Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of Drew Crum - Stifel Nicolaus.
Drew Crum - Stifel Nicolaus
I want to start with the guidance for 2009. Is there a revenue range you are looking at for 2009 now?
Maureen O’Connell
In line to our current performance we are looking for a slight increase to flat revenue in the second half of the year excluding Harry Potter.
Drew Crum - Stifel Nicolaus
The $0.65 to $0.95 you mentioned in the second half for 2009 that is excluding the severance charges and one-time items?
Maureen O’Connell
Correct. It includes normalized severance. As you know we had severance in the past on a normal basis but we have included that $8 million of normalized severance but this additional severance related to these cost action programs we have put in place such as the voluntary retirement and other cost programs is not included.
Drew Crum - Stifel Nicolaus
What are you assuming as far as the allowance for doubtful accounts which I believe was about $6 million pre-tax in the second quarter in addition to foreign currency? Can you talk about what your assumptions are there for the second half of 2009?
Maureen O’Connell
We prudently reserve for our trade receivables in both our domestic and U.K. businesses. So that does include an enhanced reserve for bad debt for those two businesses looking more conservatively at the current outlook.
Drew Crum - Stifel Nicolaus
Anything on foreign currency?
Maureen O’Connell
We are assuming a flat foreign currency base in the second half.
Drew Crum - Stifel Nicolaus
I also wanted to ask you about the pricing strategy you implemented at the beginning of the academic year. Can you measure the success of that initiative? Can you quantify the benefit you got or recognized during the second quarter? You mentioned you had seen a transition or flight to lower ticket items.
Maureen O’Connell
If we look at our cost of goods sold where the impact of higher pricing will show up, that rate has actually improved before you factor in the increase in royalty reserves and higher amortization associated with our new product development so we are seeing real benefit from the price increases. Even though they are migrating to lower price items there was still a big value gap there and we were able to raise the prices on those lower priced items as well. So we are seeing in all our book businesses the benefit of the price increase.
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