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 January 31, 2001 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 January
31, 2001 were:
Class A, par value $1.00 - 49,299,643
Class B, par value $1.00 - 11,691,164
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 January 31, 2001 and 2000, and April 30, 2000..............3
Condensed Consolidated Statements of Income - Unaudited
for the Three and Nine Months ended January 31, 2001 and 2000....4
Condensed Consolidated Statements of Cash Flows - Unaudited
for the Nine Months ended January 31, 2001 and 2000..............5
Notes to Unaudited Condensed Consolidated Financial Statements....6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................10-14
Item 3. Quantitative and Qualitative Disclosures About Market Risk.........14
PART II - OTHER INFORMATION
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)
January 31, April 30,
-----------------------------------------
Assets 2001 2000 2000
------------------- ------------------ ----------------
Current Assets
Cash and cash equivalents $ 80,151 82,070 $ 42,299
Accounts receivable 94,145 87,299 68,080
Inventories 49,691 39,884 46,109
Deferred income tax benefits 14,642 3,857 10,999
Prepaid expenses 9,023 6,108 9,624
------------------ ------------------ ------------------
Total Current Assets 247,652 219,218 177,111
Product Development Assets 41,219 40,310 39,809
Property and Equipment 44,329 35,452 38,226
Intangible Assets 288,249 305,965 297,085
Deferred Income Tax Benefits 3,388 10,144 3,395
Other Assets 14,040 13,374 13,711
-------------------- ------------------ ------------------
Total Assets $ 638,877 624,463 $ 569,337
==================== ================== =====================
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable and current portion of long-term debt $ 30,344 30,000 $ 30,000
Accounts and royalties payable 75,634 72,910 45,816
Deferred subscription revenues 134,618 139,343 112,337
Accrued income taxes 13,796 9,921 6,102
Other accrued liabilities 50,838 54,766 59,795
-------------------- ------------------ ------------------
Total Current Liabilities 305,230 306,940 254,050
Long-Term Debt 65,000 95,000 95,000
Other Long-Term Liabilities 34,334 32,372 32,109
Deferred Income Taxes 17,264 16,476 15,440
Shareholders' Equity 217,049 173,675 172,738
-------------------- ------------------ ------------------
Total Liabilities & Shareholders' Equity $ 638,877 624,463 $ 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 Nine Months
Ended January 31, Ended January 31,
---------------------------------------- ---------------------------------
2001 2000 2001 2000
--------------------- ---------------- ---------------- ---------------
Revenues $ 160,960 158,394 $ 468,987 445,712
Costs and Expenses
Cost of sales 52,442 52,861 149,376 149,675
Operating and administrative expenses 75,143 72,676 221,558 207,995
Amortization of intangibles 4,679 4,371 13,109 12,073
--------------------- ---------------- ---------------- ---------------
Total Costs and Expenses 132,264 129,908 384,043 369,743
--------------------- ---------------- ---------------- ---------------
Operating Income 28,696 28,486 84,944 75,969
Interest Income and Other 538 478 1,420 1,035
Interest Expense (2,020) (2,192) (6,522) (6,338)
--------------------- ---------------- ---------------- ---------------
Interest Income (Expense) - Net (1,482) (1,714) (5,102) (5,303)
--------------------- ---------------- ---------------- ---------------
Income Before Taxes 27,214 26,772 79,842 70,666
Provision For Income Taxes 9,933 10,040 29,142 26,500
--------------------- ---------------- -------------- ---------------
Net Income $ 17,281 16,732 $ 50,700 44,166
===================== ================ ================ ===============
Income Per Share
Diluted $ 0.27 0.26 $ 0.80 0.68
Basic $ 0.28 0.27 $ 0.84 0.72
Cash Dividends Per Share
Class A Common $ 0.04 0.04 $ 0.12 0.11
Class B Common $ 0.04 0.03 $ 0.12 0.10
Average Shares
Diluted 63,414 64,242 63,378 64,951
Basic 60,644 61,201 60,484 61,745
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 Nine Months
Ended January 31,
------------------------------------------
2001 2000
-------------------- -------------------
Operating Activities
Net income $ 50,700 44,166
Noncash items
Amortization of intangibles 13,109 12,073
Amortization of composition costs 16,911 17,515
Depreciation of property and equipment 10,019 8,377
Other noncash items 20,805 39,312
Net change in operating assets and liabilities 12,079 22,790
-------------------- -------------------
Cash Provided by for Operating Activities 123,623 144,233
-------------------- -------------------
Investing Activities
Additions to product development assets (25,733) (23,592)
Additions to property and equipment (16,648) (8,965)
Proceeds from sale of publishing assets 2,500 -
Acquisition of publishing assets (7,052) (145,092)
-------------------- -------------------
Cash Used for Investing Activities (46,933) (177,649)
-------------------- -------------------
Financing Activities
Repayment of long-term debt (30,000) -
Net borrowings of short-term debt 351 -
Cash dividends (7,294) (6,477)
Purchase of treasury shares (2,694) (27,093)
Proceeds from exercise of stock options 1,490 1,147
-------------------- -------------------
Cash Used for Financing Activities (38,147) (32,423)
-------------------- -------------------
Effect of Exchange Rate Changes on Cash (691) (1,061)
-------------------- -------------------
Cash and Cash Equivalents
Increase for Period 37,852 (66,900)
Balance at Beginning of Period 42,299 148,970
-------------------- -------------------
Balance at End of Period $ 80,151 82,070
==================== ===================
Cash Paid During the Period for
Interest $ 7,169 6,615
Income taxes $ 15,369 12,998
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 January 31, 2001 and
2000, and April 30, 2000, and results of operations and cash flows for
the periods ended January 31, 2001 and 2000. The results for the three
and nine months ended January 31, 2001 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 Nine Months
Ended January 31, Ended January 31,
---------------------------------- ---------------------------------
2001 2000 2001 2000
--------------- --------------- -------------- ---------------
(thousands)
Weighted average shares outstanding
60,983 61,726 60,821 62,268
Less: Unearned deferred compensation
shares (339) (525) (337) (523)
--------------- --------------- -------------- ---------------
Shares used for basic income per share
60,644 61,201 60,484 61,745
Dilutive effect of stock options and
other stock awards 2,770 3,041 2,894 3,206
---------------
--------------- -------------- ---------------
Shares used for diluted income per share
63,414 64,242 63,378 64,951
--------------- --------------- -------------- ---------------
3. Inventories were as follows:
January 31, April 30,
--------------------------------
2001 2000 2000
-------------- -------------- -------------
(thousands)
Finished goods $45,839 33,107 $40,370
Work-in-process 2,492 4,055 3,537
Paper, cloth and other 4,999 4,836 5,241
-------------- -------------- -------------
53,330 41,998 49,148
LIFO reserve (3,639) (2,114) (3,039)
-------------- -------------- -------------
Total inventories $49,691 39,884 $46,109
-------------- -------------- -------------
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Comprehensive income was as follows:
Three Months Nine Months
Ended January 31, Ended January 31,
--------------------------------- --------------------------------
2001 2000 2001 2000
-------------- ------------- ------------- --------------
(thousands)
Net Income $17,281 16,732 $50,700 44,166
Other Comprehensive Income (Loss) - Foreign
Currency Translation Adjustments 1,711 (841) 825 (854)
-------------- ------------- ------------- --------------
Comprehensive Income $18,992 15,891 $51,525 43,312
-------------- ------------- ------------- --------------
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 January 31,
------------------------------------------------------------------------------------
2001 2000
---------------------------------------- ---------------------------------------
(thousands)
Inter- Inter-
External segment External segment
Revenues Customers Sales Total Customers Sales Total
-------------- ------------ ------------ ------------- ------------ ------------
Domestic Segments:
Scientific, Technical, and Medical $33,925 2,311 36,236 $34,453 164 34,617
Professional/Trade 39,441 3,707 43,148 35,303 6,334 41,637
Higher Education 32,789 5,384 38,173 32,857 5,371 38,228
European Segment 34,534 3,900 38,434 35,251 3,520 38,771
Other Segments 20,271 242 20,513 20,530 182 20,712
Eliminations - (15,544) (15,544) - (15,571) (15,571)
-------------- ------------ ------------ ------------- ------------ ------------
Total Revenues $160,960 - 160,960 $158,394 - 158,394
-------------- ------------ ------------ ------------- ------------ ------------
Direct Contribution to Profit
Domestic Segments:
Scientific, Technical, and Medical $15,225 $13,779
Professional/Trade 10,181 8,855
Higher Education 14,104 13,545
European Segment 10,923 12,178
Other Segments 6,149 6,203
------------ ------------
Total Direct Contribution to Profit 56,582 54,560
Shared Services and Admin. Costs (27,886) (26,074)
------------ ------------
Operating Income 28,696 28,486
Interest Expense - Net (1,482) (1,714)
------------ ------------
Income Before Taxes $27,214 $26,772
------------ ------------
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
Nine Months Ended January 31,
--------------------------------------------------------------------------------------
2001 2000
----------------------------------------- ----------------------------------------
(thousands)
Inter- Inter-
External segment External segment
Revenues Customers Sales Total Customers Sales Total
-------------- ------------ ------------- -------------- ------------ ------------
Domestic Segments:
Scientific, Technical, and Medical $104,901 5,775 110,676 $102,415 3,149 105,564
Professional/Trade 110,654 11,630 122,284 98,027 12,951 110,978
Higher Education 97,030 18,118 115,148 91,474 16,801 108,275
European Segment 105,021 9,108 114,129 104,781 7,915 112,696
Other Segments 51,381 897 52,278 49,015 460 49,475
Eliminations - (45,528) (45,528) - (41,276) (41,276)
-------------- ------------ ------------- -------------- ------------ ------------
Total Revenues $468,987 - 468,987 $445,712 - 445,712
-------------- ------------ ------------- -------------- ------------ ------------
Direct Contribution to Profit
Domestic Segments:
Scientific, Technical, and Medical $49,735 $43,940
Professional/Trade 24,996 22,154
Higher Education 40,854 37,279
European Segment 35,403 32,922
Other Segments 12,854 11,759
------------- ------------
Total Direct Contribution to Profit 163,842 148,054
Shared Services and Admin. Costs (78,898) (72,085)
------------- ------------
Operating Income 84,944 75,969
Interest Expense - Net (5,102) (5,303)
------------- ------------
Income Before Taxes $79,842 $70,666
------------- ------------
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
Operating activities provided $123.6 million of cash, or $20.6 million less
than the prior year's comparable period. The decrease was primarily due to
higher payments of accounts payable and accrued liabilities, higher
inventory levels attributable to tighter inventory management by key
accounts, and the delayed receipt of certain journal subscriptions which
were received in February 2001.
Investing activities used $46.9 million during the current year-to-date, or
$130.7 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. The increase in
additions to property and equipment relates to the planned relocation of
the Company's headquarters to Hoboken, New Jersey.
Current year financing activities primarily reflect the purchase of
treasury shares, dividend payments and the $30 million scheduled repayment
of long-term debt.
Although the statement of financial condition indicates a negative working
capital of $57.6 million, current liabilities include $134.6 million of
deferred income related to journal subscriptions for which the cash has
been received and which will be recognized in income as the journals are
delivered to customers. In addition, the Company believes its cash balances
together with existing credit facilities are sufficient to meet its
obligations.
RESULTS OF OPERATIONS
THIRD QUARTER ENDED JANUARY 31, 2001
Revenues for the third quarter were adversely affected by a stronger U.S.
dollar and advanced 2% to $161 million compared with $158.4 million in the
prior year period. Excluding foreign currency translation effects, revenues
increased 4% for the quarter over the prior year. Operating income for the
current quarter increased 1% to $28.7 million, compared with $28.5 million
in the prior year. Net income advanced 3% to $17.3 million, and income per
diluted share increased 4% to $.27 compared with $.26 in the prior year.
Third quarter results were tempered somewhat by industry-wide sluggish
sales, particularly in the Higher Education and Professional/Trade
segments. Scientific, Technical and Medical (STM) achieved solid revenue
gains for the quarter.
Cost of sales as a percentage of revenues decreased to 32.6% compared with
33.4% in the prior year. Operating expenses as a percentage of revenues
were 46.7% in the current quarter, compared with 45.9% in the prior year's
third quarter. The increase was primarily due to higher technology related
expenses. Operating expenses increased 3% over the prior year, reflecting
favorable foreign currency translation effects. The operating margin was
approximately 18% in the current quarter, on par with the prior year's
third quarter.
The effective tax rate was 36.5% 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 $36.2 million increased 5% over the prior year,
with journals, books and online services contributing to the performance.
The direct contribution to profit increased 10% to $15.2 million. The
direct contribution margin improved to 42.0% in the current quarter
compared with 39.8% 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. Several enhanced access licenses were signed during the
quarter, including multi-year agreements with the NorthEast Research
Library Consortium, the Danish Consortium, and Kyoto University. Usage of
Wiley InterScience continued to increase during the quarter, as reflected
in the 9% growth in the number of registered users and a 12% increase in
the average daily user sessions compared with the previous quarter.
A number of Wiley InterScience system enhancements were rolled out during
the quarter. ArticleSelect provides individual article access to enhanced
access license customers. BoldIdeas, an online collection of 40 business
and environmental management periodicals, was launched in January. This new
initiative is an excellent example of the Company's ability to leverage
Wiley InterScience beyond the STM market.
In January, the Company published some highly regarded journals as a result
of new agreements with scholarly and professional societies, including The
Annals of Neurology, published with the American Neurological Society, and
Arthritis and Rheumatism and Arthritis Care and Research, published with
the American College of Rheumatology. Also, an agreement was reached with
the Movement Disorder Society to publish its official journal.
Early in the fourth quarter, the Company signed a multi-year agreement with
IEEE, the premier society for electrical, electronics and computer
engineers with more than 360,000 members in approximately 150 countries.
The Company and IEEE will publish a co-branded series of books and market,
sell and distribute IEEE Press' extensive backlist.
Domestic Professional/Trade segment revenues of $43.1 million for the third
quarter advanced 4% over the comparable prior year period, reflecting the
effect of sales softness at some key retail accounts, as well as tighter
inventory management practices adopted by major wholesalers. Sales through
online accounts continued to grow around the world. The direct contribution
to profit advanced 15% to $10.2 million. The direct contribution margin
improved from 21.3% in the prior year to 23.6%.
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. As
previously mentioned, BoldIdeas, an online collection of 40 businesses and
environmental management periodicals was launched during the quarter on the
Wiley InterScience platform.
During the third quarter, The Power of Gold, The Ernst & Young Tax Guide
2001, and J.K. Lasser's Income Tax Guide 2001 appeared on best seller lists
in the The Wall Street Journal, New York Times, and Business Week. The 2000
editions of the J.K. Lasser and Ernst & Young tax guides were listed as
bestsellers for the year by USA Today.
The Association of American Publishers cited the WAIMH Handbook of Infant
Mental Health as the year's best social science reference book. Secrets and
Lies was selected as a finalist for one of Software Development Magazine's
Jolt Product Excellence and Productivity Awards in the books and
computer-based training category. During the quarter, the Company published
the first title in our partnership with CNBC, CNBC 24/7 Trading by Barbara
Rockefeller. CNBC promoted the title on-air and on CNBC.com.
Domestic Higher Education segment revenues of $38.2 million were
essentially flat for the quarter primarily due to accelerated ordering by
college bookstores earlier in the year. The direct contribution to profit
increased 4% to $14.1 million. The direct contribution margin increased to
36.9% compared with 35.4% in the prior year.
The Higher Education segment 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
Higher Education segment business has Web sites serving the needs of
professors and students. In the distance learning area, The Higher
Education segment is working with Caliber Learning Network to provide
online courses for the higher education and corporate lifelong learning
markets. Alliances have been formed to provide many of our top-selling
textbooks in the eBook format to link course content with interactive
tutorial software and simulators. During the quarter, the Company published
several e-books for the Higher Education market, including the Interactive
Learning Editions of Boyce & DiPrima: Elementary Differential Equations,
and Callister: Fundamentals of Materials Science and Engineering. Based on
customer feedback, the Higher Education Web site was relaunched with
greater e-commerce capabilities. The Company is leveraging the Web in its
sales and marketing efforts to reach students and faculty at universities
worldwide. Two notable examples include an interactive electronic brochure
that was created to drive sales of a leading accounting textbook and a
major e-mail campaign promoting upper-level titles to faculty.
European segment revenues of $38.4 million for the quarter were adversely
affected by the stronger U.S. dollar. Excluding foreign currency
translation effects, European revenues advanced 5% over the prior year's
third quarter. Growth was driven by a strong publishing program, and growth
in online accounts. The direct contribution to profit of $10.9 million
decreased 10% compared with the prior year, reflecting the combined effect
of product mix related to publication schedules, increased investments in
new journals and increased page volume. The direct contribution margin
decreased to 28.4% in the current period compared with 31.4% in the prior
year.
Excluding adverse foreign currency translation effects, the other segment
revenues advanced 8% for the quarter led by strong market share gains in
Asia, partially offset by industry-wide sluggish sales at a major Canadian
account.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JANUARY 31, 2001
Revenues for the first nine months were adversely affected by a stronger
U.S. dollar and advanced 5% to $469.0 million compared with $445.7 million
in the prior year period. Excluding foreign currency translation effects,
revenue for the first nine months increased 8%. Operating income increased
12% to $84.9 million, compared with $76.0 million in the prior year. Net
income advanced 15% to $50.7 million, and income per diluted share
increased 18% to $.80 compared with $.68 in the prior year.
Results for the nine months reflected healthy revenue and earnings
increases in all of the Company's core businesses.
Cost of sales as a percentage of revenues decreased to 31.9% compared with
33.6% in the prior year. The improvement was attributable to lower relative
composition costs as a result of technology-driven productivity
initiatives, and lower inventory obsolescence reserves. Operating expenses
as a percentage of revenues were 47.2%, compared with 46.7% in the prior
year's first nine months. Operating expenses increased 7% over the prior
year. The operating margin improved to 18.1% for the first nine months,
compared with 17.0% for the prior year. The effective tax rate was 36.5%
for the first nine 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 $110.7 million increased 5% over the prior year
led by stronger renewal rates in the journal programs. The direct
contribution to profit increased 13% to $49.7 million. The direct
contribution margin improved to 44.9% compared with 41.6% in the prior
year, reflecting lower composition costs.
Domestic Professional/Trade segment revenues of $122.3 million for the
first nine months advanced 10% over the comparable prior year period,
significantly better than industry results. 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 13% to $25.0 million. The direct
contribution margin increased slightly from 20.0% in the prior year to
20.4%.
Domestic Higher Education segment revenues of $115.1 million increased 6%
over the prior year, which compares favorably with overall market growth.
According to the Association of American Publishers (AAP), the Higher
Education market reported a sales increase of only 3% in calendar year
2000. The direct contribution to profit increased 10% to $40.9 million, and
the direct contribution margin improved to 35.5% compared with 34.4% in the
prior year.
European segment revenues of $114.1 million for the first nine months were
adversely affected by the stronger U.S. dollar. Excluding foreign currency
translation effects, European revenues advanced 9% over the prior year, led
by strong book sales and higher journal revenues. The direct contribution
to profit of $35.4 million increased 8% over the prior year. The direct
contribution margin was 31.0% compared with 29.2% in the prior year.
The other segment revenues advanced 12% for the first nine months excluding
foreign currency translation effects. The improvement was mainly due to
market share gains in Asia, partially offset by industry-wide sluggish
sales at a major Canadian account.
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 outstanding at
January 31, 2001, which approximated fair value. The weighted average
interest rate as of January 31, 2001 was approximately 6.7%. 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 January 31, 2001, the Company had open foreign
exchange forward contracts expiring through January 2003 as follows:
Average
Currency Purchased U.S. $Value Contract Rate
------------------ --------------- -------------
Euro $ 5.2 million $ .91
Pound Sterling $ 16.3 million $ 1.49
PART II - OTHER INFORMATION
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 January
31, 2001
"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: March 13, 2001
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 9 MONTHS
FISCAL-YEAR-END APR-30-2001
PERIOD-START MAY-01-2000
PERIOD-END JAN-31-2001
CASH $ 80,151
SECURITIES 0
RECEIVABLES 158,425
ALLOWANCES 64,280
INVENTORY 49,691
CURRENT-ASSETS 247,652
PP&E 120,061
DEPRECIATION 75,732
TOTAL-ASSETS 638,877
CURRENT-LIABILITIES 305,230
BONDS 30,344
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 83,190
OTHERS-SE 133,859
TOTAL-LIABILITY-AND-EQUITY 638,877
SALES 0
TOTAL-REVENUES 468,987
CGS 149,376
TOTAL-COSTS 384,043
OTHER-EXPENSES 0
LOSS-PROVISION 0
INTEREST-EXPENSE 6,522
INCOME-PRETAX 79,842
INCOME-TAX 29,142
INCOME-CONTINUING 50,700
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 50,700
EPS-PRIMARY 0.84
EPS-DILUTED 0.80