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 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 reflect subsequent events or circumstances. Mr. Pesce, please go ahead.

Good afternoon and welcome to Wiley's second quarter conference call. I am with Ellis Cousens. I will provide an overview, then we will respond to your questions. Revenue for the second quarter and first half of fiscal year 2008 increased by 49% and 48% respectively. Excluding Blackwell, revenue for the second quarter and first half increased by 8% and 6% respectively. Favorable foreign exchange added approximately 2% to 3% to these results. The UK and Germany passed new income tax legislation which favorably affected reported results. Excluding certain tax benefits and Blackwell, adjusted EPS increased 25% in the quarter and 12% for the six months. Blackwell was accretive to EPS in the quarter and for the first half. Wiley's top line growth was driven by Blackwell and the strong global performance of Professional/Trade. Scientific, Technical and Medical revenue increased modestly from strong performances in last year's second quarter and first half. Higher Education reported top line growth in the quarter after a sluggish start to the year. For the first half, Wiley's gross margin of 65.5% was down from prior year as expected. Blackwell's gross margin is lower than Wiley's, primarily due to the high proportion of its revenue that is generated from society journals. Excluding Blackwell and the effective currency, year-to-date operating expenses increased 4% from prior year. Taxes contributed positively to the year-on-year earnings growth in the quarter and first half. Free cash flow for the six months improved by approximately $25 million excluding Blackwell. Higher cash earnings and lower tax payments were the primary contributors to the year-on-year growth. Excluding Blackwell, receivables increased from prior year by $26 million, but day sales outstanding improved by 2 days. The increase in inventories reflects significant reprints and a strong frontlist. The growth in property, plant and equipment was principally…

Thank you. [Operator Instructions]. The first question comes from Drew Crum, Stifel Nicolaus.

All right, good afternoon everyone, it's Stifel Nicolaus. Two questions for you on Blackwell. The guidance for the fiscal year is $0.10 accretion, yet you've already recognized $0.09 year-to-date. Is there anything one time or are there any additional costs or ramp in costs in the back half of the year that we should expect? And I guess related to that, the $0.09 that you have recognized to date, how much of that can you attribute to the costs and revenue synergies you guys outlined when you made the acquisition?

Yes, Drew, this is Ellis. The effect on Blackwell in second half versus first half of the year, many of the transition integration programs and projects will ramp up in the second half of the year. We have accomplished quite a bit over the course of the first half of the year, but there will be some incremental spending in the second half of the year according to our forecast. And so as a result of that, the contributions to the bottom line is that we are including transition as we report to Blackwell numbers as I've said in the past. That includes all of the transition-related activities and expenses wherever they occur. There is this... as Will provided guidance, Wiley standalone excludes any transition spending even if those costs were incurred as... or within former Wiley accounts so to speak. So there is some lack of symmetry between the first and second half of the year. With respect to the second part of your question, in terms of where the upside is coming or are there cost and revenue synergies associated with the $0.09 accretion thus far in here to the first six months. That accretion comes from two places in particular versus where we had expected originally, which is in part why we've changed our guidance here. And those two principal areas are interest expense and the tax benefit of how it is repurchased and financed Blackwell, some of which came together sort of... it became fully known to us after actually closing on the acquisition and providing guidance. So most of it comes from, or all of it's actually coming from interest expense and tax benefit. There really are no material cost savings to speak of in the first half of the year. We are just kind of getting underway quite frankly in those things that will generate ongoing savings. There were certainly some small benefits here and there, but not significant, in other words, to speak of with respect to severance and redundancies and some minor activities. But it really is in the second half of the year that all of the plans and activities that we have with respect to integration come to fruition. So, again, just to be cautious, there will be expense in the second half of the year as a lot of these projects come to completion. There will be cost savings, but they'll principally be recognized in the following year as they annualize out as it were. So we'll exit the year in better shape from a net cost savings perspective than we sit today. And that's all according to the plan and the plan is being executed fairly well.

Okay, great. Just want to shift gears and get your thoughts on what you're hearing from your retail partners as far as inventory levels and shelf space for P/T both in the U.S. and abroad. And Will, I'd be interested in your comments on the new Kindle product by Amazon. You've talked about a lot in the past Amazon being one of your best partners and just want to get your thoughts around that. Thanks.

Yes, Drew, there is really not a whole lot to say about inventory levels other than to mention to you that really across the board, our performance has been very solid in P/T. When I say across the board, I mean across several publishing categories and also through the various accounts of the bricks and mortar stores as well as the online in the States and abroad. We are really very pleased with the momentum we have in that business and we expect it to continue given the strength of the frontlist and also frankly the depth and breadth of our backlist. You should also hopefully all observe that in my comments, particularly over the last, I would say, 12 to 15 months or so, we are getting revenue growth out of our professional and trade business not only through the traditional kind of books through various accounts, but also increasingly technology-enabled revenues through, for example, Frommers.com, to pick one of specific case, but also through licensing of some of the great brands that we have. So this business is really doing very well in very competitive markets and our relationships with various retailers is as good as ever. So we are getting the shelf space that we need to promote and sell our products and we feel very good about those partnerships. You asked about the Kindle product with Amazon, one of the reasons why I have made positive statements about our relationship with Amazon over the years is that, frankly, well, they've helped us reach customers who may not have had access to brick and mortar stores not only in the United States but abroad, and that's obviously a good thing. With Wiley's deep backlist, they have been able to provide so-called virtual shelf space if you will…

Okay, great. One last question. Ellis, can you offer an effective tax rate we should be using in our model for '08 and book tax rate as well then and where should we see that normalize as time progresses?

Yes, I think for the year in total I would look at 20% to 25%.

Okay.

All right.

This is effective tax rate, correct?

Yes, book rate for the full year.

Okay.

Okay.

Got it. Thanks guys.

You're welcome.

[Operator Instructions]. Next question comes from David Lewis of J.P. Morgan.

Hi guys. Solid quarter. Just a few questions. I just wanted to follow up first with the taxes. The tax benefit that Blackwell is seeing, I believe that's related to UK corporate reduction. Does that... are we going to see that benefit on Blackwell through the balance of second half '08?

David, the tax benefit I spoke to, I am not sure which one you are speaking to, but the one I was speaking to with respect to having a positive benefit through the first half of the year, which will continue --

Okay.

Through the second half of the year is through a tax vehicle that we used in the UK within UK law. We were permitted to make an acquisition of Blackwell in the UK... it's a [ph] UK company through an entity which we've referred to as WEIHL. It's an entity that allows us to finance the acquisition in the UK partially through contribution, equity contribution from Wiley and also by borrowed funds. So the interest expense related to funds that are borrowed to make the acquisition in the UK are deductible there under UK tax law. And also since the umbrella borrowing, as it were, here in the U.S. to finance the acquisition and our other corporate needs is deductible here in the U.S., we essentially get a deduction in the UK for a portion of the acquisition and a deduction for the entire borrowing here in the U.S. So it's the tax benefit related to that borrowing in the UK to finance the acquisition of Blackwell

Okay.

Yes, this year there is no tax benefit related to the reduction in the corporate income tax rate in the UK. There is a benefit related to the tax reduction in Germany which was retroactive to the 1st of May which just nicely winds up at the start of our fiscal year. So we are realizing a benefit there and will continue forward. In the UK, we want to see that till next year coming from the reduction in the corporate tax rate.

Okay. One question on the off shoring of some these costs, pre-publication costs. McGraw-Hill mentioned last week at Media Week that they were seeing a 50% reduction in costs when you offshore some of these pre-publication costs. Is that a good ballpark of the economics that you guys are seeing?

I am not sort of in a position yet to put a percent change on that, but we are off shoring, and principally off shoring, not outsourcing. Some of it's outsourced through an entity that was acquired as part of the Blackwell acquisition. We have a Blackwell Publishing Services group in Singapore. So at least with respect to initially all of the journal publishing and activity, these pre-pub costs will be... that activity will be moving to Singapore over time. It's not all there yet. There are significant savings associated with that. I can't yet put a number to that. And then of course there is over time some forward opportunity with respect to other parts of the business to move that as well.

Okay. And the last one is can you guys remind me the timing; you are doing a great job with adding these new society publishing agreements. When do they... when are they going to start to hit the books? And I imagine it's... there is going to be a variety of different schedules, but when does that going to start to see an impact?

Well I'll start and Ellis will... this is Will... will jump in. Well they do start at the beginning of a calendar year, not at the beginning of a fiscal year. And normally, it's at least... it's about a year out in terms of shifting responsibility for those agreements. So there is a distinction as we talk about this, and I made comments specifically as it related to what was going on with Blackwell. There are several different ways in which we are expanding the business. One is of course if we don't currently publish the journal, it's being published by a competitor and we are successful in winning that one over. And usually if we are able to do that, we can sign up agreements, I would say minimally three year agreements, typically five year agreements, sometimes longer than that. Another way in which we can solidify the business is to take existing contracts that aren't yet ready. They maybe within a couple of years, let's say, of reaching termination or being subject to renewal. And we may actually begin those conversations before to continue that relationship. So we have that going on. And then of course there are the renewals of existing agreements as we approach the term. But what you should assume for sure is that it's the beginning of a calendar year and in many cases it's about a year out. But it's not... that's not always the case. And I think the main point I want to emphasize and hope you'll take away, the reason I highlighted that in my opening remarks is you're going... we're going through a process of putting together two very significant, reputable publishing companies in the field of scientific, technical and medical publishing, Blackwell and Wiley. And while we are doing that, we are dealing with quite a bit of transition and integration and all that that takes. And you would imagine that there could be some people who think that this would be a great time to try to win over some of those society relationships that either Blackwell or Wiley had. And the fact that we are winning a very high percentage of contracts or proposals for society journals that are being published by others while renewing and extending our own during this period of transition, I think, as I said earlier, is a very positive statement about the acquisition in terms of the leading indicator if you will.

Okay, great. Thanks guys.

Okay.

[Operator Instructions]. And it appears there are no further questions.

Well thank you very much for your interest and support. We look forward to speaking with you again when we report third quarter results. Best wishes to you, your family and friends for a happy, healthy and peaceful holiday season. Thank you.

That does conclude today's conference. Thank you for your participation.