SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended October 31, 2000 Commission File No. 1-11507
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from to
JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5593032
- ---------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
605 THIRD AVENUE, NEW YORK, NY 10158-0012
- ------------------------------ ----------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (212) 850-6000
--------------
NOT APPLICABLE Former name, former address, and
former fiscal year, if changed since last report
Indicate by check mark, whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
The number of shares outstanding of each of the Registrant's classes of common
stock as of October 31, 2000 were:
Class A, par value $1.00 - 49,269,941
Class B, par value $1.00 - 11,701,064
This is the first page of a 16 page document
JOHN WILEY & SONS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements.
Condensed Consolidated Statements of Financial Position - Unaudited
as of October 31, 2000 and 1999, and April 30, 2000............... 3
Condensed Consolidated Statements of Income - Unaudited
for the Three and Six Months ended October 31, 2000 and 1999...... 4
Condensed Consolidated Statements of Cash Flows - Unaudited
for the Six Months ended October 31, 2000 and 1999................ 5
Notes to Unaudited Condensed Consolidated Financial Statements.. 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 10-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 14
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............ 14-15
Item 6. Exhibits and Reports on Form 8-K.................................. 15
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995........................ 15
SIGNATURES................................................................... 16
EXHIBITS
27 Financial Data Schedule
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
(UNAUDITED)
October 31, April 30,
------------------------------------
Assets 2000 1999 2000
---------------- ------------------ ------------------
Current Assets
Cash and cash equivalents $ 10,565 2,419 $ 42,299
Accounts receivable 94,953 87,977 68,080
Inventories 49,952 40,133 46,109
Deferred income tax benefits 13,427 3,883 10,999
Prepaid expenses 8,518 6,082 9,624
---------------- ------------------ ------------------
Total Current Assets 177,415 140,494 177,111
Product Development Assets 40,866 40,375 39,809
Property and Equipment 37,564 34,301 38,226
Intangible Assets 291,692 305,574 297,085
Deferred Income Tax Benefits 2,415 11,463 3,395
Other Assets 18,871 12,399 13,711
------------------- ------------------ ------------------
Total Assets $ 568,823 544,606 $ 569,337
=================== ================== ====================
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable and current portion of long-term debt $ 78,445 69,736 $ 30,000
Accounts and royalties payable 78,606 56,192 45,816
Deferred subscription revenues 38,535 43,252 112,337
Accrued income taxes 8,568 6,719 6,102
Other accrued liabilities 51,116 50,260 59,795
---------------- ------------------ ------------------
Total Current Liabilities 255,270 226,159 254,050
Long-Term Debt 65,000 95,000 95,000
Other Long-Term Liabilities 33,091 32,174 32,109
Deferred Income Taxes 14,478 15,807 15,440
Shareholders' Equity 200,984 175,466 172,738
------------------- ------------------ ------------------
Total Liabilities & Shareholders' Equity $ 568,823 544,606 $ 569,337
=================== ================== ====================
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
JOHN WILEY & SONS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands except per share information)
Three Months Six Months
Ended October 31, Ended October 31,
--------------------------------------- -------------------------------------
2000 1999 2000 1999
-------------------- ---------------- ------------------- ---------------
Revenues $ 157,118 150,338 $ 308,027 287,318
Costs and Expenses
Cost of sales 49,001 49,272 96,934 96,814
Operating and administrative expenses 75,526 71,579 146,415 135,319
Amortization of intangibles 4,286 4,573 8,430 7,702
-------------------- ---------------- ------------------- ---------------
Total Costs and Expenses 128,813 125,424 251,779 239,835
-------------------- ---------------- ------------------- ---------------
Operating Income 28,305 24,914 56,248 47,483
Interest Income and Other 356 (67) 882 557
Interest Expense (2,391) (2,313) (4,502) (4,146)
-------------------- ---------------- ------------------- ---------------
Interest Expense - Net (2,035) (2,380) (3,620) (3,589)
-------------------- ---------------- ------------------- ---------------
Income Before Taxes 26,270 22,534 52,628 43,894
Provision For Income Taxes 9,325 8,450 19,209 16,460
-------------------- ---------------- ------------------- ---------------
Net Income $ 16,945 14,084 $ 33,419 27,434
==================== ================ =================== ===============
Income Per Share
Diluted $ 0.27 0.22 $ 0.53 0.42
Basic $ 0.28 0.23 $ 0.55 0.44
Cash Dividends Per Share
Class A Common $ 0.04 0.035625 $ 0.08 0.07125
Class B Common $ 0.04 0.031875 $ 0.08 0.06375
Average Shares
Diluted 63,534 64,526 63,438 65,099
Basic 60,607 61,423 60,481 61,812
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)
For The Six Months
Ended October 31,
------------------------------------------
2000 1999
-------------------- -------------------
Operating Activities
Net income $ 33,419 27,434
Non cash items
Amortization of intangibles 8,430 7,702
Amortization of composition costs 11,374 12,206
Depreciation of property and equipment 7,095 5,408
Other non cash items 11,298 24,070
Net change in operating assets and liabilities (81,199) (90,470)
-------------------- -------------------
Cash Used for Operating Activities (9,583) (13,650)
-------------------- -------------------
Investing Activities
Additions to product development assets (16,376) (14,858)
Additions to property and equipment (11,546) (4,417)
Proceeds from sale of publishing assets 2,500 --
Acquisition of publishing assets (7,052) (139,838)
-------------------- -------------------
Cash Used for Investing Activities (32,474) (159,113)
-------------------- -------------------
Financing Activities
Repayment of long-term debt (30,000) --
Net borrowings of short-term debt 48,731 39,736
Cash dividends (4,858) (4,326)
Purchase of treasury shares (1,664) (10,968)
Proceeds from exercise of stock options 1,193 709
-------------------- -------------------
Cash Provided by Financing Activities 13,402 25,151
-------------------- -------------------
Effect of Exchange Rate Changes on Cash (3,079) 1,061
-------------------- -------------------
Cash and Cash Equivalents
Decrease for Period (31,734) (146,551)
Balance at Beginning of Period 42,299 148,970
-------------------- -------------------
Balance at End of Period $ 10,565 2,419
==================== ===================
Cash Paid During the Period for
Interest $ 5,381 4,019
Income taxes $ 14,468 9,610
The accompanying Notes are an integral part of the condensed
consolidated financial statements.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the Company's
consolidated financial position as of October 31, 2000 and 1999, and April
30, 2000, and results of operations and cash flows for the periods ended
October 31, 2000 and 1999. The results for the three and six months ended
October 31, 2000 are not necessarily indicative of the results to be
expected for the full year. These statements should be read in conjunction
with the most recent audited financial statements contained in the
Company's Form 10-K for the fiscal year ended April 30, 2000.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
2. A reconciliation of the shares used in the computation of income per share
follows:
Three Months Six Months
Ended October 31, Ended October 31,
---------------------------------- -- ---------------------------------
2000 1999 2000 1999
--------------- --------------- -------------- ---------------
(thousands)
Weighted average shares outstanding
60,956 61,946 60,817 62,333
Less: Unearned deferred compensation
shares (349) (523) (336) (521)
--------------- --------------- -------------- ---------------
Shares used for basic income per share
60,607 61,423 60,481 61,812
Dilutive effect of stock options and
other stock awards 2,927 3,103 2,957 3,287
---------------
--------------- -------------- ---------------
Shares used for diluted income per share
63,534 64,526 63,438 65,099
--------------- --------------- -------------- ---------------
3. Inventories were as follows:
October 31, April 30,
--------------------------------
2000 1999 2000
-------------- -------------- -------------
(thousands)
Finished goods $46,318 35,209 $40,370
Work-in-process 2,183 3,070 3,537
Paper, cloth and other 4,990 3,868 5,241
-------------- -------------- -------------
53,491 42,147 49,148
LIFO reserve (3,539) (2,014) (3,039)
-------------- -------------- -------------
Total inventories $49,952 40,133 $46,109
-------------- -------------- -------------
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Comprehensive income was as follows:
Three Months Six Months
Ended October 31, Ended October 31,
--------------------------------- --------------------------------
2000 1999 2000 1999
-------------- ------------- ------------- --------------
(thousands)
Net Income $16,945 14,084 $33,419 27,434
Other Comprehensive Income (Loss) - Foreign
Currency Translation Adjustments
(309) (67) (886) (11)
-------------- ------------- ------------- --------------
Comprehensive Income $16,636 14,017 $32,533 27,423
-------------- ------------- ------------- --------------
5. In August, 2000, the Company entered into an agreement to lease
approximately 400,000 square feet of office space in Hoboken, New Jersey.
The term of the lease is 15 years and will commence upon completion of
construction, as defined in the agreement, which is estimated to occur
during fiscal 2003. The future minimum payments under the lease aggregate
to approximately $194 million over the term. Annual rent payments during
the first five years will amount to approximately $12 million per year.
6. The Company is a global publisher of print and electronic products,
specializing in scientific, technical, and medical journals and books;
professional and consumer books and subscription services; and textbooks
and educational materials for undergraduate and graduate students as well
as lifelong learners. The Company has publishing, marketing, and
distribution centers in the United States, Canada, Europe, Asia, and
Australia. The Company's reportable segments are based on the management
reporting structure used to evaluate performance. Segment information is as
follows:
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Segment information was as follows:
Three Months Ended October 31,
------------------------------------------------------------------------------------
2000 1999
---------------------------------------- ---------------------------------------
(thousands)
Inter- Inter-
External segment External segment
Revenues Customers Sales Total Customers Sales Total
-------------- ------------ ------------ ------------- ------------ ------------
Domestic Segments:
Scientific, Technical, and Medical $36,474 1,777 38,251 $34,508 1,363 35,871
Professional/Trade 38,433 4,516 42,949 36,475 3,495 39,970
College 29,943 6,911 36,854 28,085 6,550 34,635
European Segment 36,978 2,568 39,546 36,561 1,703 38,264
Other Segments 15,290 336 15,626 14,709 175 14,884
Eliminations -- (16,108) (16,108) -- (13,286) (13,286)
-------------- ------------ ------------ ------------- ------------ ------------
Total Revenues $157,118 -- 157,118 $150,338 -- 150,338
-------------- ------------ ------------ ------------- ------------ ------------
Direct Contribution to Profit
Domestic Segments:
Scientific, Technical, and Medical $18,263 $15,286
Professional/Trade 9,619 9,207
College 10,788 10,461
European Segment 12,672 9,880
Other Segments 3,016 3,016
------------ ------------
Total Direct Contribution to Profit 54,358 47,850
Shared Services and Admin. Costs (26,053) (22,936)
------------ ------------
Operating Income 28,305 24,914
Interest Expense - Net (2,035) (2,380)
------------ ------------
Income Before Taxes $26,270 $22,534
------------ ------------
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended October 31,
-------------------------------------------------------------------------------------
2000 1999
----------------------------------------- ---------------------------------------
(thousands)
Inter- Inter-
External segment External segment
Revenues Customers Sales Total Customers Sales Total
-------------- ------------ ------------- -------------- ------------ -----------
Domestic Segments:
Scientific, Technical, and Medical $70,976 3,464 74,440 $67,962 2,985 70,947
Professional/Trade 71,213 7,923 79,136 62,724 6,617 69,341
College 64,241 12,734 76,975 58,617 11,430 70,047
European Segment 70,487 5,208 75,695 69,530 4,395 73,925
Other Segments 31,110 655 31,765 28,485 278 28,763
Eliminations -- (29,984) (29,984) -- (25,705) (25,705)
-------------- ------------ ------------- -------------- ------------ -----------
Total Revenues $308,027 -- 308,027 $287,318 -- 287,318
-------------- ------------ ------------- -------------- ------------ -----------
Direct Contribution to Profit
Domestic Segments:
Scientific, Technical, and Medical $34,510 $30,161
Professional/Trade 14,815 13,299
College 26,750 23,734
European Segment 24,480 20,744
Other Segments 6,705 5,556
------------- -----------
Total Direct Contribution to Profit 107,260 93,494
Shared Services and Admin. Costs (51,012) (46,011)
------------- -----------
Operating Income 56,248 47,483
Interest Expense - Net (3,620) (3,589)
------------- -----------
Income Before Taxes $52,628 $43,894
------------- -----------
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
During this seasonal period of cash usage, operating activities used $9.6
million of cash, or $4.1 million less than the prior year's comparable
period. The decrease was primarily due to higher accounts payable levels.
The use of cash during this period is consistent with the seasonality of
the journal subscription business and the college segment's receipts cycle
that occurs, for the most part, in the second half of the fiscal year.
Investing activities used $32.5 million during the current year-to-date, or
$126.6 million less than the comparable prior year's period. Prior year
investing activities included the acquisition of Jossey-Bass and certain
higher education titles amounting to $138 million.
Current year financing activities primarily reflect the purchase of
treasury shares, dividend payments, the $30 million scheduled repayment of
long-term debt and short-term borrowings of $48.7.
RESULTS OF OPERATIONS
SECOND QUARTER ENDED OCTOBER 31, 2000
Revenues for the second quarter were adversely affected by a stronger U.S.
dollar and advanced 5% to $157.1 million compared with $150.3 million in
the prior year period. Excluding foreign currency translation effects,
revenues increased 7% for the quarter over the prior year. Operating income
for the current quarter increased 14% to $28.3 million, compared with $24.9
million in the prior year. Net income advanced 20% to $16.9 million, and
income per diluted share increased 23% to $.27 compared with $.22 in the
prior year.
Revenue and income gains were achieved in all of the Company's core
businesses, with particularly strong contributions from the Scientific,
Technical and Medical (STM) publishing groups in the U.S. and Europe.
Operating margins continued to increase as a result of gross margin
improvements and productivity gains.
Cost of sales as a percentage of revenues decreased to 31.2% compared with
32.8% in the prior year. The improvement was attributable to lower relative
composition costs as a result of technology-driven productivity
initiatives. Operating expenses as a percentage of revenues were 48.1% in
the current quarter, compared with 47.6% in the prior year's first quarter.
The increase was primarily due to higher technology costs. Operating
expenses increased 5.5% over the prior year. The operating margin improved
to 18% in the current quarter, compared with 16.6% in the prior year's
first quarter.
The effective tax rate was 35.5% in the current quarter, compared with
37.5% in the prior year. The favorability is due to higher foreign sourced
income which is taxed at lower rates.
SEGMENT RESULTS
Domestic STM revenues of $38.3 million increased 7% over the prior year, led by
increases in the journal and book programs. The direct contribution to profit
increased 19% to $18.3 million. The direct contribution margin improved to 47.7%
in the current quarter compared with 42.6% in the prior year. Journal renewal
rates were stronger in calendar year 2000 compared with the prior year. In
addition to the revenue growth, improved gross margins on books and journals,
primarily reflecting lower composition costs, contributed to the profit
increase.
Wiley InterScience continues to evolve as a successful online global enterprise.
Many more enhanced access licenses were signed during the quarter. Among the
most notable were multi-year agreements with the California State
University/University of California system, the Israeli Center for Digital
Information Services, the Korean Electronic Site Licensing Initiative, the
Council of Australian University Librarians in Australia, and Saitama University
in Japan. Usage continued to increase during the second quarter, as reflected in
the 11% growth in the number of registered users and a 37% increase in the
average user sessions per day compared with the previous quarter. Wiley
InterScience has been expanded to include major reference works, such as the
renowned Kirk-Othmer Encyclopedia of Chemical Technology. The STM publishing
division is developing a new mobile Internet service to provide tables of
contents and abstracts from Wiley InterScience directly to personal and wireless
handheld devices and Web-enabled phones. The MobileEdition service is being
launched in collaboration with AvantGo, Inc., and initially will provide Cancer
MobileEdition from the latest issues of Cancer and Cancer Cytopathology, the
flagship journals of the American Cancer Society. An agreement was also reached
with Maruzen Knowledge Worker to provide a Japanese interface to enable
searching and browsing Wiley InterScience in that language.
Domestic Professional/Trade segment revenues of $42.9 million for the second
quarter advanced 7% over the comparable prior year period. The improvement was
due to strong frontlist sales, particularly in the business and computer
publishing programs, and increased volume through online accounts. Second
quarter results were impacted, by soft backlist sales and higher returns from a
small number of accounts. The direct contribution to profit advanced 4% to $9.6
million. The direct contribution margin decreased slightly from 23% in the prior
year to 22.4%, as a result of increased spending related to new technologies.
The Professional/Trade business continues to take advantage of the dramatic
growth of e-commerce. Online selling plays to Wiley's strength as a niche
publisher with a deep backlist serving the professional needs of its customers.
There is a growing demand for electronic products among the professional markets
that it serves, notably computing, accounting, finance, psychology and
architecture. Professional/Trade is capitalizing on these opportunities with a
combination of print and Web-based products and services, as well as through the
formation of strategic alliances. The Professional/Trade segment extended its
existing agreement with netLibrary and signed a new one with Lightning Source to
provide online distribution of about 750 new frontlist titles per year.
Additonally, netLibrary will provide Wiley with digital conversion services.
Through its Jossey-Bass imprint, the Company has agreed to co-develop a new
series of Internet-based courses for business and management professionals with
PrimeLearning.com. The Company also expanded its relationship with
getabstract.com, a leading producer and distributor of online business books, to
enable Internet and wireless delivery of abstracted versions of many Wiley
titles. Wiley has executed a license with MeansBusiness to excerpt Wiley
business management titles for its online database of information.
Domestic College segment revenues of $36.9 million increased 6% over the prior
year. College revenues in the second quarter were affected by early bookstore
ordering in the first quarter. It appears that some bookstores increased their
orders in July because they were concerned about losing sales to online accounts
if textbooks were not on the shelves when students visited the bookstore in
August. The direct contribution to profit increased 3% to $10.8 million. The
direct contribution margin declined slightly to 29.3% compared with 30.2% in the
prior year, as a result of higher sales and marketing related expenditures.
College continued to invest in technology to help teachers teach and students
learn. Every major college textbook now has a technology component designed to
facilitate teaching and learning. The College business has over 750 Web sites
serving the needs of professors and students. In the distance learning area,
College is working with Caliber Learning Network to provide online courses for
the higher education and corporate lifelong learning markets. Alliances are also
being formed to provide many of our top-selling textbooks in the eBook format to
link course content with interactive tutorial software and simulators. The
College segment reported a dramatic increase in the use of its Web products,
with the number of visitor sessions increasing 65%. During the quarter,
Versaware was selected to produce and host ebook versions of several key
textbooks. An agreement was signed with ADAM.com, a highly regarded Internet
store, to share revenues from sales driven to ADAM.com from Wiley's anatomy and
physiology site.
European segment revenues of $39.5 million for the quarter were adversely
affected by the stronger U.S. dollar. Excluding foreign currency translation
effects, European revenues advanced 13% over the prior year's second quarter.
Growth was driven by a strong publishing program, healthy backlist sales, growth
in online accounts and decreasing returns rates. The direct contribution to
profit of $12.7 million increased 28% over the prior year. The direct
contribution margin increased to 32% in the current period compared with 25.8%
in the prior year, as a result of expense containment measures.
The other segment revenues advanced 5% for the quarter led by strong market
share gains in Asia partially offset by industry-wide sluggish sales at a major
Canadian account. The weaker Australian dollar adversely affected revenue
growth.
RESULTS OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 2000
Revenues for the first six months were adversely affected by a stronger U.S.
dollar and advanced 7% to $308.0 million compared with $287.3 million in the
prior year period. Excluding foreign currency translation effects, revenue for
the first six months increased 10%. Operating income increased 18% to $56.2
million, compared with $47.5 million in the prior year. Net income advanced 22%
to $33.4 million, and income per diluted share increased 26% to $.53 compared
with $.42 in the prior year.
Cost of sales as a percentage of revenues decreased to 31.5% compared with 33.7%
in the prioryear. The improvement was attributable to lower relative composition
costs as a result of technology-driven productivity initiatives; more efficient
print runs; and lower inventory obsolescence reserves. Operating expenses as a
percentage of revenues were 47.5%, compared with 47.1% in the prior year's first
six months. Operating expenses increased 8% over the prior year. The operating
margin improved to 18.3% for the first six months, compared with 16.5% for the
prior year. The effective tax rate was 36.5% for the first six months, compared
with 37.5% in the prior year, as a result of higher foreign sourced income which
is taxed at lower rates.
SEGMENT RESULTS
Domestic STM revenues of $74.4 million increased 5% over the prior year led by
stronger renewal rates in the journal programs. The direct contribution to
profit increased 14% to $34.5 million. The direct contribution margin improved
to 46.4% compared with 42.5% in the prior year, reflecting lower composition
costs.
Domestic Professional/Trade segment revenues of $79.1 million for the first six
months advanced 14% over the comparable prior year period. The improvement was
due to strong frontlist sales in the business and computer book publishing
programs, and increased volume through online accounts. The direct contribution
to profit advanced 11% to $14.8 million. The direct contribution margin
decreased slightly from 19.2% in the prior year to 18.7%, as a result of
increased spending related to new technologies.
Domestic College segment revenues of $77 million increased 10% over the prior
year, primarily related to a strong frontlist. The direct contribution to profit
increased 13% to $26.8 million, and the direct contribution margin improved to
34.8% compared with 33.9% in the prior year.
European segment revenues of $75.7 million for the first six months were
adversely affected by the stronger U.S. dollar. Excluding foreign currency
translation effects, European revenues advanced 11% over the prior year, led by
strong book sales and higher journal revenues. The direct contribution to profit
of $24.5 million increased 18% over the prior year. The direct contribution
margin was 32.3% compared with 28.1% in the prior year, as a result of expense
containment measures.
The other segment revenues advanced 10% for the first six months mainly due to
market share gains in Asia.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and
Hedging Activities", as amended by SFAS No. 138 which specifies the accounting
and disclosure requirements for such instruments, and is effective for the
Company's fiscal year beginning on May 1, 2001. It is anticipated that the
adoption of this new accounting standard will not have a material effect on the
consolidated financial statements of the Company.
The Financial Accounting Standard Board's Emerging Issues Task Force ("EITF")
has reached a conclusion on EITF issue 00-10, "Accounting for Shipping and
Handling Fees and Costs" which specifies how these items are to be classified
and disclosed in financial statements and will become effective in the Company's
fourth quarter of this fiscal year. The adoption of this EITF will require the
Company to reclassify certain amounts as revenues which are currently recorded
in expenses, as well as restatement of prior period comparable financial
statements. It is anticipated that this will not have a material effect on the
consolidated financial statements of the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
The Company is exposed to market risk primarily related to interest rates and
foreign exchange. It is the Company's policy to monitor these exposures and to
use derivative financial instruments from time to time to reduce fluctuation in
earnings and cash flow when it is deemed appropriate to do so. The Company does
not use derivative financial instruments for trading or speculative purposes.
Interest Rates
The Company had a $95 million variable rate long-term loan and $48.4 million of
variable rate short-term debt outstanding at October 31, 2000, which
approximated fair value. The weighted average interest rate as of October 31,
2000 was approximately 6.8%. The Company did not use any derivative financial
instruments to manage this exposure.
Foreign Exchange Rates
The Company is exposed to foreign currency exchange movements primarily in
European, Asian, Canadian and Australian currencies. Consequently, the Company,
from time to time, enters into foreign exchange forward contracts as a hedge
against its overseas subsidiaries' foreign currency asset, liability,
commitment, and anticipated transaction exposures, including intercompany
purchases. At October 31, 2000, the Company had open foreign exchange forward
contracts expiring through January 2003 as follows:
Average
Currency Purchased U.S. $Value Contract Rate
------------------- ----------- -------------
Euro $ 5.9 million .91
Pound Sterling $20.3 million 1.49
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were voted upon at the annual meeting of shareholders of
the Company on September 21, 2000.
Election of Directors
- ---------------------
Ten directors as indicated in the Proxy Statement were elected to the Board,
three of whom were elected by the holders of Class A Common Stock, and seven by
the holders of Class B Common Stock.
Ratification of Appointment of Arthur Andersen LLP, as Independent Public
- --------------------------------------------------------------------------
Accountants for the Year
- ------------------------
Ending April 30, 2001
- ---------------------
The appointment was ratified as follows:
Votes For 64,898,813
Votes Against 15,294
Abstentions 14,199
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended October
31, 2000
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995
- ------------------------------------------------
This report contains certain forward-looking statements concerning the Company's
operations, performance and financial condition. Reliance should not be placed
on forward-looking statements, as actual results may differ materially from
those in any forward-looking statements. Any such forward-looking statements are
based upon a number of assumptions and estimates that are inherently subject to
uncertainties and contingencies, many of which are beyond the control of the
Company, and are subject to change based on many important factors. Such factors
include, but are not limited to: (i) the pace, acceptance, and level of
investment in emerging new electronic technologies and products; (ii) subscriber
renewal rates for the Company's journals; (iii) the consolidation of the retail
book trade market; (iv) the seasonal nature of the Company's educational
business and the impact of the used book market; (v) worldwide economic and
political conditions; and (vi) other factors detailed from time to time in the
Company's filings with the Securities and Exchange Commission. The Company
undertakes no obligation to update or revise any such forward-looking statements
to reflect subsequent events or circumstances.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JOHN WILEY & SONS, INC.
Registrant
By /s/William J. Pesce
--------------
William J. Pesce
President and
Chief Executive Officer
By /s/Robert D. Wilder
--------------
Robert D. Wilder
Executive Vice President and
Chief Financial Officer
Dated: December --, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JOHN WILEY & SONS, INC.
Registrant
By
-----------------------
William J. Pesce
President and
Chief Executive Officer
By
-----------------------
Robert D. Wilder
Executive Vice President and
Chief Financial Officer
Dated: December --, 2000
Exhibit 27
FINANCIAL DATA SCHEDULE
(Dollars in Thousands Except Per Share Data)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND THE CONSOLIDATED STATEMENT OF
INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
PERIOD TYPE 6 MONTHS
FISCAL-YEAR-END APR-30-2001
PERIOD-START MAY-01-2000
PERIOD-END OCT-31-2000
CASH $ 10,565
SECURITIES 0
RECEIVABLES 155,561
ALLOWANCES 60,608
INVENTORY 49,952
CURRENT-ASSETS 177,415
PP&E 109,301
DEPRECIATION 71,737
TOTAL-ASSETS 568,823
CURRENT-LIABILITIES 255,270
BONDS 65,000
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 83,190
OTHERS-SE 117,794
TOTAL-LIABILITY-AND-EQUITY 568,823
SALES 0
TOTAL-REVENUES 308,027
CGS 96,934
TOTAL-COSTS 251,779
OTHER-EXPENSES 0
LOSS-PROVISION 0
INTEREST-EXPENSE 4,502
INCOME-PRETAX 52,628
INCOME-TAX 19,209
INCOME-CONTINUING 33,419
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 33,419
EPS-PRIMARY 0.55
EPS-DILUTED 0.53