Operator: Good morning, everyone and welcome to Wiley Third Quarter 2013 Earnings Conference Call. As a reminder today's call is being recorded. At this time I like to introduce Wiley's Director of Investor Relations, Brian Campbell. Please go ahead sir.
Brian Campbell - Director of Investor Relations: Thank you. Hello everyone and thank you for participating in our call today. Before introducing Steve Smith, President and Chief Executive Officer and Ellis, President and Chief Financial and Operations Officer, I would like to remind you that this call is being recorded and may include 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 obligations to update or revise forward-looking statements to reflect subsequent events or circumstances.
For this quarter we are introducing a new format for our presentation to include visual materials that are designed to provide clarity and comprehension of our third quarter and year-to-date performance. In addition we will provide an update on our previously announced restructuring program and our full-year business outlook.
For those who prefer to listen to the call over the phone, but would still like to view the slides. We recommend clicking on the gears icon located on the lower portion of the left hand side window and selecting live phone. This will eliminate any delays you may experience in viewing the slide transitions as well as remove any potential background noise should you ask a question on the call.
A copy of this presentation will be available on our Investor Relations page at the conclusion of this call. Thank you.
I'd now like to turn the call over to Steve.
Stephen M. Smith - President and CEO: Thank you Brian. In recent years Wiley's revenue growth slowed due to the combination of difficult market conditions and shifting end-user behavior. Library budgets on which a significant proportion of our core business depends remained tight around the globe impacting both journals and books.
Sales of print text books continue to decline due to a combination of factors including the impact of used books and rentals in global education, bricks and mortar book store closures and tighter inventory management by many of our channel partners.
Print book sales are also affected by the ongoing transition from prints to eBooks. Digital book revenues continue to grow rapidly across all three Wiley businesses both in the current quarter and year-to-date.
In global education we are addressing the decline in sales of traditional hard cover text books through the introduction of low-cost formats and custom publishing as well as eBooks and WileyPLUS. Digital text book sales more than doubled in the quarter to $8 million while WileyPLUS revenues grew by 24% to $15 million.
To address the slow revenue growth of our core business, we've recently acquired several high growth businesses and platforms that will enable us to leverage new opportunities across the spectrum of Wiley's core content, asset, brand and relationships.
We continue to diversify our product mix to mitigate library funding constraints in areas like funded access and article delivery, assessment and certification in our professional business and online program management in higher education.
We've divested our consumer publishing program due to its declining revenue performance and its uncertain trajectory in a digital environment. We continue to develop and refine our content-enabled service offerings with WileyPLUS in our education business and financial certification and test prep in our professional business. These investment and activities should result in higher rates of sustainable revenue growth in coming years.
The persistent pressure on top line growth combined with the fact that we have a large and somewhat fixed infrastructure supporting legacy business models along with the need to continue to invest in technology capabilities to support our growth plans has led to significant pressure on earnings.
In response and as mentioned during our conference call in December, we've embarked on a significant company-wide program of cost restructuring in order to support earnings in the short-term and to enable reinvestment of resources in new growth opportunities for the future. We are making progress to improve the efficiency and return from our technology investment in order to enter new markets, develop new content-enabled services and platforms, increase agility and improve our variable to fixed cost ratio.
Ellis Cousens will provide a high-level description of our restructuring plans later in this presentation. Through this initiative, we will accelerate Wiley's transformation to a knowledge business that serves the evolving needs of our customers in research, learning and professional practice.
Wiley's revenue grew 6% in the third quarter, excluding the impact of foreign exchange and adjusted to exclude the results of our divested consumer assets due to the contribution of recent acquisitions notably Deltak and Efficient Learning Systems and modest organic growth in professional and higher education offset by declines in STMS journal revenues and print books.
Excluding the addition of Deltak and ELS and $4 million in revenue from delayed shipments due to the storm at the end of the last quarter, revenue grew by 1%. Adjusted EPS for the quarter which excludes the divested consumer publishing programs grew 6% due to higher gross profit margins, cost control measures and share repurchases. Newly acquired businesses added a penny per share in the quarter.
For the nine months year-to-date, revenue increased by 1% excluding foreign exchange in the divested consumer assets, but was flat excluding the impact of newly acquired businesses. STMS journal revenue declined due to factors affecting the timing of revenue recognition and lower corporate and backfile sales.
Print book sales have declined across the board partially offset by the growth in sales of digital books. Adjusted EPS is down 5% excluding the impact of foreign exchange and the operational results from the divested assets, the gain on sale of travel publishing assets and all impairment and restructuring charges. The lower EPS performance was due to the decline in top line performance and higher technology costs due to investments in digital products and infrastructure.
Now I would like to provide a brief commentary on the performance of the Wiley's three global businesses.
STMS revenue for the third quarter and year-to-date is down 3% and 2% respectively excluding the impact of foreign exchange. Despite growth in subscription billings of almost 2% in calendar year 2012, earned revenues have declined slightly by less than 1% in the fiscal year-to-date because of differences in the timing of issue publications, between fiscal year 2012 and fiscal 2013. Delayed revenue recognition due to changes in license terms of some customers as described in the earnings release and as yet on paid license agreements from at least one large Middle East customer.
Journal subscriptions account for approximately 60% of the STMS business. STMS print books, advertising, corporate reprints and backfiles are also down, while digital books and funded open access continue to provide growth, albeit from a relatively small base.
In January The Journals of the American Geophysical Union went live on Wiley online library adding a collection of 160,000 articles to the database.
Despite revenue challenges leading indicators in the research sectors are generally very positive. At this time calendar year 2013 journal renewals are showing 3% to 4% growth over prior year with about 85% of expected full-year business closed as at the end of February. Much of that growth stems from the contribution of the contract with The American Geophysical Union that brings additional revenues of more than $20 million in the year.
Proportion of total journal revenues under institutional license remains constant at close to 80%. Article submissions to Wiley journals continue to rise.
In the quarter STMS signed new contracts with (society) to publish two new journals with combined annual revenue of approximately $150,000 and renewed or extended contracts to publish 40 journals with combined annual revenue of $26 million. No journal contracts were lost.
For the nine months year-to-date, the aggregate value of new contracts won is $27 million versus $6 million in contracts lost. Society contract renewal rates remain overall very strong. Percentage of STMS revenue derived from digital products continues to grow with online books accounting for almost a quarter of book revenue this quarter. Full text article accesses increased again by 11% in the quarter.
All of these leading indicators demonstrate that Wiley's core STMS products and services continue to meet the needs of our customers in research and professional practice and are highly valued by end users. However, our ability to convert that customer value to higher rates of revenue growth remains constrained by stagnant library funding.
The Professional Development or PD business showed modest organic growth for the quarter excluding acquisitions and divestments and foreign exchange. Prink book sales declined by 4% or $3 million partially offset by digital book growth of 20% or $2 million. Business and Technology categories performed well, and digital revenue now accounts for 18% of total PD revenue, a 74% increase over the prior year.
Online assessment is a major growth focus for professional development, following the acquisition of Inscape and ELS over the last year. Both Inscape and ELS are performing above our expectations and we expect to realize synergies by leveraging the acquired platforms and distribution capabilities across more of Wiley's assets in the months and years ahead.
Following the acquisition of Deltak in November, 2012, the trajectory of our Global Education business looks quite different from previous quarters. The percentage of revenue coming from traditional print textbooks is now down to a little over 50% while digital revenue now makes up a third of overall revenue.
For the quarter, print textbooks continued to decline while binder-ready version and custom print grew modestly. eBook sales more than doubled and WileyPLUS continue to show promising growth, accounting for 13% of revenue in the quarter.
Deltak contributed $17 million in its first reportable quarter under Wiley's ownership exceeding expectations in our acquisition model. Since the closing of the acquisition Deltak has signed three new partner agreements each with a contract period of at least seven years. Working together, Wiley and Deltak colleagues are realizing new ways to grow the combined customer base and broaden the range of products and services we offer. As a result, total education revenue grew 18% namely due to the acquisition of Deltak. Organic revenue excluding Deltak showed modest growth of 1% due to WileyPLUS and eBooks.
At this point, I'll handover the presentation to Ellis Cousens who will take us through shared service costs, cash flow performance and describe our restructuring plans.
Ellis E. Cousens - EVP, Chief Financial and Operations Officer: Thanks Steve. Shared service expense increased by 5% in the quarter excluding foreign exchange. Among the three largest functional areas in shared services, distribution expense as you see declined, in fact improved so to speak. It was favorably impacted by lower print unit shipped both variable labor costs and trucking expenses associated with print books and also we gained efficiencies in journal shipping and there was a one-time facility restoration charge in the prior year that wasn't repeated in the current year.
Technology spending is higher due to continuing investment in digital products and services, principally content management systems and the addition of the technology support activities from the Deltak acquisition at the end of the second quarter. Year-to-date technology expense is up about 9% both with and without exchange.
Finance and other admin is lower principally due to reduced accrual of incentive compensation and some duplicate rent in the prior year.
Free cash flow is $96 million lower than last year due to the following principal factors. Timing of journal cash receipts which is the principal driver of $42 million cash shortfall and deferred revenue. I can report that a good portion of that $42 million has been made up as of this date. The $29 million tax deposit related to the previously announced German tax audit disagreement that Wiley has with the German tax authorities. As you may recall, according to German tax law a company must pay all contested taxes and the related interests, have the right to defend its position when challenged by the tax authorities in Germany. The challenge will ultimately be decided in courts but it will take several years to reach resolution. If the company is successful as we anticipate we will be all those funds will be returned along with 6% simple interest. I should note that while is not unique in challenging the German tax authorities on their interpretation of this specific tax matter. Additional deposits of up to $33 million are expected in future years until the matter is completely resolved. The 6% interest that I noted earlier is being recorded an offset to our tax provision.
$22 million of the free cash flow difference is related to the timing of cash tax payments which will normalize by the end of the fiscal year. Lower composition and capital spending offset most of the other increases and lower operating performance on year-to-date basis versus our prior year.
We were active in the share repurchase program to the third quarter, acquiring just under 900,000 shares, bringing the total shares repurchased year-to-date to 1.1 million. We have 1.3 million shares remaining in the current authorized program. In June, we increased our quarterly dividend 20% to an annualized rate of $0.96 a share and this represented our 19th consecutive annual increase.
We continue to manage capital spending judiciously although we expect spending to be a bit higher than last year by the end of this fiscal year. If you look back to the last 10-Q and you look at the 10-Q which will be issued in the coming days, we don't expect any changes to forecasted full year composition, royalty advances or capital spending, so $55 million, $110 million and $75 million respectively will stick.
Net debt was about $450 million at the end of the third quarter and our average cost of borrowing all-in was just under 2%. Our current level of leverage, 1.7 times EBITDA remains at a comfortable level. We also have considerable balance sheet flexibility despite some weakness in recent operating performance.
I will turn to a high level discussion of the restructuring program. You'll recall that in December, we initiated a ballpark conversation with you and our efforts to identify a comprehensive cost restructuring program that as we sit today will result in approximately $80 million of run rate savings by the time we exit the next fiscal year, so that is April 30th of 2014.
In January, we retained AlixPartners to work with us to evaluate and assess our businesses, processes and organizational design. Implementation of the restructuring program will consist of the following actions over the remainder of this fiscal year, and throughout fiscal 2014. Implementation of the first initiative already underway is global coordination and realignment for procurement, tracking and management of outside supplied services, products and materials using the recently engaged Ariba toolset, which I have mentioned previously. We're in the progress of implementation of the toolset redesigning workflows and the organization of our activities to make best use of the capabilities that Ariba brings us.
The restructuring program will delay redundant management and functional areas throughout the organization that can be consolidated. We will be developing and driving a shared service support model deeply into the organization which may involve moving certain functions to lower cost Wiley locations and potentially outsourcing to non-Wiley locations where it warranted to achieve saving and flexibility going forward.
We are evaluating our product offerings to determine where and how we can streamline and/or simply how we develop and support our array of product and services while meeting current and future expected consumer demand.
Back to you Steve.
Stephen M. Smith - President and CEO: Based on key indicators going into the fourth quarter, our guidance is unchanged on an operating basis. Currency neutral low-single-digit revenue growth including $37 million of additional revenue from the Deltak and ELS acquisitions and the forgone revenue from the divested consumer businesses. Our full year U.S. GAAP EPS of approximately $2.95 to $3.05, which includes the net negative impacts from the divestiture of the consumer publishing assets, a restructuring charge of $0.06 per share in the first quarter, $0.14 per share benefit from the reduction in U.K. tax rates and forecasted $0.02 per share of negative foreign exchange will be further impacted by the $25 million restructuring charge equivalent to approximately $0.30 per share we expect to take in the coming quarter.
With that as background, we welcome your comments and questions.
Operator: Drew Crum, Stifel, Nicolaus & Company.
Drew Crum - Stifel, Nicolaus & Company: So Steve I wanted to talk about the subscription renewals for calendars '13 and with the change behind the outlook has been recall in the December quarter, December earnings release. You suggested that the renewals are tracking to a comparable rate to what you'd experienced in calendar '12 which was around 2%. Now you are looking at 3% to 4% growth can you talk about what has changed over the course of the last couple of months?
Stephen M. Smith - President and CEO: The primary driver of the higher rate of growth is the commencement of our relationship with The American Geophysical Union, the AGU brings total revenues of over $20 million, not all of that is subscription revenue, something less than three quarters of it is subscription revenue, but if you add that on to the base that certainly helps improve the overall rate of growth, both as we have a larger database, there is 160,000 additional articles that I mentioned. There can always be timing factors, particularly at this time of the year depending on the rate at which, or the pace at which we build new customers. We believe that every year, do get a little earlier as licensing terms become perhaps mostly it's about customers. We close that business a little bit more quickly that can sometimes affect a view at any point in time. Really from the period of December through to round about now in early March, but overall with 85% of the business complete we are pretty encouraged by the 3% to 4% for the full year and we'll continue to report on that at the end of the next quarter.
Drew Crum - Stifel, Nicolaus & Company: Ellis, as far as the cost savings are concerned, can you help us understand what portion of the $80 million will be reinvested and what portion enhances earnings and cash flow going forward?
Ellis E. Cousens - EVP, Chief Financial and Operations Officer: Yeah Drew, I can and Steve can add to my description of that as he sees appropriate. So, we're in the process of developing or finalizing plans that will drive those $80 million worth of cost savings, again it's an approximate figure, but we are feeling relatively confident around that number. It will take place as I described, or the actions will take place over the course of the remainder of fiscal '13 which is about a month and a half, plus all of '14. In terms of redeployment of those savings or deployment of those savings, a fair chunk of that will go into investing in digital businesses and activities, accelerating some of the investments to drive forward the performance of some of the acquisitions that we've already made. So there clearly is an intention to reinvest a meaningful portion of those savings into investments that we have already for the most part identified. But we will be able to do that without dilution coming from those investments as we may have had in the past so to speak. However, a majority, meaning more than half but less than whole will be used to improve financial performance. So clearly there will be some acceleration of earnings growth coming from this, principally after '14. So you will see that in '15, that will not materialize in '14 because of how those programs will be implemented and how those savings will accumulate over the course of '14. We'll be a lot clear about that because we'll be in the implementation phase by the time we get to June. In fact we'll be well into the implementation phase in June, so we can be a lot more numerically descriptive and descriptive around that in June. So the best I can say now is that something more than half will be used to improve financial performance. That's an important element of the restructuring. It isn't all around reinvestment, but a fair portion of that savings that will be used for reinvestment as well.
Drew Crum - Stifel, Nicolaus & Company: Now just the follow on, your response as far as IT spending is concerned within your shared services and admin line, how should we think about that in terms of growth going forward?
Ellis E. Cousens - EVP, Chief Financial and Operations Officer: I would say, Drew, after this year. So this year, as you know, we've discussed and described in the past kind of mid-teens growth in technology expenditure over the course of the foreseeable future. We've taken on some additional resources and capabilities and at the same time we've, as part of how it is, we are resourcing these into third-party resources. We've consolidated a lot of those activities into two very large partners and we've gotten some very favorable terms associated with using to source through partners rather than the merit of provided to use in the past for specialized services. So, that will mitigate a lot of what is the additional resource investment we've made this year to improve our capabilities going forward. So this year is a transitional year. We will not have sort of the ongoing rate savings coming out of, having moved to provider externally resourced service methodology so to speak or construction. So to answer your question about this year, not materially different than in past year. So, let's say, kind of mid-to-low-teens is where we're thinking will come out this year, so a little bit better than in the past but not significantly so. But moving out into future years clearly seeing that sort of mid-teens growth declining to sort of low teens to maybe shall I say don’t hold me to it though, the very highest single digit if not the lowest sort of double digit so to speak. But clearly a moderation in spending coming from increased level of activity quite frankly so not less activity, more activity which is the way and how it is we are deploying and utilizing those investments.
Drew Crum - Stifel, Nicolaus & Company: Last question for me guys, if I heard you correctly, Steve you said that the acquisitions contributed a penny to third quarter results and I apologize if I missed that, but thinking about the balance of physical '13 what is the accretion or dilution expectation from some of the acquisitions you made during the course of physical '13?
Stephen M. Smith - President and CEO: I think we still anticipate being about neutral on a full year basis, it may just be a timing here.
Ellis E. Cousens - EVP, Chief Financial and Operations Officer: You did hear me correctly.
Stephen M. Smith - President and CEO: Again we are talking about just Deltak and ELS, right. Inscape contribution of its own, but that was included in our original guidance.
Operator: Daniel Moore, CJS Securities.
Daniel Moore - CJS Securities: The $80 million of cost savings looking out to fiscal '15 and beyond can you give some sense of the breakout between shared service and operating costs within the segments?
Stephen M. Smith - President and CEO: Dan those $80 million come from effectively all aspects of our business, so it comes out of three businesses segments themselves it comes out of each functional area within shared services. There is quite literally no area that's left untouched with respect to what we've examined and explored and what we are planning to do. I will say that currently some activities that are presently undertaken within each of the three business units will be moved to a shared service model that will drive, as I described, a deeper shared service model into the business. So that means that some of the cost savings at presently is some of the expenses that's currently undertaken within the business will now become a shared service expense. That may even be that, in time, we have additional categories of shared service expense beyond what we've typically described around distribution, technology, finance and then all other which included in the past, and does include facilities, legal, executive human resources and the like. So as a result of examining how it is we execute on some of these businesses, particularly as more and more of the business is digitally oriented, it may be that we have other services that presently are self-provided so to speak in the businesses that become shared service model. The point of all of what I am saying is that, the mathematics of how that comes together is really quite frankly unimportant when you look at it from a business-to-business-to-business, a shared service perspective, because it touches literally upon all businesses and all shared services.
Daniel Moore - CJS Securities: In terms of the $25 million or so restructuring charge that you expect to take in the coming quarter, do you have a ballpark order of magnitude when we look out to fiscal '14 what the total cost, in terms of restructuring will be in order to achieve that $80 million in cost savings?
Ellis E. Cousens - EVP, Chief Financial and Operations Officer: Clearly there will be more and we expect that in the course of '14 there will be a significant charge or charges as well as we've outlined at least narratively in the earnings release. By the time we get to June, I can be very clear in terms of specifying a bit more with respect to magnitude and timing. Our effort would be to try and isolate those restructuring costs into as few quarters as possible, ideally one, but realistically as one implements programs it may be that restructuring charges are triggered by some of the actions that we take. We'll call those out as best we can ahead of time, which is why in June I'd like to be able to identify what we expect in '14 and why here, as we sit in the third quarter I'm identifying our best shot at what we think will be the charge that we'll take in the fourth quarter. So $25 million is an estimate. Clearly by the end of April we'll know what that number is and we can talk to about what it relates to when we get to June and same thing in June about potential charges in '14. There may be also be some a cleanup, so to speak, charge sort of referred to it that way but things that may move later into '14 after we've taken the charge we may discover some additional opportunities that may result in a change in '15, but as we sit here today we expect something like $25 million in the fourth quarter, a charge of not the similar size and scale, but it could be large, it could be smaller, that's rather vague somewhere around the middle of the fiscal year we'll signal that in June and describe that more fully and then potentially a smallest charge, if we, kind of due to sequencing as we expect we will in fiscal '15.
Daniel Moore - CJS Securities: Then switching gears quickly one more on Deltak. You mentioned its outperforming your expectations and a number of the contract signings, maybe just give a little bit more color on how that’s performing relative to your expectations as well as what you are – what type of growth rate we should expect over the next year or two?
Ellis E. Cousens - EVP, Chief Financial and Operations Officer: The early response from Deltak's existing client base to the acquisition have been extremely favorable. So people really welcome the coming together of Wiley and Deltak, which adds a lot of potential to the way that we serve institutional customers with online program development. I mentioned that Deltak successfully closed three new partner licenses violations taking the total number from 23 to 26 in the quarter since the acquisition. I know they have very strong pipeline of likely prospects negotiations that are close to being finalized. We expect to announce in the coming quarter. We see a huge amount of potential here just to expand on Deltak business model; the sources of growth there come from our increasing the numbers of students that are recruited for existing programs that's one of the key drivers of growth. The launch of new programs with existing products and then the addition of additional partner relationships. The potential here in the United States is very exciting there are also little longer-term significant opportunities in international markets to leverage Deltak's capability to institutional sales and across some of our existing customers outside the United States. So the performance in the quarter is everything that we hoped it would be and a little bit more. As we get to know the leadership team there really well and they integrate more fully with the leadership team of our existing Global Education business, we see opportunities to leverage their strength in technology, in institutional sales and in program development more widely; and that will drive their future growth. I won't give a projection for the future growth of the business, but we expect it to continue a trajectory that's pretty consistent with the high level of growth that it's achieved in the past.
Stephen M. Smith - President and CEO: Which is – Dan, as we described, it is a high-growth business at an attractive margin. So and some of what we described earlier in terms of reinvestment around restructuring will help to drive even faster the growth that we expected out of Deltak, so beyond what our initial expectation was, which was attractive. I will say that when we get to June or maybe September, in the coming quarters, let me put it that way to not make a commitment for June, but we will begin to provide some indicative metrics for Deltak and potentially for Inscape as well, that will give you better insight. I know this is a relatively new business for you as it is for us. You have metrics that are, provide leading indicators like subscriptions, the amount of billings closed year-to-date, what the growth rates looks like. So we'd like to provide a leading indicator as well for a business like Deltak as we all get familiar with it in terms of understanding what to expect of it in the future. So I'll say that that will happen somewhere over the next couple of quarters, but not commit specifically to it because we need to understand what we can and can't say in part because of our partner relationships and in part because of competitive dynamics in the marketplace.
Daniel Moore - CJS Securities: Lastly, housekeeping, you bought back some close to 900,000 shares in Q1. Have you continued to or how many shares you bought back to-date thus far in Q2?
Ellis E. Cousens - EVP, Chief Financial and Operations Officer: That was Q3, yeah, fiscal third quarter. In fourth quarter the window just opened. I made no commitment but has indicated that there is open authorization or existing authorization and existing program. I can't say much more than that.
Operator: William Packer, Exane BNP Paribas.
William Packer - Exane BNP Paribas: Of course, the question is around the higher education division if possible. Firstly, we've heard from a number of publishers that – and you mentioned it today, but textbook rentals have acted as a drag on higher education organic revenue growth. We've heard from Cengage the take-up in rentals is starting to flatten, i.e. the growth is flattening. Is that something you see?
Stephen M. Smith - President and CEO: Sorry, could you just repeat the question, last part. We sort of hookup a little bit.
William Packer - Exane BNP Paribas: Is the growth in rentals flattening, textbook rental flattening?
Stephen M. Smith - President and CEO: We like other higher education publishers saw a spike in revenues in what was Wiley's fiscal year 2012, actually a little bit in '11, a little bit in '12. As the rental channel kind of get up, because that inventory need them to get out into the marketplace some of it came from the used book market. A lot of it came and actually fueled some growth for higher education publishers and that, we certainly are not seeing large volumes of our sales going out into the rental market as far as we can determine. The overall impact of rentals on the traditional full priced textbook sale have been pretty dramatic over the last couple of years and so if you look at total market declines market has been declining for the traditional print textbook and the compound rate is probably around 10%. Wiley's performance has been a little better than that, but as I mentioned in my remarks what we are really seeing is a pretty rapid transition away from traditional print textbook in favor of other lower-priced models such as bind and ready volume, the bind and ready versions and custom. And more particularly towards eBooks and WileyPLUS which is as you know a much more fully integrated online learning solution that adds a lot more value both to the teacher and to the student. So we're pleased to see that transition we think that’s a more sustainable model, don't see digital or eRental a being a particularly viable business model and so the quicker that business moves to digital the better it will be from our perspective.
William Packer - Exane BNP Paribas: Secondly how do you see higher education enrollment developing in 2013 we heard recently that number for 2012 was minus 2%. Do you expect enrollments to improve from that or to deteriorate further or stay roughly similar?
Stephen M. Smith - President and CEO: We are not expecting any significant rebound in enrollments I think there is still a lot of pressure on state budgets and still pressure on the for-profit sector. So our assumptions looking forward are that enrolments stay pretty flat.
William Packer - Exane BNP Paribas: Just what do you mean flat, do you stay at minus 2 or go rebound to zero?
Stephen M. Smith - President and CEO: Somewhere between the two, probably.
William Packer - Exane BNP Paribas: Then the last question for me is could you comment on the threat or opportunity you see from open educational resources, it's something we've heard more and more about in the media and the trade press and it would be interesting to hear your views?
Stephen M. Smith - President and CEO: Yes, sure. Well, we support, obviously, the principle of widening access to higher education and providing more value for the student dollar, both in terms of in tuition and the quality of tuition that they receive and the price and value of the educational materials that are available to them. We're working in partnership with a number of players who are in the open arena, the books, if you like, working on content licensing models and pilots with a number of the major players there. We feel that and the future trajectory is moving more to a service model for education where there's an opportunity for public-private partnership to really add significant value to the overall educational endeavor, and that is why we were so delighted to be able to come together with Deltak to build a business around a wider and full-service model. But we also see that products like WileyPLUS are very well-positioned to continue to grow because even if a sustainable model could be found for open educational resources and without significant either tax payer or philanthropic funding it's hard to see how the quality of content that's available through the open model is really going to be of sufficient level to attract customers. Even if that were enabled, we still think that teachers and students are going to want to move from the kind of static delivery of two dimensional text material to a much more fully integrated online learning platform experience that adds the capability for adaptive learning, personalization, customization and in a way that really requires very significant investment on the part of the publishers and we believe the acquisition in the value chain is very sustainable there.
Operator: Michael Corty, Morningstar.
Michael Corty - Morningstar: Good morning. Just a few questions; one, a bit backwards looking and one more forward looking. Just in context of all these cost savings and restructurings, I just wanted to get a sense of, I know Wiley has always looked to cut cost and look ways to improve the efficiency of the business. Can you ballpark maybe what percentage of these ideas and cost cutting savings were in process before, the higher ed business kind of took a hit and maybe what versus what was spread up by the decline of higher ed business maybe that would kind of be helpful just for some context. Then kind of looking ahead, on the bar chart in the higher ed business, any thoughts strategically on how you might possibly speed up the process in terms of a transition from print to digital, looking at your bindery eBook and WileyPLUS businesses. How you might use those to offset that decline in print?
Stephen M. Smith - President and CEO: I'll take those questions in order that you asked them. The restructuring initiative that we are now embarked upon has really picked up pre-existing initiatives that were already in place across all three of our businesses. So you are right Wiley has always looked to rationalize its cost base. It was through the careful examination of the returns that we were getting from those consumer assets that led us to the decision to divest those last year. I think what we are really seeing here is pace of change in our market have accelerated dramatically our print book business, for example, is many tens of million dollars smaller than it was just three years ago, as we've seen, not just in the higher education market, but also in professional business in STM where the movement to digital continues, but the decline in the demand for print products is falling off more sharply. We need to accelerate some of the things that we are already doing in response the acceleration of pace of change in that market. It's not just about the pace of change; it's also about the uncertainty concerning future rates of change. So to the extent that a significant proportion of that cost base was to a degree fixed around long-term contracts and wholly-owned enterprises. We feel that given the uncertainty about the future trajectory of those businesses, we need to move to a more flexible cost base that we can flex, the resources and the investment in those resources as revenue rates change going forward, as well as to be able to continue to invest in accelerating the digital model, maybe that leads into the second part of your question. We see a real change in student behavior over the last couple of years. Student acceptance of eTextbooks is a relatively new and rapidly growing phenomenon. That's partly driven by improvements in the interfaces, although most of our eTextbooks are still delivered today to a laptop environment rather than to digital readers. There is an opportunity, I think, for that to further accelerate if and when new digital reading devices, that gives students the kind of flexibility in the way they read and use that content. That hopefully is not too far around the corner. The biggest single driver frankly is that, when we sell WileyPLUS or eBooks to students, then those eBooks, those books or online courses cannot be sold back into the used book market. We get to sell something to every student, every semester rather than selling to most students in the first semester of the quarter run, and the heavy attrition in the year, or the semesters in the years that follow. It enables us to really reduce the initial price to the student. So the price that students, have been asked to pay historically for the traditional print textbook is reduced considerably around these lower priced print editions as well as all of the digital versions that we offer them. So, we think that the trajectory has really increased in terms of the movement from print to digital. As I said, print textbooks today are less than – are around 50% of our total global ed revenues and we expect that percentage to continue to decline pretty rapidly in the coming years.
Michael Corty - Morningstar: I'm going to try to sneak in one more real quick. In terms of the STMS business and it’s a global business and a lot of times with the library budgets. I get questions from investors, the focus on the U.S., if you could maybe kind of remind us where there's other key geographies where the library budgets are soft other than the U.S. that would be kind of helpful?
Stephen M. Smith - President and CEO: So, we tend to look at this, the Americas, Europe, Middle East and Africa and Asia Pacific at the most macro level. Across those three geographic regions, the most growth challenged are actually in Europe still, so we still continue to see full out from the deep economic recession that affected particularly Southern European countries and challenges around funding in the U.K. and in some other Northern European countries. The Middle East has been in some turmoil. For example we had a significant business a few years back in Iran, we don't have a business in Iran anymore and Egypt and many other Middle East countries have been rocky. So while we still see growth in some parts and we still believe the long-term potential is still there. We can be affected by short-term political and economic events. Asia Pacific still continues to outpace the growth of the other two regions. Today, it's over 20% of our revenue, it's come forward a long way. I'm still seeing a very nice growth in China, in Korea, increasingly from India and Japan. Actually in dollar terms it's the second largest journal market in the world after the U.S. and it has been pretty resilient over the years. Then in the States, even within the U.S., significant variability from state-to-state and from consortium-to-consortium depending on, again, we'll hopefully be seeing the short-term funding constraints. But overall, we are not expecting library funding on a global basis to provide much growth to our ability to grow there. In the coming few years, it's going to be driven by market share gains, increasing the portfolio of products that we have through new society take-ons, new journal launches as well as new and emerging business models, such as funded access and the article delivery.
Operator: It does conclude today's question-and-answer session. I'll turn the conference back over to management for any closing remarks.
Stephen M. Smith - President and CEO: Thank you. So at our next investor call in June, we will report on our full year numbers for fiscal '13 and as discussed, we will provide a restructuring progress report including a more detailed timeline. As usual in June, we will give revenue and EPS guidance for fiscal '14 and we will also provide some more forward-looking cover around long-term expectations for revenue and EPS growth. Before we hang up and in the spirit of full disclosure and transparency, I would like to inform you that as part of our customary careful approach to succession planning, Ellis Cousens has announced his intention to retire at the end of fiscal year 2014, due in around 14 months' time. In the coming quarter, we will commence a recruitment search for a new CFO and we are therefore providing this advanced information to investors. Thank you for participating in our third quarter earnings call.
Operator: That does conclude today's conference. Again, thank you for your participation.