content published in highly regarded peer review journals.

  • Our global team has built respectful, professional relationships with individual librarians and consortia around the world.

  • Bolstered by the Blackwell acquisition, Wiley is well positioned to our get fair share of that business no matter how tight the budgets.

  • And if colleges and universities really want to improve teaching and learning, if they really want to deliver more for less, our colleagues in higher education have many options for professors and students.

  • If we are being barraged by negative news about the economy and differing opinions about where and when to invest ,the Wiley investment proposition remains the same.

  • We publish quality content that makes a difference in the lives of human beings around the world.

  • A substantial portion of our revenue is recurring.

  • And a growing percentage is delivered electronically.

  • We have and impressive collection of global brands, that are highly regarded by the constituencies we serve.

  • Our revenue is derived from global markets, 51% from the states, 21% from Europe, 13% from Asia, and 12% from the rest of the world.

  • Our cash flow will continue to be healthy providing the financial resources to reduce debt, pay dividends, and invest in our future.

  • And last, but certainly not least, our performance based culture built on a rock solid foundation of ethics and integrity is the primary source of sustainable competitive advantage.

  • We recently conducted a survey of some current and prospective investors.

  • I would like to share a few quotes from that survey.

  • One investor said, "I admire their honesty and transparency, they answer questions head on".

  • Another investor said, "we came away with the feeling that everything they did was well thought out and that continues to this day.

  • I mean look at their track record when it comes to execution".

  • Another said, "they preserve capital well, they exercise fiscal discipline, their acquisitions have been tremendous, investors are never worried about empire building or paying too much for a company which most of their peers have done ".

  • And my favorite, "Wiley is a paradise from an investors perspective".

  • Honesty, transparency, execution, fiscal discipline.

  • I cannot predict the future with certainty but I can state with conviction that those words will continue to describe the way in which we conduct our business.

  • With that as background, we welcome your comments and

  • Operator

  • (Operator Instructions) We will take your first question from Drew Crum with Stifel Nicolaus.

  • - Analyst

  • Good afternoon everyone.

  • I wanted to start with the revenue guidance, you've reduced it owing to the professional and trade business.

  • Are you guys anticipating seeing this get worse there or similar to what we saw in the third quarter?

  • Related to that, if you could give us an update on your inventory and the retail channel and just an update of the status of accounts receivables which your larger customers?

  • Thanks.

  • - President, CEO

  • Drew, this is Will, I will start expectations for the balance of the fiscal year.

  • The short story there is in terms of comparisons in the fourth quarter of last fiscal year, we are expecting improvement, and we are expecting improvement for two reasons.

  • One is you may recall that some of the softness in revenue that we are currently experiencing began in the fourth quarter of the last fiscal year, so the comparables are in that respect more favorable if you will.

  • Second is when you look at the combination of the publishing program, the list, feed back we are getting, from our sales representatives as they work with major accounts some of the agreements that we signed, we are anticipating that the improvement will come or begin to come in the fourth quarter.

  • That assumes of course that there is nothing that happens in a significant way in terms of markets deteriorating any further.

  • We are not expecting a huge turn around in the market in the fourth quarter but as long as it kind of stabilizes or slightly better we think we have enough going for us internally where those comparisons will be favorable for professional trade in the fourth quarter of the year.

  • - Analyst

  • Can I interject and ask is that improvement on a sequential basis or year to year or both?

  • - President, CEO

  • Both.

  • - Analyst

  • Okay.

  • - EVP, CFO, COO

  • Drew in terms of your question about receivables and inventory on the inventory side, -- well, let me start with receivables, if you look at last year this time versus thus year, we actually had a little bit of improvement in terms of accounts that occur, small but meaningful, just to be sure we do review all of our significant customers on a regular basis meaning at least monthly we have calls within directly and have discussions with them directly about their current situations good, bad or indifferent.

  • Then with customers that we think might be may be in a little bit more of a greater risk profile we have more frequent conversations.

  • We actually have also agreements with them in confidence to look at some of their underlying information, to be able to get a good feel for their financial condition.

  • So we're in relatively good shape in that respect.

  • And so we are versus last year, current situation in pretty good shape.

  • On the inventory side for the most part I think we are in pretty good shape there as well.

  • Provisions are adequate for our current situation with respect to professional trade, and I think we are in good shape there as well.

  • No concerns at this stage.

  • - Analyst

  • If I could ask another question, I just wonder if you could unwind the impact from foreign currency, are there any specific buckets you can call out, did you do any hedging in the quarter, if not why, and any guidance you can give us for the fourth quarter assuming facts remains as it is today?

  • That would be great.

  • - EVP, CFO, COO

  • I will try to give a much shorter answer than I gave you last quarter in deference to all.

  • As Will noted and in earnings release as well, $47.5 million negative exchange in the Q3, if current rates hold I think on the last time on the call I'm pretty sure I gave you second half of the year weighted average exchanges rates for the major currencies.

  • Those rates are roughly hold for the fourth quarter as well.

  • I will give you specifically the rates for the fourth quarter.

  • So you have a feel for it.

  • Last years weighted average rate for the year was $1.53.

  • For sterling was $1.98.

  • As we sit today, spot last time I looked was $1.27 on the euro and $1.38 on sterling, so a 17% strengthening of the dollar against the euro and a 30% strengthening against sterling, with respect to the dollar.

  • Those are more significant moves in the third quarter.

  • So the distribution of our business has not materially shifted.

  • One should assume that the effect assuming current rates hold will be at least as significant in the fourth quarter as it was in the third quarter.

  • So that's the first part.

  • I am using roughly as a rule of thumb, 25% of negative affective exchange or the positive if that happens again which I think hopefully it will the in my lifetime about 25% of it is left unhedged by the time we get to operating income.

  • The way that happens, to give you a little bit of color about that is we're -- we have far more revenues denominated in euros than expenses, so we have a relatively small operation in Germany but collect significant revenues throughout all of euro land so to speak, there are far more euro based revenues than there are euro expenses.

  • The opposite is true of sterling.

  • As you know we made the acquisition of Blackwell.

  • They're based in Oxford, we also had an existing business in Chichester as well and still have so we have more expenses based in sterling than we have revenues.

  • So to the extent anyone of those currencies weakens against the dollar we have definitely a negative affect on revenue no question about that.

  • However, we are more than hedged so to speak in sterling so there's a positive effect when you get to the bottom line but that's significantly more outweighed by the fact that we had far fewer expenses in euros than we have revenue.

  • That's how you get to that sort of roughly 25% impact.

  • Also there is some negative affect with respect to strengthening against Canadian dollars and Australian dollars, because we have favorable margins in those countries and so principally in those currencies in those countries.

  • So you add all that together that's how you get the 25% hit or benefit to the extent of operating income.

  • The wild card here that relates to your question about what hedging activity we may or may not have pursued.

  • We do not hedge our P&L.

  • That by being as others who I talked to about this.

  • Being an old treasury person who grew up in fancy treasury, one learns over time that it's a bit of a fool's errand to try and hedge a P&L over the long-term.

  • If anyone has a crystal ball and can see a month or two away when you have a move that's been as great as this has you would be a winner.

  • But probably would have been more of a foreign exchange hedge trader than a corporate CFO or something like that.

  • All that to say is that hedge of P&Ls there are very few companies that I'm aware of, and none in my experience that do that have done it successfully over any period of time.

  • On a transactions basis, different story, we do in fact hedge third party nondollar transactions, those are relatively small and few and far between.

  • We do hedge those.

  • The things that we do not hedge are third party dollar based transactions, that has been what is responsible for that foreign exchange loss that sits below interest expense or below operating income.

  • Sorry, in other income and expense.

  • That essentially is principally a dollar borrowing in the UK to essentially fund their operations, their revolving credit facility so that's denominated in dollars, we are a dollar based Company, ultimately all cash and the hedging of that so to speak is in dollars.

  • It's coming back to dollars.

  • So to hedge that using a sterling forward or a option would be rather foolish from an economic perspective because you would hedging away from the currency that we ultimately want to cover.

  • We don't hedge that.

  • The unfortunate affect is US GAAP treats that interestingly shall I say, that's the best way I be characterize it, to the extent there was in this case, a strengthening of the dollar, you translate that dollar borrowing back to sterling which is the borrowing entity, our UK Company even though it's parent Company will be dollar based so they record a loss in US GAAP, which is what you see on that line, and then when it's translated back in consolidation to dollars, it flows through the balance sheet, through cumulative translation adjustment.

  • In fact there is no economic affect related to that.

  • No cash flow but this unfortunate, rather ugly translation or transaction loss that sits down at the bottom there.

  • So I will continue to not hedge transactions which make no economic sense to do so.

  • We, at this stage it makes no sense and historically would not have made sense to attempt to hedge a P&L, it's again, I think rather false sense of thinking that you can mature against unknown changes in foreign exchange over the longer term.

  • So we remained essentially unhedged in our P&L and to the extent there are small transactions that are non dollar denominated to third parties we do in fact hedge those.

  • Does that answer the question?

  • - Analyst

  • It does, thank you.

  • Two last questions, one, can you give us an update on your guidance around the synergies related to Blackwell for fiscal year '10?

  • And then for Will how would you say the stimulus package changed the outlook for your business?

  • - EVP, CFO, COO

  • In terms of '10, we haven't provided any guidance related to '10 yet.

  • I can tell you that in terms of our overall cost of $30 million, by the end of the third year, which would be next year, that we are still tracking to the $30 million, I would imagine we are analyzing this again, stepping away from all of this what is going on quite frankly in terms of our reported results and the reasons for the ups and downs and the pluses and minuses, and I think we will find it, at least reaffirm the $30 million in savings, we are on track for the end of next year.

  • I don't want to say this yet but I would imagine in this environment may be a little bit better but it's a bit hard to decipher some of what is cost savings related to integration and combination of Wiley and Blackwell and cost savings trying to quite frankly, be fiscally disciplined in this kind of environment.

  • - President, CEO

  • Drew, regarding the stimulus package, I will make a couple of comments about that, and the first case as it relates to our higher education business, I think the very good news there is for the first time that I can remember, at any level, that there is part of the package relates to instructional materials.

  • At the higher education level.

  • I believe it is in the form of tax credits.

  • It's probably no surprise to you or others who are listening that the early indicators in terms of applications and potential enrollment growth at two and four year public and private institutions is as strong as ever.

  • And that's not unusual during difficult economic times.

  • Whether or not all those people will ultimately end up in the places they want to and whether they will have the financing they need to pay tuition and all that remains to be seen.

  • I think it is fair to say the combination of these economic conditions, the perceived value of a higher education, and some support from government, is all very positive as it relates to higher education and I repeat for the first time even some support for instructional materials.

  • In addition, there are other components of the package that are in support of science and technology and health care and research, and part of what I've communicated so many times with passion and conviction and I repeated again today, is that this is a Company that is all about promoting knowledge and understanding and we happen to publish in many areas on the national agenda in terms of where we need improvement.

  • I would like to believe we have access to people who can help educate and inform others about this and I believe that there is support for research that will come out of this and I believe that research will, the people who are performing the research and want to be published will want to be published in some of the highest quality peer review journals.

  • We happen to have more than our fair share of those.

  • In all cases I think there is certainly a positive here.

  • Exactly what percentage you would put on that.

  • I think what it does to a large extent is it helps to compensate for some of the other issues that people are dealing with.

  • What do I mean by that?

  • Discretionary income for the parents who are sending students to college is obviously down significantly.

  • So , to the extent that there is a stimulus package in place that helps deal with some of that pain it gets us back hole if you will in the higher ed business.

  • I think to the extend that library budgets are going to be tighter because state revenues are decreasing significantly, there could be some aspects of the stimulus package that begin to offset that a bit to get it not necessarily back to whole, what it would be in a robust market, but that could help alleviate some of that.

  • So overall it happens to be that two of our three businesses in particular, will benefit to some degree.

  • From that package if it's executed in a manner I've been reading

  • - EVP, CFO, COO

  • Just to complete, on the foreign exchange transaction loss, just to note is that that UK revolver was paid off during the third quarter so there's no balance that's carried forward into the fourth quarter.

  • Operator

  • (Operator Instructions) Next question from (inaudible).

  • - Analyst

  • Hi, thanks for taking my question.

  • Good afternoon everybody, this is (inaudible) speaking on behalf of (inaudible).

  • A couple of questions regarding today's presentation.

  • Couple of questions if I may regarding today's presentation.

  • First could you share with us the amount of revenues Wiley plus accounted for in this quarter?

  • - EVP, CFO, COO

  • I actually don't have that number, hang on a second.

  • I can give you a percentage of annual revenue, I have a forecast for that.

  • It's at a point where it's approximating 10% of Wiley's global higher education revenue on a 12 month rolling 12 month basis.

  • What it was in that exact quarter, what the exact amount was in the quarter I don't have at my fingertips.

  • It increased 900,000 from the prior year in the quarter.

  • So it's just under 1 million from the prior year.

  • I don't recall what was in the quarter though.

  • - Analyst

  • Secondly, you talked about it with Drew, but my question was we heard from McGraw Hill and Send Gauge predictions of about 3 to 4% in growth in the higher education markets, would you say that forecast is plausible or possibly too optimistic?

  • - President, CEO

  • This is Will.

  • No I think that's, I think that's very reasonable number.

  • I would see no reason why that cannot be accomplished given what I know about the front end of this whole process in terms of applications and enrollments.

  • Look, that doesn't always, obviously that doesn't convert one for one to purchases of instructional materials.

  • But the fact of the matter is that's an important statistic to look at.

  • And it is very very favorable right now.

  • I would like to believe hat given some of the other budget pressures that are going to be on public and private institutions in terms of staff and resources, I believe instructional materials are going to be as important as ever, I think companies that have some effective digital alternatives as we do, could benefit from this as well.

  • I'd actually, if you don't mind want to take advantage and build on that particular question with an additional point is, I suspect none of us are enjoying operating in this kind of environment and if there are some of you who are, I'm not sure I really want to understand why, but I will tell you from my point of view there are certain things that could come out of this that could have long-term beneficial affects.

  • One of those things is that if it helps to accelerate the adoption of technology enabled delivery of instruction materials, I think that would be beneficial to the customers we serve and to our Company and shareholders.

  • I really do believe we are in a position where we can deliver more for less.

  • I think as a result when I say more for less, I think at lower price points for the student but more units, so our revenue per unit per se may go down but we'd actually grab more revenue because of less piracy and used books and things of that nature, and I believe as I've spoken about on many occasions the outcomes are more quantifiable, that is that teaching and learning is actually happening.

  • And greater opportunities to customize materials to the individual learning styles, of various students, and last but certainly not least, the benefits it has on a Company's balance sheet and cash flow, because you don't obviously have the inventory and the warehouse and the returns to deal with.

  • It is my belief that this could possibly spur on or help accelerate if you will, acceptance of electronic delivery of instructional materials.

  • I think that would be a good thing.

  • - EVP, CFO, COO

  • The number you're looking for at least through nine months, was about just under 21 million, so about 15% of revenue year to date for Wiley's plus.

  • - Analyst

  • Another question if I may, talking about higher education again, would you say that January has shown a decline in the rate of growth or was it in line with November or December?

  • - President, CEO

  • There t was nothing in our experience in January that is unusual for January.

  • I'm not seeing any pattern there of change that would be worth commenting on and I would say as a caution having been a part of the business for a long time, one should not read into one month particularly between December and January when easily revenue could flip from one month to the other based on books to ordering pattern, it is a much if I could provide some advice, much wiser thing to look at an entire quarter because some of those things could conflict from one month to the other.

  • - Analyst

  • What about the other divisions, STM and professional trade would you say it's the same trend?

  • On every month of the quarter?

  • - President, CEO

  • One comment I would make about that is of course that our STMS business, was affected by those processing delays that I mentioned that as I also mentioned the problems that caused that we've pretty much taken care of, but there is still some catch up in processing that.

  • There would have been revenue that typically would have happened if we were up to date in January, which would have distorted the January to January comparisons.

  • That will flop into the fourth quarter.

  • So but other than that in terms of market based underlying growth rates, there is really nothing material that I could suggest relative to any of our businesses.

  • - Analyst

  • Okay.

  • One last question, I don't know if you can give us color but the beginning of Q4, if you saw some new points especially in higher education that would be really different and really material compared to Q3?

  • - President, CEO

  • There is really nothing -- we as a matter of principal to be frank we don't provide a whole lot of time providing guidance quarter to quarter, or month to month, we don't actually think its a wise or good thing to do, however there is only one quarter left in the year, and in fact, in our fiscal year, and in fact one full month is already gone, and we are in basically almost the halfway point of the last quarter, and we've provided as definitively as we can guidance for the year.

  • - Analyst

  • Okay.

  • - President, CEO

  • I think that should give you an indication of how we feel.

  • - Analyst

  • Thank you very much, gentlemen.

  • - President, CEO

  • You're welcome.

  • Operator

  • (Operator Instructions) We will now take our next question from Dave Lewis with JPMorgan.

  • - Analyst

  • Hey, guys.

  • - President, CEO

  • Hello.

  • - Analyst

  • Can you hear me?

  • - President, CEO

  • Yes.

  • - Analyst

  • Sorry, I'm on the speaker.

  • Having a little trouble with my line.

  • But, I was wondering if you could walk through the visibility you have right now within the STMS segment across both US and international and across corporate universities as well as government?

  • - President, CEO

  • Sure.

  • I don't know that I can break it down in to that fine of a breakdown but I will give you a shot at what I think is important in how I see this all playing out.

  • I think it's important for us not to trip over the differences between calendar years and fiscal years and all of that.

  • I'm going to state this clearly then I will respond to as clearly as I can, respond to any additional questions you might have.

  • So far, as I pointed out earlier in our STMS business at the beginning of this fiscal year, and in fact, as you know when one fiscal year ends and then we have our first quarter conference call of the new year we provide you with guidance about how we think the year is going to go.

  • At that time we believed that all of our businesses had a very good opportunity to grow in the mid single digit area, we actually didn't see huge differences from one business to the other.

  • Now all of that would be on a currency neutral basis, needless to say, because we've said it so many other times already in this, the foreign exchange effect has been huge.

  • So if you just look at it on a performance basis we thought all three businesses had a really good shot at mid single digit growth.

  • I'll repeat what I said before because I think it's really important, we still believe that about our STMS business and our higher ed business on a performance basis.

  • Where we really missed significantly is in our professional trade business for all the reasons we had spoken about.

  • And so, we aren't really seeing anything significantly positive or negative about what is going on in our STMS business, there are some, the sources of revenue are a little bit different, what I mean by that, the advertising revenue is off of our expectations, some of the back file sales are off of our expectations, commercial reprints that are basically sold through to pharmaceutical companies and other commercial enterprises are off our expectations.

  • The journal subscription income is holding up well, we have books going on print and on line, when you look at the whole picture almost a year later, despite everything else that's happening out there it's gone pretty much according to plan.

  • I might add that includes adding Blackwell to all of this, it wasn't just the Wiley component of it.

  • The reason I started out with, let's be clear about calendar years and fiscal years and all of that, the calendar year '09 renewal season is essentially done, we have that picture pretty clear in our heads.

  • We have had this processing delay that I've mentioned a few times and we now feel we have our arms around that.

  • That's been entirely an internal issue, we have addressed it, we're catching up, we will be able to provide everything that customers need.

  • That's all being worked out.

  • So the calendar year '09 renewals are in good shape.

  • That takes us through a, obviously the rest of this fiscal year, but also a big chunk of what we call fiscal year '10.

  • The concern about library budget ifs you look at the affect of this and how it may work its way through the system we all know that state, let's talk about the United States for the moment state revenues have been obviously affected big time by all of this, so the funding for libraries is going to be affected by this.

  • We have our eye focusing on that for a calendar year '10, which would then have some affect on Wiley's fiscal year '10 from January 1, to April 30, four months.

  • So that's how the calendar year fiscal year difference comes into play.

  • We have pretty good visibility on a big chunk of the year, but obviously not all of it.

  • There aren't huge differences that we can articulate right now or that we've seen between corporate and academic, clearly the pharmaceutical industry, like many industries but the pharmaceutical industry has taken its hits, they are a major customer of ours, the main affect we're seeing there is on commercial reprints not so much on subscription revenues.

  • On the academic side of things, there is nothing we are seeing right now in terms of usage statistics, ability to pay, all sorts of things.

  • Are all pretty much as we had expected them to be.

  • Then when you fast forward to this period of time that would affect calendar year 2010, or January through April of 2010 for our fiscal year '10, I want to reinforce a comment I made earlier I can't predict, I never would even try with certainty what the full affect could be on some of these budgets but I can tell you this, journals -- scientific, technica, medical, scholarly journals the kinds of journals that make up the collection of Wiley and Blackwell publications are not discretionary purchases.

  • They are absolutely considered to be essential to the academic enterprise.

  • On top of that, on the first place libraries spend a lot of money on a lot of things, then within that you look at the areas they consider to be more discretionary if you will than others.

  • The kind of content that we publish has always been considered by librarians and the communities they serve as closer to must have then anything else that they do.

  • On top of that, we think we are really well positioned to get our fair share of those budgets for the following reasons, the quality of our content.

  • When I say quality, I know that means different things to different people, when you look at the authors we are able to attract, the places we are able to attract them from, the stong global brands that our journals represent and the number of them that we do in association with prestigious societies, all of that says that Wiley's portfolio in STMS journal publishing is really a very strong portfolio that became even stronger with the Blackwell acquisition.

  • On top of that, as you know, we've been investing millions of dollars over a long period of time enhancing access and discoverability, making that content more available to more people so that it can facilitate the productivity of research.

  • We think that's very important and robust in any kind of market but particularly a market that may be getting a little bit tighter.

  • The other thing is that we believe all of this is governed, this is my word by reasonable licensing agreements.

  • All companies have different ways of licensing this content, we have built I think really productive professional relationships with individual librarians as well as with consortia and I think part of that has to do with business terms that we offer, and the quality of the content that we offer.

  • For all of those reasons, do I think that the market is going to be a bit tougher, in terms of library funding in calendar year 2010 that have been was in calendar year 2009 or will be in 2009?

  • Yes, I do.

  • It will be tougher.

  • Do I think we are in a position the gain fair share of budgets, absolutely.

  • Do I think we will benefit from the Blackwell acquisition, absolutely.

  • So that's how I would characterize that and I think those comments apply equally, whether you are talking about the United States, or abroad, if you are talking about corporate accounts or academic libraries.

  • - Analyst

  • That's great, thanks, Will.

  • Can you talk a little bit about how the multiyear licenses are selling?

  • And related to that I think you had a small price increase related to the new Wiley Interscience merged platform, and how that's being received?

  • Thanks.

  • - President, CEO

  • Well, I think in terms of multiyear, I believe which you may be talking about, or I hope you are talking about has to do with the customer license that on average, well, customers can license anything from one, they can license the duration of one or two or three years, I'm not aware that there are any that are longer than that.

  • There may be a few but I doubt that.

  • And I think when you look at, there are a couple of things coming together, the Wiley licenses and the Blackwell licenses, so you put it all together, we still have a significant percentage of our licenses cover a 3 year period of time.

  • There -- the next significant percentage would be annual licenses, and in terms of the price increases and additions to content and services that went in to those licenses I repeat we had a very solid, other than this processing delay which I repeat was internal we had a very strong renewal season, there is nothing in that, if there wasn't -- if we didn't have these projections about the pressure on state budgets I wouldn't even be talking about calendar year '10 now.

  • I'm feeling very good about what our colleagues have accomplished with the '09 renewals other than the processing delay and there is really no big news there.

  • Now I think we should all be clear about the significance of one year deals, two year deals, three year deals and all of that.

  • What we basically do is we make a commitment to provide a certain amount of content at a certain price we cap out, price increases so it gives the institution if you will, some certainty having to do with what it's going to take to fund their purchases of Wiley Blackwell materials.

  • We think that that's a service to them, it is obviously a benefit to us because as you like to say it gives us visibility in terms of revenue and predictability.

  • Having said that, if a library customer ran into a major funding concern, we're not going to run around and say well, we have a three year deal it's your problem.

  • That's not the way we build lasting customer relationships, we feel good about the fact that we have a number of three year deals, but it doesn't totally isolate us or anybody else from a library saying I have a funding issue, how are we going to work together.

  • As I've always said, I'm direct and candid about those things.

  • I could have let you with we got a three year deal.

  • It's interesting and it's good.

  • But what we have are long-term customer relationships and we need to act responsibly as it relates to that.

  • On average there's still that, we still have a bunch of one year deals as well.

  • We have a bunch of terrific content that our customers are indicating to us they want more access to.

  • - Analyst

  • That's great.

  • Thanks, Will.

  • I was wondering if you could touch on, I had housekeeping questions I will direct towards Ellis, but I was wondering if you could also touch on a more secular topic, the Kindle and the traction that that has had over the course of the past few months.

  • I know it's still early days but I'd be interested in hearing your latest thoughts.

  • - President, CEO

  • Well, what I would say about that is, first is, you've heard me say it before I will say it again, Amazon has been a terrific partner with our Company and I just find a terrific partner is not only a company that services it's customers at a very high level which I believe they do but also a partner that works collaboratively with publishers like Wiley to provide more value and more service to the customers we all are about.

  • And Amazon and Wiley are constantly working on new ideas.

  • And they could be new ideas that have to do with packages of books or promotional campaigns or things of that nature, by the way, it all began with our professional trade business but relates to our STMS book publishing and increasingly to higher education.

  • So that partnership once again is unique combination of three businesses.

  • A relationship that started with professional trade has benefited professional trade, STMS and higher ed.

  • I think you can see more of that in the future.

  • Now, as it relates to the Kindle, the reason I started with all of that is we have been speaking with Amazon about different ways to disseminate our content or our information to customers.

  • The Kindle is one of those devices, they obviously are very very excited about it, there is hardly a day that goes by that you don't hear something about the Kindle one or the Kindle two, it's a terrific device in my view, much better than some of the earlier versions that other companies have come out it.

  • It's definitely getting better and better from a readers point of view.

  • We have some content, as you know we don't publish fiction, there are many people who are interested in taking several books on other Kindle on a vacation, and, or on a business trip and they may have their fair share of a fiction, they may also want to include some Wiley books, books that may help them make a difference in their careers or help them learn about a particular subject.

  • You may find down the road that there are certain content we have that if you're a traveler, and you're at a particular place that you might be interested in that we may have content that we can use the Kindle for.

  • My point is, this is very much early days we are encouraged by the technology.

  • We're as enthusiastic as ever about our working relationship with Amazon and we are agnostic as it relates to the platform.

  • What I've said for years now and I feel very strongly about this, as long as the partners we work with have respect for our intellectual property rights, the rights of the publisher and the author and willing to pay fair compensation to gain access to that we are all for different ways of disseminating the content, serving existing customers better and maybe reaching new ones our work with Amazon and Kindle and other things is just a clear representation of that underlying philosophy.

  • So early days, yes we are participating, what you will see is that content is available at lower price points, there is a reason why it's available at lower price points in a printed book, there are actually some economy stuff if we are able to do this in an affective way.

  • Some of it is still experimental, we're still searching for the right business model f you will, or business models, but we are actively engaged in that.

  • There is nothing -- our performance this quarter this year, there is nothing material there.

  • Having to do with Kindle or any of the (inaudible).

  • - Analyst

  • Thank you.

  • I'm going to hop off here since I been on a while, I will come back if nobody else is on the line.

  • - President, CEO

  • Okay.

  • Operator

  • We will now take our next question from Drew Crum with Stifel Nicolaus

  • - Analyst

  • Just two quick follow-ups, just wanted to drill down a little further on this processing delay you said $7 million of revenue gets pushed to the fourth quarter, what is the impact on cash flow?

  • And then also you mentioned there was some backlog related to that.

  • Is there any way you can quantify what that means for the fourth quarter?

  • - EVP, CFO, COO

  • Drew I can speak to that.

  • So we did note $7 million worth of revenue was associated with that.

  • If you multiply that by 12, because the calendar year had one month in the quarter it was January, come up with essentially what was didn't reach the fourth -- the third quarter, sorry that will move in to the fourth quarter.

  • That will be collected as cash, and also as revenue that slips into the fourth quarter.

  • So there -- well, that's the number, 80 million, mid 85 million, 86 million, $87 million or so worth of activity that was moved in to the fourth quarter.

  • Too, if you want to have an explanation of, you can let me know if you want to hear more about what happened.

  • But I can tell you more about what the affect is, no one has asked the question yet so I will answer it in anticipation of you possibly asking it.

  • Is that, so how does this look then for the fourth quarter inasmuch as our net debt position hasn't really changed and typically in the third quarter is when you would see the biggest move with respect to net debt.

  • It's essentially within a couple million dollars of where it was last year.

  • The expectation is that we will wind up the year, this is excluding any discretionary pending contributions, wind up about $100 million lower than last year at the end of the year, that's net debt.

  • That would mean that debt would be something like 750 as opposed to 850, 840 something or other and cash about the same, it depends, might have little more cash at the end of the year because the collections running a little bit later because of the processing running little bit later, we may not be able to mobilize that cash to reduce the revolver as quickly right at the end of the year so that's why, talk to net debt, rather than the absolute amount of debt.

  • So that would mean that where as last year our position would have only declined by -- our net debt position would have only decreased by -- well, it did decrease by $29 million.

  • I expect it to decrease by $120 million some odd this year.

  • I don't know if that was the question you were going to ask.

  • - Analyst

  • That was my next question.

  • - EVP, CFO, COO

  • I knew you were headed in that direction.

  • Sorry to take the wind out of your sales.

  • - Analyst

  • Maybe I can ask one more, is there any update on your planned CapEx spend and product development asset spend?

  • - EVP, CFO, COO

  • You mean for next year?

  • - Analyst

  • Fiscal year '09.

  • - EVP, CFO, COO

  • For '09?

  • - Analyst

  • Yes.

  • - EVP, CFO, COO

  • We are going to release the Q end of the day today or tomorrow.

  • I think you will see the same numbers 125 and 45.

  • I'm going to just tell you the 145 is like a little one of these things, should it be -- it could be a little bit lighter than that on the capital spending side.

  • I think the product development numbers are pretty much spot on.

  • But on the capital expenditures side, meaning the software development, hardware, that kind of stuff might be a little bit below that.

  • It's a bit tough to tell.

  • - Analyst

  • Okay.

  • Thank you.

  • - EVP, CFO, COO

  • You're welcome.

  • Operator

  • We will now take our next question from (inaudible).

  • - Analyst

  • I was wondering how much flexibility you have on product development cost, and if that's an area you can easily cut as you are emphasizing fiscal prudence?

  • - EVP, CFO, COO

  • Capital, well, there are two components, one is composition cost the other is author advances.

  • Will spoke a little bit earlier in his remarks about author advances and one of the growth avenues in our journals business now bigger than it was in the past was signing up new society relationships, we've for 200 years had book relationships that were quite extensive.

  • There are author advances associated with those.

  • Conceivably we could do those, but I don't think it's in the cards.

  • I think that would be essentially sacrificing some of our future potential.

  • So on composition costs essentially that is the presumption of the materials that essentially are the content.

  • On the capital spending side is the area that we could be potentially more judicious and are, in terms of looking at specific investments, particularly in the area of technology, there may be some investments that in a different environment might have looked to be more economically justifiable but in this environment might need to be sort of slowed down in some way, shape or form.

  • So we might defer some investments in technology investment to a later period.

  • So there is a little bit of potential there.

  • Also I note that the amount that we had for capital spending continues to include integration spending that should decline it has declined over the course of this year and will decline a little bit more next year.

  • - Analyst

  • Can you remind me how the composition cost and the author advances how that flows through the P&L.

  • - President, CEO

  • The author advances are essentially recognized as the product is sold, composition is, averages three years on a double declining balance basis.

  • - Analyst

  • Thank you.

  • Operator

  • We will now take your next question from John Helmer with Caldwell Securities.

  • - Analyst

  • Will, this is a question that came up a week ago today in the Wall Street Journal a letter to the editor, entitled Free Model Hurts Science Journals the author spoke about today's scientific publishers who have faced increasing pressures in recent years to make their publications freely available on line to anyone without subscription.

  • hat sounds like a preposterous idea to me I wonder if you have any comment?

  • - President, CEO

  • I'm with you.

  • Actually this is a topic we have discussed and I'm happy to give you the short version if you want to talk with me a little bit more separately I'm happy to do it.

  • We've discussed this in previous conference calls and in other forum.

  • What you are referring to is the notion of some people call it open access, some call it author pays as most of you know, the current model that has been in place for a long time is that a subscriber, the reader or the intermediary that is providing services to a reader pays a certain amount of money to gain access to this material in print or electronic form, what people have been debating is whether or not that that model is providing the most access to people and whether or not there is a different way to quote, Fund it, and the one of the models that has been talked about in many circles and for sometime now is whether the author should pay and maybe that payment would come out of an authors pocket, maybe it would come out of a research grant that the author would pay and then it would be free to all.

  • And the key points I would make about that is that this is not new.

  • Many people have many opinions about it.

  • Wiley offers a, we have a model whereby you can go essentially an authors pay model or a subscription model, there is not much take up on the authors pay part of it.

  • We view an author pays model as literally nothing more or less than another business model.

  • The thing that to me is just it's unimaginable to me how anyone can assume that this content can be developed, digitized, disseminated, stored all the things that have to happen for with no one paying.

  • If people think it can be supported by advertising money or sponsorship or whatever, fine, but somebody needs to pay something in order to maintain this peer reviewed process that we are all a part of in scientific, technical, and medical publishing and I just want to point out and it's near and dear to my heart because I'm in my 11th year as CEO, and the very first day, not just because I became CEO, it's the way the market was going is we began this journey of digitizing content and all I can tell you is, one is, I'm pleased we did it.

  • Two is, it's an expensive proposition, in that it doesn't happen for nothing.

  • As a result of digitizing this content what us publishers have done is we have made it more accessible to more people.

  • We've helped the productivity of research.

  • So what you are talking about is another model, where the financing comes from somewhere else, there are certain people, certain companies, certain entities that have been promoting this and in fact the model exists.

  • The take up of that model or embracing of the model has been frankly, pretty slow, for a Company like Wiley we are totally open minded as long as we have a sustainable business model.

  • A sustainable business model that can allow us to perform our responsibilities at the high level that we are used to.

  • I would also say one other thing, that is really very important to this.

  • That involves customers and governments, when people talk about going from one to another, let's go from, let's say from one extreme to another, all subscription based to all author pays you are making major decisions about who is paying for that information.

  • An example, I run a major research institution, let's say that major research institution happens to be in the United States.

  • In an author's pays model I'm paying either through the grant from maybe the U.S.

  • government or some other place, I'm paying a grant to put that content together and the rest of the world and users around the world academic and corporate would gain access to it for nothing.

  • Because it's already been paid for, by the developer or the author whomever.

  • That has significant effects on the funding and financing of the institutions where a lot of this research happens and in the countries where those institutions are housed as well as for the individuals who are contributing to it.

  • Am I saying that that model can't work?

  • No, I'm not saying that at all.

  • What I am saying is that it does take money to do these things, and this is not a, some kind of easy thing to accomplish overnight.

  • And what we are finding is it's not being accomplished overnight , there is going to be more than one business model and still by far the prevalent one, is the people, the users are paying for all this.

  • So what you read was someone who was questioning the wisdom of some of these things and there is lots of literature about it.

  • As I said if you have the appetite for it I would be happy to talk with you a little bit more about some of the nuances in these different

  • - Analyst

  • Thanks, Will.

  • - President, CEO

  • You're welcome.

  • Operator

  • We will now take a follow-up question from Dave Lewis with JPMorgan.

  • - Analyst

  • Thanks, guys.

  • I was wondering could you guys site constant currency cost growth for the quarter?

  • - EVP, CFO, COO

  • You talking about total costs and expenses from the top of the -- are you talking about--?

  • - Analyst

  • Yes.

  • - EVP, CFO, COO

  • Okay.

  • There was $35 million worth of exchange associated with the third quarter.

  • So if you back out the difference, there was actually an improvement of about $14.5 million year on year.

  • So reduction in expense.

  • - President, CEO

  • That's operating and administrative expenses on that line.

  • - Analyst

  • Thanks, Ellis.

  • And can you break out the integration costs and the cost savings for the quarter?

  • - EVP, CFO, COO

  • There is three or four components to the $14.5 million savings and then some things going in the opposite direction.

  • One of the pieces was some of the incentive reductions, the accruals that Will mentioned a number of times and have been noted in the earnings release.

  • There were cost savings of about, I would say about 4 million, $5 million or so incrementally in the third quarter.

  • About $7 million year to date or so.

  • There is also some integration expenses in the prior year that aren't in the current year.

  • So I don't note those as savings, they're just a lower level of investment to integrate the businesses, and then there were contingency savings, or what we refer to as far as contingency savings which is our approach to managing in a very disciplined way whether it be keeping positions open and vacant.

  • Reducing advertising and marketing spend where we think it's least effective.

  • Those kinds of activities.

  • I would rather not go into the piece by piece quantification but I can tell you all of those were considerable, favorable impacts in the quarter and then working in the opposite direction was that we certainly did start the year with merit increases so there is an increase in compensation associated with the folks here at Wiley.

  • So as we did manage head count in open positions we did have merits increases within the context of fiscal 2009, that works in the opposite direction.

  • Are we done with integration costs at this point?

  • No, we are continuing to -- well, there are some minor integration projects that are still underway.

  • There is a little bit of integration expenditure that continues with respect to the fulfillment systems, which is part of what was some of the issues related to the third quarter.

  • This is the systems the that one uses to bill an invoice customer, once youy've settled upon what it is they want to buy from you.

  • That affects our journals business both in print form and in electronic form.

  • So that's relatively de minimus.

  • Some of that activity is still ongoing.

  • That would have continued quite frankly, irrespective of whether there were delays in that that will continue on for a little bit of time.

  • Will has spoken about Wiley on line library.

  • I would less characterize that as a integration as an enhancement to our capabilities as a Company and as a business.

  • However, it does affect, directly affect and benefit both the combination of Wiley and Blackwell.

  • There are cost savings notionally associated with that.

  • Because we would have done that each independently maybe to different degrees but there are savings associated with that.

  • We've decided to invest some of those savings in a more robust platform to deliver more content and more capabilities with respect to how those, how that content is utilized by researchers, and also by society partners.

  • So one might call some of that integration savings.

  • It gets a little bit fuzzy when you start to try and decipher what is investment and reinvestment from what is cost savings integration related.

  • - Analyst

  • Great, thanks, Ellis.

  • I just have one quick follow-up, you guys were transitioning costs offshore, is there any adjustment to the currency exposure in the next two quarters because of that?

  • - President, CEO

  • We have moved a fair amount of our journal fulfillment in our shipping and handling operations to Singapore.

  • So that transition is not yet complete.

  • But for the most part, the Sing dollar is pretty well hinged to the US dollar.

  • There is no affect there with respect to currency, there clearly is an expense savings with respect to costs of supporting that kind of activity in Singapore versus where it formally was, and we are still doing some of that work in other locations in the United States, in the UK and in some other locations.

  • We principally have shifted most of that activity to Singapore, to an entity that was a former Blackwell entity that we've expanded to move all of our fulfillment and shipping and handling operations there as well as some content management activities as well.

  • - Analyst

  • Thanks a lot, guys.

  • - President, CEO

  • You're welcome.

  • Operator

  • Thank you.

  • This does conclude today's question and answer session.

  • I would like to turn the conference back over to Mr.

  • Will Pesce.

  • - President, CEO

  • Thank you all very much for participating today and for your thoughtful questions.

  • In closing I would like to share one more quote from the investor survey, in reference to Ellis and me and I quote, Both of them give verbose answers but it's actually a good thing because they take the time to explain their reasoning, unquote.

  • I hope you still feel the same way.

  • Thank you very much.

  • Operator

  • This does conclude today's John Wiley & Sons conference call, thank you for joining us and have a wonderful day.