Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Drew Crum - Stifel Nicolaus.
Drew Crum - Stifel Nicolaus
I wondered if I could start with foreign currency. You talked a little bit about that in your preamble. It detracted about $0.07 in the quarter and you’re projecting an adverse impact in the back half of ?09. Should we expect a similar impact to what we saw in the second quarter where foreign currency essentially cut the earnings growth rate in half or should we expect further diminution in the growth rate?
Ellis Cousens
Drew, this is Ellis. That’s an incredibly good and complicated question to try and answer and it’s one that I’ve struggled with actually for several weeks now, since the dollar has pretty much appreciated by 20% plus across most currencies and it’s complicated. There’s going to be a little bit of a longer answer than you might have expected rather than a yes or a no or an absolute number or direction and I’ll tell you why it’s so complicated.
One is, the mix of revenue that ultimately winds up down to the bottom line after cost of sales and direct expense and so forth. It has shifted from what it’s historically been for a number of reasons; one is, certainly professional trade is much weaker this year than it has been in the past and that would be typically lots of US dollar contributions that aren’t happening.
STMS is growing nicely as is higher education and STMS this year and last year, but last year in a stable foreign exchange environment, this year in an unstable environment is much larger as a business today because of the acquisition of Blackwell, which as you know is a higher than average Wiley margin business. So its contributions to the bottom line from a revenue perspective are higher, proportionately than the rest of Wiley on average including higher Ed and professional trade.
As you know we took on some additional expense associated with the acquisition of Blackwell in Oxford and also in the US, as well and in other areas outside the United States. So that adds to the complexity of that.
We have some integration cost savings in Europe that we achieved over the course of the last I guess now 21 months or so. How does that factor into it? There’s another element of this that although maybe minor, I’m quite sure yet, is the functional currency for journals that’s changing beginning in November where formerly most licenses written outside the States were either US dollar denominated or Sterling.
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