FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: April 30, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the transition period from to
Commission file number 1-11507
JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5593032
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State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization
111 River Street, Hoboken, NJ 07030
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Address of principal executive offices Zip Code
Registrant's telephone number including area code (201) 748-6000
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Securities registered pursuant to Section 12(b) Name of each exchange
of the Act: Title of each class on which registered
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Class A Common Stock, par value $1.00 per share New York Stock Exchange
Class B Common Stock, par value $1.00 per share New York Stock Exchange
Securities registered pursuant to Section 12(g)
of the Act:
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None
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_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K_____
The number of shares outstanding of the Registrant's Class A and Class B Common
Stock, par value $1.00 per share as of May 31, 2005, was 48,358,022, and
10,722,663 respectively, and the aggregate market value of such shares of Common
Stock held by non-affiliates of the Registrant as of such date was
$1,511,879,843 based upon the closing market price of the Class A and Class B
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive proxy statement to be filed with the Commission on
or about August 5, 2005, for the Annual Meeting of Shareholders to be held on
September 15, 2005 (the "2005 Proxy Statement"), is, to the extent noted below,
incorporated by reference in Part III.
JOHN WILEY AND SONS, INC. AND SUBSIDIARIES
FORM 10-K
FOR THE FISCAL YEAR ENDED APRIL 30, 2005
INDEX
PAGE
PART I
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ITEM 1. Business 3
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ITEM 2. Properties 4
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ITEM 3. Legal Proceedings 5
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ITEM 4. Submission of Matters to a Vote of Security Holders 5
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PART II
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ITEM 5. Market for the Company's Common Equity and Related Stockholder Matters and
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Issuer Purchases of Equity Securities 5
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ITEM 6. Selected Financial Data 5
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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 5
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ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk 5
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ITEM 8. Financial Statements and Supplemental Data 5
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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 56
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ITEM 9A. Controls and Procedures 56
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ITEM 9B. Other Information 56
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PART III
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ITEM 10. Directors and Executive Officers of the Registrant 57-58
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ITEM 11. Executive Compensation 59
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ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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ITEM 13. Certain Relationships and Related Transactions 59
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ITEM 14. Principal Accounting Fees and Services 59
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PART IV
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ITEM 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 59-61
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Signatures 62-63
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PART I
Item 1. Business
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The Company, founded in 1807, was incorporated in the state of New
York on January 15, 1904. (As used herein the term "Company" means
John Wiley & Sons, Inc., and its subsidiaries and affiliated
companies, unless the context indicates otherwise.)
The Company is a global publisher of print and electronic products,
providing must-have content and solutions to customers worldwide. Core
businesses produce professional and consumer books and subscription
products; scientific, technical, and medical journals, encyclopedias,
books, and online products; and textbooks and educational materials,
including integrated online teaching and learning resources, for
undergraduate and graduate students, teachers and lifelong learners.
The Company takes full advantage of its content from all three core
businesses in developing and cross-marketing products to its diverse
customer base of professionals, consumers, researchers, students, and
educators. The use of technology enables the Company to make its
content more accessible to its customers around the world. The Company
maintains publishing, marketing, and distribution centers in the
United States, Canada, Europe, Asia, and Australia.
Further description of the Company's business is incorporated herein
by reference in the Management's Discussion and Analysis section of
this 10-K.
Employees
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As of April 30, 2005, the Company employed approximately 3,400 persons
on a full-time basis worldwide.
Financial Information About Industry Segments
---------------------------------------------
The note entitled "Segment Information" of the Notes to Consolidated
Financial Statements and the Management's Discussion and Analysis
section of this 10-K, both listed in the attached index, are
incorporated herein by reference.
Financial Information About Foreign and
Domestic Operations and Export Sales
---------------------------------------
The note entitled "Segment Information" of the Notes to Consolidated
Financial Statements and the Management's Discussion and Analysis
section of this 10-K, both listed in the attached index, are
incorporated herein by reference.
Item 2. Properties
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The Company occupies office, warehouse, and distribution facilities in
various parts of the world, as listed below (excluding those locations
with less than 10,000 square feet of floor area, none of which is
considered material property). All of the buildings and the equipment
owned or leased are believed to be in good condition and are generally
fully utilized.
Location Purpose Approx. Sq. Ft. Lease Expiration
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Leased
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Australia Office 65,000 2020
Warehouse 68,000 2009
Canada Office and Warehouse 87,000 2011
Office 20,000 2008
England Office 27,000 2012
Warehouse 126,000 2012
United States:
New Jersey Corporate Headquarters 383,000 2017
Offices
New York Editorial and Administrative 4,100 2010
Offices
New Jersey Distribution Center 188,000 2007
and Office
New Jersey Warehouses 303,000 2006
Indiana Editorial and Administrative 120,000 2009
Offices
California Office 38,000 2012
Singapore Office and Warehouse 68,000 2005
Owned
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Germany Office 57,000
England Office 50,000
Item 3. Legal Proceedings
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The Company is involved in routine litigation in the ordinary course
of its business. In the opinion of management, the ultimate resolution
of all pending litigation will not have a material effect upon the
financial condition or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to the Company's security holders during the
last quarter of the fiscal year ended April 30, 2005.
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder
Matters and Issuer Purchases of Equity Securities
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The Quarterly Share Prices, Dividends, and Related Stockholder Matters
listed in the index on page 6 are incorporated herein by reference.
Item 6. Selected Financial Data
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The Selected Financial Data listed in the index on page 6 is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Management's Discussion and Analysis of Financial Condition and
Results of Operations listed in the index on page 6 is incorporated
herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
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The information appearing under the caption "Market Risk" in
Management's Discussion and Analysis of Financial Condition and
Results of Operations listed in the index on page 6 is incorporated
herein by reference.
Item 8. Financial Statements and Supplemental Data
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The Financial Statements and Supplemental Data listed in the index on
page 6 is incorporated herein by reference.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and information appearing on the pages
indicated are filed as part of this report:
Page(s)
Management's Discussion and Analysis of Business, Financial Condition and Results of Operations......................... 7-26
Results by Quarter (Unaudited).......................................................................................... 26
Quarterly Share Prices, Dividends, and Related Stockholder Matters and Issuer Purchases of Equity Securities............ 27
Selected Financial Data................................................................................................. 28
Management's Report on Internal Control over Financial Reporting........................................................ 29
Reports and Consent of Independent Registered Public Accounting Firm.................................................... 30-32
Consolidated Statements of Financial Position as of April 30, 2005 and 2004............................................. 33
Consolidated Statements of Income for the years ended April 30, 2005, 2004, and 2003.................................... 34
Consolidated Statements of Cash Flows for the years ended April 30, 2005, 2004, and 2003................................ 35
Consolidated Statements of Shareholders' Equity for the years ended April 30, 2005, 2004, and 2003...................... 36
Notes to Consolidated Financial Statements.............................................................................. 37-54
Schedule II -- Valuation and Qualifying Accounts for the years ended April 30, 2005, 2004, and 2003..................... 55
Other schedules are omitted because of absence of conditions under which they
apply or because the information required is included in the Notes to
Consolidated Financial Statements.
Management's Discussion and Analysis of Business,
Financial Condition and Results of Operations
The Company is a global publisher of print and electronic products, providing
must-have content and solutions to customers worldwide. Core businesses produce
professional and consumer books and subscription products; scientific,
technical, and medical journals, encyclopedias, books, and online products; and
textbooks and educational materials, including integrated online teaching and
learning resources, for undergraduate and graduate students, teachers and
lifelong learners. The Company takes full advantage of its content from all
three core businesses in developing and cross-marketing products to its diverse
customer base of professionals, consumers, researchers, students, and educators.
The use of technology enables the Company to make its content more accessible to
its customers around the world. The Company maintains publishing, marketing, and
distribution centers in the United States, Canada, Europe, Asia, and Australia.
Professional/Trade
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The Company's Professional/Trade business acquires, develops and publishes books
and subscription products in all media, in the subject areas of business,
technology, architecture, hospitality and culinary, psychology, education,
travel, consumer reference, and general interest. Products are developed for
worldwide distribution through multiple channels, including major chains and
online booksellers, independent bookstores, libraries, colleges and
universities, warehouse clubs, corporations, direct marketing, and Web sites.
Global Professional/Trade publishing accounted for approximately 42% of total
Company revenue in fiscal year 2005.
Key revenue growth strategies of the Professional/Trade business include adding
value to its must-have content, developing its leading brands and franchises,
and executing strategic acquisitions. Revenue for the Company's worldwide
Professional/Trade business grew at a compound annual rate of approximately 16%
over the past five years.
Publishing alliances and franchise products are central to the Company's
strategy. The Company's ability to bring together Wiley's product development,
sales, marketing, distribution and technological capabilities with a partner's
content and brand name recognition has been a driving factor in its success.
Professional/Trade alliance partners include General Mills, MTV, American Media
Inc., the Culinary Institute of America, the American Medical Association, the
American Institute of Architects, Mergent, Inc., the National Restaurant
Association Educational Foundation, the Leader to Leader Institute (formerly The
Peter F. Drucker Foundation) and Morningstar, among many others.
The Company's Professional/Trade customers are professionals, consumers, and
students worldwide. Highly respected brands and extensive backlists are
especially well suited for online bookstores such as Amazon.com. With their
unlimited "virtual" shelf space, online retailers merchandise the Company's
products for longer periods of time than brick-and-mortar bookstores.
There is an active and growing Professional/Trade custom publishing program,
particularly through the For Dummies brand, in which books are created that tap
the brand's highly successful format and approach to meet the specific
information needs of a wide range of companies and organizations.
Strategic Acquisitions: The Company's business plan includes growth through
organic growth as well as acquisitions. Key strategic Professional/Trade
acquisitions over the past five years include: (i) In fiscal year 2003, a list
of approximately 250 titles from Prentice Hall Direct, a unit of Pearson
Education. These titles include a collection of practical, "hands-on" teaching
resources, which complement the Company's renowned Jossey-Bass education series
and its market-leading Janice Van Cleave series. (ii) In fiscal year 2002, the
Company acquired Hungry Minds Inc., a leading publisher with an outstanding
collection of respected brands, with such product lines as the For Dummies
series, the Frommer's and Unofficial Guide travel series, the Bible and Visual
technology series, the CliffsNotes study guides, Webster's New World
dictionaries, and Betty Crocker and Weight Watchers cookbooks. (iii) In fiscal
year 2002 the Company acquired Frank J. Fabozzi Publishing and Australian
publisher, Wrightbooks Pty Ltd., both publishers of high quality finance books
for the professional market. (iv) In fiscal year 2000, the Company acquired J.K.
Lasser Tax, a publisher of tax and other financial help guides and Jossey-Bass,
a publisher of titles on business, psychology, religion, education, and health
management.
Scientific, Technical, and Medical (STM)
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The Company is a leading publisher for the scientific, technical, and medical
communities worldwide including, scientists, researchers, clinicians, students
and professors, and academic and corporate librarians. STM products include
journals, major reference works, reference books and protocols, in print and
online. STM publishing areas include the life and physical sciences, select
medical areas, chemistry, statistics and mathematics, electrical and electronics
engineering, and telecommunications. The Company's STM programs develop products
for global distribution through multiple channels, including library consortia,
subscription agents, bookstores, online booksellers, and direct sales to
professional society members and other customers. Global STM represented 38% of
total Company revenue in fiscal year 2005. STM's revenue grew at a compound
annual rate of 8% over the past five years.
The Company's web-based service, Wiley InterScience
(www.interscience.wiley.com), established commercially in 1999, offers online
access to more than 1,000 journals, major reference works, online books, Current
Protocols laboratory manuals, databases, as well as a suite of professional and
management resources. Wiley InterScience is based on a successful business model
that features Enhanced Access Licenses. One to three years in duration, these
licenses provide academic and corporate customers with multi-site online access.
Access is also provided through Pay-Per-View, which serves customers who wish to
purchase individual articles. With over 12 million users in 87 countries around
the globe, Wiley InterScience is one of the world's leading providers of
scientific, technical, and medical content.
Wiley InterScience takes advantage of the ability conferred by technology to
update content frequently, and it adds new features and resources on an ongoing
basis. Two examples are EarlyView, through which customers can access individual
articles well in advance of print publication, and MobileEditions, which enables
them to view tables of content and abstracts on wireless handheld devices and
Web-enabled phones. The Company also sells electronic back-files of its legacy
journal content.
Publishing alliances play a major role in the Company's STM success. The Company
publishes the journals of dozens of societies, including the American Cancer
Society's flagship publication, the journal Cancer. These alliances bring mutual
benefit, with the societies gaining Wiley's publishing and marketing expertise,
while Wiley receives peer-reviewed content and enhanced visibility among society
memberships.
Strategic Acquisitions: In fiscal year 2002, the Company acquired A&M Publishing
Ltd., a U.K.-based publisher for the pharmaceutical and health-care sectors, and
GIT Verlag GmbH, a German publisher for the chemical, pharmaceutical,
biotechnology, security, and engineering industries. These businesses derive
revenue principally from advertising.
Higher Education
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The Company publishes educational materials for the higher education market in
all media, focusing on courses in the sciences, geography, mathematics,
engineering, accounting, business, economics, computer science, psychology,
education, and modern languages. In Australia, the Company is also a leading
publisher for the secondary school market.
Higher Education customers include undergraduate, graduate, and advanced
placement students, educators, and lifelong learners worldwide. Product is
delivered principally through college bookstores, online booksellers, and Web
sites. Globally, Higher Educational publishing generated 20% of total Company
revenue in fiscal year 2005. Through organic growth and acquired products, both
print and electronic, the Company's worldwide Higher Education publishing
revenue grew at a compound annual rate of 4% over the past five years.
Higher Education's mission is to help teachers teach and students learn. Our
strategy is to provide value-added quality materials and services through
textbooks, supplemental study guides, course management tools and more, in print
and electronic/Web-based formats. The Higher Education Web site offers online
learning materials on more than 3,200 sub-sites to support and supplement
textbooks.
Higher Education delivers high-quality online learning materials that offer more
opportunities for customization and accommodate diverse learning styles. The
prime example is eGrade Plus, an activity-based interface that provides an
integrated suite of teaching and learning resources on one Web site. By offering
an electronic version of a text along with supplementary materials, content
provided by the instructor, and administrative tools, eGrade Plus supports the
full range of course-oriented activities online--planning, presentations, study,
homework, and testing.
In fiscal year 2002 the Company introduced the Wiley Faculty Network, a
peer-to-peer network of faculty/professors supporting the use of online course
material tools and discipline-specific software in the classroom. The Company
believes this unique, reliable, and accessible service gives the Company a
competitive advantage.
Higher Education is also leveraging the Web in its sales and marketing efforts.
The Web increases the Company's ability to have direct contact with students and
faculty at universities worldwide through the use of interactive electronic
brochures and e-mail campaigns.
Strategic Acquisitions: In fiscal year 2003 the Company acquired the assets of
Maris Technologies to support the Company's drive to produce Web-enabled
products. This acquisition included the market-leading software Edugen, which
provides the underlying technology for eGrade Plus. Located in Moscow, the
development facility is staffed by approximately 45 programmers and designers
who had been employed in the space program of the former Soviet Union. In fiscal
year 2002 the Company acquired publishing assets consisting of 47 higher
education titles from Thomson Learning. The titles are in such areas as
business, earth and biological sciences, foreign languages, mathematics,
nutrition, and psychology.
Publishing Operations
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Journal Products
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The Company publishes over 1,000 journals and other subscription-based STM and
Professional/Trade products, which accounted for approximately 32% of the
Company's fiscal year 2005 revenue. Most journals are owned by the Company, in
which case they may or may not be sponsored by a professional society. Some are
owned by societies and published by the Company in collaboration with the
societies pursuant to contracts. Societies that sponsor or own such journals
generally receive a royalty and/or other consideration. The Company usually
enters into agreements with outside independent editors of journals that state
the duties of the editors, and the fees and expenses for their services.
Contributors of journal articles transfer publication rights to the Company or
professional society, as applicable.
Journal subscriptions result primarily from licenses for the web-based Wiley
InterScience negotiated directly with customers or their subscription agent by
the Company's sales representatives, direct mail or other advertising,
promotional campaigns, and memberships in professional societies for those
journals that are sponsored by such societies. Licenses range from one to three
years in duration.
Printed journals are generally mailed to subscribers directly from independent
printers. Journal content for virtually all journals is also made available
online. Subscription revenue is generally collected in advance, and is deferred
and recognized as earned when the related issue is shipped or made available
online, or over the term of the subscription as services are rendered.
Book Products
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Materials for book publications are obtained from authors throughout most of the
world through the efforts of an editorial staff, outside editorial advisors, and
advisory boards. Most materials originate with their authors or as a result of
suggestion or solicitations by editors and advisors. The Company enters into
agreements with authors that state the terms and conditions under which the
materials will be published, the name in which the copyright will be registered,
the basis for any royalties, and other matters. Most of the authors are
compensated by royalties, which vary with the nature of the product and its
anticipated sales potential. The Company may make advance payments against
future royalties to authors of certain publications.
The Company continues to add new titles, revise existing titles, and discontinue
the sale of others in the normal course of its business, also creating
adaptations of original content for specific markets fulfilling customer demand.
The Company's general practice is to revise its textbooks every three to five
years, if warranted, and to revise other titles as appropriate.
Subscription-based products are updated more frequently on a regular schedule.
Approximately 33% of the Company's fiscal year 2005 U.S. book-publishing revenue
was from titles published or revised in the current fiscal year.
Professional and consumer books are sold to bookstores and online booksellers
serving the general public; wholesalers who supply such bookstores; warehouse
clubs; college bookstores for their non-textbook requirements; individual
professional practitioners; and research institutions, jobbers, libraries
(including public, professional, academic, and other special libraries),
industrial organizations, and governmental agencies. The Company employs sales
representatives who call upon independent bookstores, national and regional
chain bookstores, wholesalers, and jobbers. Trade sales to bookstores,
wholesalers, and jobbers are generally made on a returnable basis with certain
restrictions. The Company provides for estimated future returns on sales made
during the year principally based on historical experience. Sales of
professional and consumer books also result from direct mail campaigns,
telemarketing, online access, and advertising and reviews in periodicals.
Adopted textbooks and related supplementary material (i.e., textbooks prescribed
for course use) are sold primarily to bookstores including online bookstores,
serving educational institutions. The Company employs sales representatives who
call on faculty responsible for selecting books to be used in courses, and on
the bookstores that serve such institutions and their students. Textbook sales
are generally made on a fully returnable basis with certain restrictions. The
textbook business is seasonal, with the majority of textbook sales occurring
during the June through August and November through January periods. There is an
active used textbook market, which negatively affects the sales of new
textbooks.
Like most other publishers, the Company generally contracts with independent
printers and binderies for their services. The Company purchases its paper from
independent suppliers and printers. The fiscal year 2005 weighted average U.S.
paper prices increased approximately 4% over fiscal year 2004. Management
believes that adequate printing and binding facilities, and sources of paper and
other required materials, are available to it, and that it is not dependent upon
any single supplier. Printed book products are distributed from both
Company-operated warehouses and independent distributors.
The Company develops content in digital format that can be used for both online
and print products, which results in productivity and efficiency savings, as
well as enabling the Company to offer customized publishing and print-on-demand
products. Book content is increasingly being made available online through Wiley
InterScience and other platforms, and in eBook format through licenses with
alliance partners. The Company is also developing online communities of
interest, both on its own and in partnership with others, to expand the market
for its products.
The Company believes that the demand for new electronic technology products will
increase. Accordingly, to properly service its customers and to remain
competitive, the Company anticipates it will be necessary to increase its
expenditures related to such new technologies over the next several years.
The internet not only enables the Company to deliver content online, but also
helps to sell more books. The growth of online booksellers benefits the Company
because they provide unlimited virtual "shelf space" for the Company's entire
backlist.
Marketing and distribution services are made available to other publishers under
agency arrangements. The Company also engages in co-publishing of titles with
international publishers and in publication of adaptations of works from other
publishers for particular markets. The Company also receives licensing revenue
from photocopies, reproductions, and electronic uses of its content.
Global Operations
- -----------------
The Company's publications are sold throughout most of the world through
operations located in Europe, Canada, Australia, Asia, and the United States.
All operations market their indigenous publications, as well as publications
produced by other parts of the Company. The Company also markets publications
through agents as well as sales representatives in countries not served by the
Company. John Wiley & Sons International Rights, Inc. sells reprint and
translations rights worldwide. The Company publishes or licenses others to
publish its products, which are distributed throughout the world in many
languages. Approximately 41% of the Company's fiscal year 2005 revenue was
derived from non-U.S. markets.
Competition and Economic Drivers Within the Publishing Industry
- ---------------------------------------------------------------
The sectors of the publishing industry in which the Company is engaged are
highly competitive. The principal competitive criteria for the publishing
industry are considered to be the following: product quality, customer service,
suitability of format and subject matter, author reputation, price, timely
availability of both new titles and revisions of existing books, online
availability of published information, and timely delivery of products to
customers. Recent years have seen a consolidation trend within the publishing
industry, including the acquisition of several publishing companies by larger
publishers and other companies.
The Company is in the top rank of publishers of scientific and technical
journals worldwide, as well as a leading commercial chemistry publisher at the
research level; one of the leading publishers of university and college
textbooks and related materials for the "hardside" disciplines, (i.e. sciences,
engineering, and mathematics), and a leading publisher in its targeted
professional/trade markets. The Company knows of no reliable industry statistics
that would enable it to determine its share of the various international markets
in which it operates.
The Company measures its performance based upon revenue, operating income, net
income and cash flow growth excluding unusual or one-time events, and
considering current worldwide and regional economic conditions. Because of the
Company's unique blend of businesses, industry statistics do not always provide
informative comparatives. The Company does maintain market share statistics
within each area for the Professional/Trade and Higher Education businesses. For
Professional/Trade, market share statistics published by BOOKSCAN, a statistical
clearinghouse for book industry point of sale in the United States, are used.
The statistics include survey data from all major retail outlets, mass
merchandisers, small chain and independent retail outlets. For Higher Education,
the Company subscribes to Management Practices Inc., which publishes customized
comparative sales reports.
Results of Operations
Fiscal Year 2005 Compared to Fiscal Year 2004
For the full year, revenue advanced 6% over prior year to $974 million, or 4%
excluding foreign currency effects. The year-on-year growth was driven primarily
by the Company's global Scientific, Technical and Medical business and the
Professional/Trade business, particularly in Europe and Asia. Gross profit
margin for fiscal year 2005 was 66.6% compared with 66.5% in the prior year.
Improvements in U.S. Professional/Trade and the European segment were partially
offset by lower gross margins in other segments.
Operating and administrative expenses, excluding the adverse impact of foreign
exchange on costs (approximately $6.5 million), increased 3% over the prior
year. Additional sales and marketing costs to support revenue growth as planned,
annual performance compensation costs, auditing and compliance costs associated
with certification of internal controls as required by Sarbanes-Oxley 404 ($3.2
million) and investments in technology to deliver products to our customers were
partially offset by relocation incentive receipts from the State of New Jersey.
Operating and administrative expenses as a percent of revenue improved 50 basis
points to 51% reflecting prudent expense management.
Operating income advanced 9% to $141.4 million in fiscal year 2005 or 7%
excluding foreign currency gains. Primarily revenue growth, lower inventory and
royalty provisions and prudent expense management drove the year-on-year growth.
Operating margin was 14.5% compared with 14.0% in fiscal year 2004. The
operating margin increase reflects improvement in gross margin and lower
operating and administrative expenses as a percentage of revenue. Net interest
expense and other increased $1.4 million to $5.7 million. Higher interest rates
were partially offset by lower debt.
The Company's effective tax rate was 38.2% in fiscal year 2005. Excluding the
tax charges and benefits described in the non-GAAP financial disclosure, the
effective tax rate for fiscal year 2005 increased to 32.7% as compared to 31.4%
in fiscal year 2004, mainly due to higher effective foreign tax rates.
Earnings per diluted share and net income for fiscal year 2005 were $1.35 and
$83.8 million. Excluding the tax accrual on the dividends repatriated from
European subsidiaries in fiscal year 2005 and the tax benefit reported in fiscal
year 2004, which are described below, earnings per diluted share and net income
for the fiscal year ended April 30, 2005 rose 8% to $1.47 and 6% to $91.3
million, respectively.
Non-GAAP Financial Measures: The Company's management evaluates operating
performance excluding unusual and/or nonrecurring events. The Company believes
excluding such events provides a more effective and comparable measure of
performance. Since adjusted net income and adjusted earnings per share are not a
measure calculated in accordance with GAAP, it should not be considered as a
substitute for other GAAP measures , including net income and earnings per
share, as reported, as an indicator of operating performance.
Adjusted net income and adjusted earnings per diluted share excluding the tax
charges and benefits are as follows:
Reconciliation of non-GAAP financial disclosure
- -----------------------------------------------
Net Income (in millions) 2005 2004
- --------------------------------------------------------------------------------
As reported $83.8 $88.8
Resolution of tax matters - (3.0)
Tax charge on dividends repatriated 7.5 -
- --------------------------------------------------------------------------------
Adjusted $91.3 $85.8
================================================================================
Earnings per Diluted Share 2005 2004
- --------------------------------------------------------------------------------
As reported $1.35 $1.41
Resolution of tax matters - (.05)
Tax charge on dividends repatriated .12 -
- --------------------------------------------------------------------------------
Adjusted $1.47 $1.36
================================================================================
During the fourth quarter of fiscal year 2005, the Company elected to repatriate
approximately $94 million of dividends from its European subsidiaries under the
American Jobs Creation Act of 2004, which became law in October 2004. The law
provides a favorable one-time tax rate on dividends from foreign subsidiaries.
The tax accrual on the dividend included approximately $7.5 million, or $0.12
per diluted share of tax which will have no cash impact on the Company. The
income statement effect recorded in the fourth quarter of fiscal year 2005 will
be fully offset by a tax benefit that will be recognized by the Company in the
first quarter of fiscal year 2006.
In the third quarter of fiscal year 2004, the Company reported a net tax benefit
of $3 million, or $0.05 per diluted share, due to a favorable resolution of
certain state and federal tax matters and an adjustment of accrued foreign
taxes.
Cash flow provided by operating activities in fiscal year 2005 increased 15% to
$243.5 million from $212.2 million in the prior year. Cash provided by operating
activities, net of cash used for investments in product development and
property, equipment and technology of $91.2 million, was utilized during the
year to acquire 2.9 million shares of Class A common stock ($94.8 million);
acquire publishing assets (aggregating $22.5 million); purchase marketable
securities of $10.0 million; and pay dividends to shareholders ($18.1 million).
Fiscal Year 2005 Segment Results
Professional/Trade (P/T):
Dollars in thousands 2005 2004 % change
- --------------------------------------------------------------------------------
Revenue $350,338 $340,252 3%
Direct Contribution $102,326 $93,945 9%
Contribution Margin 29.2% 27.6%
Revenue of Wiley's U.S. P/T business increased 3% to $350.3 million in fiscal
year 2005, as a result of organic growth in key publishing categories,
particularly For Dummies books, the professional culinary program and Webster's
New World Dictionary. High-end technology titles showed improvement for the
year, while consumer technology publishing remained sluggish. Other publishing
revenue, principally generated through brand licensing, the sale of rights and
online advertising and improved sales return experience also contributed to the
favorable results.
P/T's direct contribution to profit was up 9% over fiscal year 2004, reflecting
gross margin improvement due to lower inventory, sales returns and author
advance provisions, and prudent expense management. Contribution margin
increased by 160 basis points to 29.2% reflecting lower provisions and product
mix. Fourth quarter revenue of $93.5 million was up 1% over the previous year's
strong finish.
P/T's books benefited from widespread media attention during the year. Young and
Simon/ iCon: Steve Jobs, The Greatest Second Act in the History of Business
received extensive media coverage around the world. Bittman/How to Cook
Everything and Ramsay/In the Heat of the Kitchen were two titles that published
with television series tie-ins. Rivoli/Travel of a T-Shirt was the subject of a
three-part series on National Public Radio, which generated positive coverage in
The Wall Street Journal, Time Magazine and the San Francisco Chronicle.
Throughout July, Wiley participated in a successful co-promotion with
Travelocity. Advertising for the campaign appeared in USA Today and The Wall
Street Journal, among other publications and online sites.
Titles included on bestseller lists for the year were the market-leading J.K.
Lasser's Your Income Tax, as well as Lencioni/Five Dysfunctions of a Team and
Tyson/Investing For Dummies; Winger/Shut Up, Stop Whining and Get a Life;
Scott/Mentored by a Millionaire; Harkins/Everybody Wins; Lencioni/Death by
Meeting; Allen/Multiple Streams of Income; Mauldin/Bull's Eye Investing; and
Tisch/The Power of We. The second editions of three bestselling Windows XP For
Dummies titles were published during the year, tied to Microsoft's launch of the
Windows XP Service Pack 2.
P/T took advantage of the considerable potential of its industry-leading brands
throughout fiscal year 2005. Frommers.com, Dummies.com, and CliffsNotes.com all
had a strong year, in terms of site traffic, subscriber counts and sales. A
redesigned CliffsNotes.com launched in August, forming the cornerstone of a
major brand awareness initiative and significantly increasing traffic to the
website. In January, a redesigned Frommers.com site was launched that includes
several new features, improved search functionality and standard ad sizes to
accommodate advertiser demand. These improvements were well received, as
evidenced by record highs in monthly traffic and book sales. An agreement with
MTV was signed during the year to publish an eight volume series of travel
guides targeted to students and co-branded as MTV and Frommer's. A new site
supporting direct ordering by government employees went live in March, providing
product information and facilitating the purchase of Wiley titles.
P/T's custom publishing had a banner year, with business growing rapidly. These
products are typically used by a company or organization for promotional or
incentive use. Books are specifically written for a customer or an existing P/T
publication can be customized, such as having the cover art include custom
imprint, messages or slogans. Of special note are customized For Dummies
publications, which are in great demand by corporations and organizations around
the world that want to leverage the power of this well known brand.
During the year Wiley signed an agreement with TTE Corporation, the manufacturer
of RCA digital television products, to publish HDTV For Dummies; launch a
"Digital TV Center" site featuring technical articles and related information;
and create a customized reference and setup guide that will be packaged with
select RCA products.
In April 2005, Wiley signed an agreement to acquire substantially all the assets
of Sybex, Inc., a global publisher of computer books and software for
information technology professionals for approximately $11 million. The sale
closed on May 31, 2005.
Scientific, Technical, and Medical (STM):
Dollars in thousands 2005 2004 % change
- --------------------------------------------------------------------------------
Revenue $190,515 $178,100 7%
Direct Contribution $88,899 $86,310 3%
Contribution Margin 46.7% 48.5%
Wiley's U.S. STM revenue increased 7% to $190.5 million in fiscal year 2005.
Electronic journals, new society publications and non-subscription revenue, such
as STM reference books, journal backfiles and advertising sales, all contributed
to the year-on-year growth.
STM's direct contribution to profit for fiscal year 2005 was up 3% over prior
year, reflecting the combined effects of increased revenue and favorable product
mix, partially offset by costs associated with new society journals.
Contribution margin for the year decreased 180 basis points to 46.7% principally
due to increased revenue from new professional society journals and STM
reference books. While society journals generate margins that exceed the
Company's consolidated margins, these margins are less than wholly-owned
journals.
Globally, the STM business recorded strong growth, up approximately 9% for the
full year. Journals and books, in print and online, contributed to year-on-year
growth. The global STM book program recorded its sixth straight quarter of
robust growth, especially in Europe and Asia, resulting in an increase of 12% in
fiscal year 2005 over the previous year. It was also a strong year for the
electronic major reference work program.
The Company's STM business continued its transformation to digital access
through Wiley InterScience. Wiley believes that the research community and
society at large are best served by the widest possible dissemination of
scientific, technical and medical information and continues to make significant
investments to add content and functionality and facilitate greater
accessibility and discoverability.
Electronic journal subscriptions to Wiley InterScience are principally sold
through Enhanced Access Licenses. One to three years in duration, these licenses
provide academic and corporate customers with multi-site online access. In
fiscal year 2005, STM enjoyed healthy renewals of Enhanced Access Licenses for
Wiley InterScience.
More customers are also gaining access to Wiley InterScience through Google and
taking advantage of alternative pricing programs such as Pay-Per-View and the
new, customer-driven pricing model for Wiley InterScience Online Books.
Reference linking improvements, new marketing initiatives like Google Adword,
ISI alerts and Wiley InterScience feature boxes and the addition of content,
including new society journals and backfile collections, also contributed to
access growth. As a result, usage during the fourth quarter increased 23% over
the third quarter and 56% over the previous year's fourth quarter.
Additional digitized journal backfiles were added to Wiley InterScience through
the launch of the Cell & Developmental Biology and Analytical Science
collections. Earlier this year, the Neuroscience collection was launched. The
Company announced its ambitious new program to digitize all its historical
journal content, dating back to the 1800s. Wiley's digitization of legacy
content is designed to improve the research pathway and ensure content discovery
is as seamless and efficient as possible. This initiative is scheduled for
completion in 2007. The completed backfile collection will span two centuries of
scientific research and comprise over 7.5 million pages - one of the largest
archives of its kind issued by a single publisher.
Wiley continued to develop its journal and book programs by forming partnerships
with prominent national, regional and international societies. In the fourth
quarter, the Company executed a multi-year co-publishing agreement with the
American Institute of Chemical Engineers. Earlier in the year, the Company
signed agreements with the Orthopaedic Research Society and the Society of
Hospital Medicine. The American Society of Cytopathology adopted as its official
journal Cancer Cytopathology, which Wiley publishes on behalf of the American
Cancer Society.
Higher Education:
Dollars in thousands 2005 2004 % change
- --------------------------------------------------------------------------------
Revenue $150,905 $152,861 -1%
Direct Contribution $38,221 $41,749 -8%
Contribution Margin 25.3% 27.3%
Wiley's U.S. Higher Education business closed out a challenging year with
revenue of $150.9 million, down 1% from the previous year. The decrease reflects
industry-wide price resistance among students and continued softness in
engineering, mathematics and computer sciences, and was partially offset by
improved sales returns. Higher Education's direct contribution to profit in
fiscal year 2005 was down 8% from the previous year and contribution margin
decreased 200 basis points to 25.3%, reflecting the top-line results,
investments in new products, services and business models, and inventory
write-offs.
Wiley is committed to delivering quality learning materials and services, while
addressing concerns among students about price and value. The Company is
migrating to online delivery in pace with the needs of students and professors.
The prime example is eGrade Plus, which has been well received in the U.S. and
abroad. An increasing number of students and professors are using its
customizable multi-format content that is organized around teaching and learning
activities such as studying, self-testing, assessment and classroom management.
A new version of eGrade Plus, with increased functionality and enhanced
branding, is set to launch in time for the next academic year.
During the fourth quarter, Higher Education began to roll out a strong frontlist
for the coming academic year, with a number of promising first editions, as well
as revisions of widely used titles. In addition, the number of lower-cost
textbooks being offered continues to increase. Outside the States, more local
adaptations of U.S. textbooks are being published, primarily for markets in Asia
and the Middle East.
Earlier in the year, Higher Education signed a multi-year publishing agreement
with the National Geographic Society (NGS), one of the world's foremost research
and educational societies. Wiley will create textbooks and digital learning
tools that will incorporate maps, photographs, graphics, illustrations and
videos from the NGS's vast library. During the first quarter, Wiley renewed and
expanded its agreement with Rand McNally & Co. to be the exclusive distributor
to the higher education community of their Goode's World Atlas. Other alliances
formed during the year include agreements with GlobalSpec to provide search
functionality to engineering students through eGradePlus; OuterNet Publishing to
co-develop lab manuals for introductory biology textbooks; Tata, a software
developer in India, for licensing and selling business simulations; Just Ask! to
create customized online solutions for several Wiley textbooks; and Aplia to
sell Besanko/Microeconomics 2e along with their software product.
Europe:
Dollars in thousands 2005 2004 % change % excluding FX
- --------------------------------------------------------------------------------
Revenue $268,857 $238,436 13% 8%
Direct Contribution $86,226 $74,585 16% 11%
Contribution Margin 32.1% 31.3%
Fiscal year 2005 was a strong year for Wiley's European-based companies, with
revenue for the year advancing 13% over the prior year to $268.9 million, or 8%
excluding foreign currency effects. Journals and non-subscription revenue, such
as STM reference books and advertising sales, contributed to the year-on-year
growth. Indigenous and imported P/T titles also performed well. Direct
contribution to profit for the year was up 16% over prior year or 11% excluding
foreign currency effects, reflecting top-line growth and favorable product mix.
Wiley's success in Europe was widespread, with nearly all business categories
growing strongly. Particularly worth noting were the strong performances of the
Cochrane Collaboration in evidence-based medicine, the success of the U.K. For
Dummies program and the robust performance of the STM book program.
Wiley continues to grow in Europe through an effective combination of organic
growth and acquisitions. During the fourth quarter, the Company completed the
acquisition of Whurr Publishers Limited, a London-based publisher of books and
journals for the Nursing, Speech and Language Therapy and Audiology, Psychology
and Special Education markets. The acquisition brings to Wiley a distinguished
list of professional reference books, peer-reviewed journals and textbooks.
Acquisitions completed earlier in the year include Microscopy and Analysis, a
controlled circulation journal; the life science reference portfolio of the
Nature Publishing Group; the book list of Professional Engineering Publishing;
the publishing arm of the Institute of Mechanical Engineers; and four journals
from Henry Stewart Publications.
Wiley signed an agreement during the fourth quarter with the British Library for
delivery of Wiley content through their document delivery service. Earlier in
the year, the Company extended its publishing partnerships with the Society of
Chemical Industry and the Cochrane Collaboration. Closer collaboration with the
American Health Care Journalists Society and the Centre for the Advancement of
Health has generated media exposure for Cochrane. Cooperative marketing
initiatives with a number of scholarly societies have also been formed to
promote other Wiley publications.
Wiley-VCH formed an alliance with the Shanghai Institute of Organic Chemistry, a
part of the Chinese Academy of Sciences, to publish the Chinese Journal of
Chemistry, the Institute's flagship journal. An agreement was also signed during
the third quarter with the Securities Institute to publish a series of
introductory finance books, bringing to Wiley a new source of authors and
customers.
The power of the For Dummies brand in Europe was evident throughout fiscal year
2005. More than one million copies of Wi-Fi For Dummies, which was custom
published for Intel, were distributed to their customers throughout the U.K. All
visitors to the 2005 London Book Fair received a copy of the London Book Fair
Tips For Dummies, which was supported and distributed by Reed Exhibitions. Over
160,000 copies of French History for Dummies have been sold since its
publication.
Asia, Australia, and Canada:
Dollars in thousands 2005 2004 % change % excluding FX
- --------------------------------------------------------------------------------
Revenue $108,649 $98,986 10% 6%
Direct Contribution $24,175 $22,218 9% -1%
Contribution Margin 22.3% 22.4%
Wiley's revenue in Asia, Australia and Canada was up a combined 10% to $108.6
million, or 6% excluding foreign currency effects. Revenue growth in all regions
contributed to the improvement, particularly Asia, which grew 11% for the year.
Direct contribution to profit in fiscal year 2005 increased 9% over the previous
year, reflecting the top-line growth, but down 1% excluding foreign currency
effects. The Canadian and Australian subsidiaries purchase certain products from
other Wiley locations in U.S. dollars while primarily selling in local currency,
thereby contributing to the more favorable results including foreign currency
effects.
Asia showed impressive revenue growth, particularly during the second half of
the year. STM books had an excellent year, driven by strong library markets in
India, Taiwan, Japan and Korea, and increased research funding in Malaysia and
Thailand. P/T revenue was up despite the challenging retail environment in many
Asian markets. Sales grew strongly in adoption, library and corporate channels
and in the business and finance, culinary and hospitality and architecture
categories. Wiley Asia's Higher Education business picked up in the fourth
quarter, mainly driven by strong adoption sales in the sciences, mathematics and
engineering.
In Australia, the Higher Education and School businesses both had a good year
due to the strength of local publishing, while P/T's performance was
disappointing, as a result of a challenging retail environment. Wiley Australia
was once again awarded the Employer of Choice citation from the Federal
Government's Equal Opportunity in the Workplace Agency. Earlier in the year, the
Australian Campus Booksellers Association and the Australian Publishers
Association awarded Wiley Australia with Publisher of the Year awards.
In Canada, P/T sales exceeded expectations as a result of improved sell-through
and lower returns at certain retail, online and mass-market accounts. Solid
gains were realized in the For Dummies and STM book programs. Higher Education
had a difficult year in Canada, reflecting similar concerns and conditions as in
the U.S.
Results of Operations
Fiscal Year 2004 Compared to Fiscal Year 2003
Revenue in fiscal year 2004 advanced 8% over the prior year to $923 million, or
5% excluding foreign currency effects. The year-on-year growth was driven
primarily by the strong second half performances of Professional/Trade in the
U.S. and Scientific, Technical, and Medical globally.
Operating income advanced 8% to $129.4 million in fiscal year 2004. Operating
margin was 14.0% compared with 14.1% in fiscal year 2003, reflecting higher
operating and administrative costs partially offset by an improvement in gross
margin.
Earnings per diluted share and net income for fiscal year 2004 were $1.41 and
$88.8 million, compared to $1.38 and $87.3 million in fiscal year 2003.
Excluding the tax benefits reported in fiscal year 2004 and 2003 and the
relocation charge in fiscal year 2003 related to the Company's relocation to
Hoboken, New Jersey, earnings per diluted share and net income for the fiscal
year ended April 30, 2004, rose 12% to $1.36 and $86 million from $1.22 and $77
million in the prior year on the same basis, respectively.
Cash flow after investing activities for fiscal year 2004 was $120 million as
compared to $44 million in fiscal year 2003. The improvement reflects the
combined effect of a 25% increase in cash provided by operating activities and
the expected decrease in capital expenditures.
Non-GAAP Financial Measures: Management believes the non-GAAP financial
measures, which exclude certain tax credits and relocation charge described
below, provide a more meaningful comparison of the Company's year-over-year
results. These events are unusual to the Company, and except for the net tax
benefits in fiscal year 2004, are unlikely to recur in the foreseeable future.
In fiscal year 2004 the Company recognized a net tax benefit of $3.0 million or
$0.05 per diluted share related to the resolution of certain state and federal
tax matters and accrued foreign taxes.
In fiscal year 2003 the Company merged several of its European subsidiaries into
a new entity, which enabled the Company to increase the tax-deductible asset
basis of the merged subsidiaries to the fair value of the business at the date
of merger. Under U.S. accounting principles, the tax benefit attributable to the
increase in tax basis is immediately included in income. Consequently, the
Company had a one-time tax benefit of $12.0 million, equal to $0.19 per diluted
share, in fiscal year 2003. The cash benefit of this change will be recognized
pro rata over a 15-year period. The Company's effective tax rate, excluding this
tax benefit, was 33.1% for the year.
The Company completed the relocation of its headquarters to Hoboken, N.J. in the
first quarter of fiscal year 2003. The new facility provides a more
collaborative and efficient work environment and will meet the Company's growth
expectations. Fiscal year 2003 includes an unusual charge for costs associated
with the relocation of approximately $2.5 million, or $1.5 million after tax.
Pro forma operating income and net income excluding the tax benefits and
relocation charge are as follows:
Reconciliation of non-GAAP financial disclosure
(In millions) 2004 2003
- --------------------------------------------------------------------------------
Operating Income as reported $129.4 $120.3
Relocation charge - 2.5
---------------------------------------
Pro Forma Operating Income $129.4 $122.8
=======================================
Net Income as reported $88.8 $87.3
Relocation charge, net of tax - 1.4
Resolution of tax matters (3.0) -
Tax benefit from merger - (12.0)
---------------------------------------
Pro Forma Net Income $85.8 $76.7
=======================================
Cost of sales as a percentage of revenue was 33.5% in fiscal year 2004 and 33.8%
in fiscal year 2003. The favorable results were principally due to higher
journal revenue and lower inventory costs resulting from cost contingency
programs in place during fiscal year 2004. Production costs for journals as a
percentage of revenue are typically lower than the same costs for books
reflecting lower royalty costs.
Operating and administrative expenses as a percentage of revenue increased to
51.5% in fiscal year 2004, from 50.7% in the prior fiscal year. The increase was
principally due to incentive compensation, pension and health costs of
approximately $12.9 million; technology costs of approximately $7.8 million,
driven by product development of Web-enabled products; and foreign exchange
effects of approximately $16.7 million.
Fourth quarter 2004 operating and administrative expenses, excluding foreign
exchange, increased $18.3 million over the fourth quarter of fiscal year 2003.
The increase was principally due to the timing of accrued performance
compensation, which reflects the achievement of cumulative corporate goals in
the fourth quarter of fiscal year 2004.
Interest expense, net of interest income improved $3.4 million due to lower debt
and interest rates. The Company's effective tax rate was 29.0% in fiscal year
2004. Excluding the tax benefits described in the Non-GAAP financial disclosure,
the effective tax rate decreased to 31.4% as compared to 33.1%, mainly due to
lower foreign taxes.
Fiscal Year 2004 Segment Results
Professional/Trade (P/T):
Dollars in thousands 2004 2003 % change
- --------------------------------------------------------------------------------
Revenue $340,252 $321,963 6%
Direct Contribution $93,945 $87,354 8%
Contribution Margin 27.6% 27.1%
Revenue of Wiley's U.S. P/T business increased 6% over fiscal year 2003 to $340
million in fiscal year 2004, principally due to organic growth in key publishing
categories. Revenue rebounded solidly in the second half of the year,
particularly in the business, architecture, culinary, education, and consumer
programs. An improving retail book market contributed to the 16% revenue
increase in the fourth quarter. Higher revenue along with lower inventory costs
due to cost contingency programs, and lower composition costs, contributed to
the improvement in margins.
P/T's business program generated strong momentum throughout the second half of
fiscal year 2004. Two finance titles performed particularly well, Hirsch &
Hirsch/Stock Trader's Almanac and Mauldin/Bull's Eye Investing (which published
during the fourth quarter and quickly made the Wall Street Journal business
bestseller list). Also contributing to the top-line results were real estate
titles, such as Allen/Multiple Streams of Income (which appeared on the Wall
Street Journal business bestseller list); leadership titles, such as the third
edition of Kouzes & Posner/Leadership Practices Inventory and Lencioni/Five
Dysfunctions of a Team (which celebrated 20 months on the BusinessWeek hardcover
business bestseller list); as well as Testosterone, Inc., an examination of CEO
misbehavior by Martha, Inc. author Christopher Byron.
Wiley's consumer programs, including the CliffsNotes and For Dummies brands, had
a solid year. Extension of the CliffsNotes brand to new CliffsStudySolver Guides
helped generate additional sales. Record-breaking traffic on Dummies.com drove
incremental sales and reinforced the brand.
P/T's travel program showed renewed strength in the second half of fiscal year
2004 as vacation and business travel rebounded. Frommer's, Wiley's
market-leading travel brand, had an excellent year. Frommers.com had a record
number of visitors during fiscal year 2004, as evidenced by a greater than 40%
increase in page views and user sessions.
The culinary program had a solid year, led by the Betty Crocker franchise. The
Betty Crocker Bisquick II Cookbook, which published during the fourth quarter,
sold well. Earlier in the year, Wiley launched a Betty Crocker microsite on
FoodTV.com to increase the brand's presence and drive sales. Building on the
successful Betty Crocker publishing partnership, Wiley signed another multi-year
agreement with General Mills to publish new cookbooks under the well-known
Pillsbury brand.
The technology publishing program gained some momentum during the second half of
fiscal year 2004 despite challenging market conditions. Although sales were down
slightly from the prior year, Wiley's program maintained the significant market
share gained in fiscal year 2003. Sales of consumer technology books on topics
such as digital photography, wireless home networking and security, and
professional technology titles, increased modestly for the year.
Scientific, Technical, and Medical (STM):
Dollars in thousands 2004 2003 % change
- --------------------------------------------------------------------------------
Revenue $178,100 $168,208 6%
Direct Contribution $86,310 $77,937 11%
Contribution Margin 48.5% 46.3%
Wiley's U.S. STM revenue increased 6% to $178 million in fiscal year 2004 from
$168 million in the prior year. Fourth quarter revenue increased over prior year
by 17% to $51 million. Society journals, digitized journal backfiles, online
major reference works, Current Protocols and the book program contributed to the
year-on-year growth. STM books finished the year strongly, posting a 14%
increase in the fourth quarter and a 4% increase for fiscal year 2004. The
improvement in margin was driven by product mix reflecting an increase in
journal products sold.
Worldwide STM journal revenue increased 11% over fiscal year 2003. The Company's
STM business continued its transformation to digital access through Wiley
InterScience. Approximately 70% of STM's global journal subscription revenue was
generated by Wiley InterScience licenses in fiscal year 2004. The number of
journal articles viewed increased by approximately 39% in fiscal year 2004,
continuing the rapid growth in customer usage since the service was launched
commercially in fiscal year 1999.
The STM book program showed improvement throughout the year. Sales of online
major reference works and OnlineBooks were robust. Early in the fourth quarter,
Wiley signed an agreement to distribute Merck's professional manuals in the
U.S., including The Merck Manual, The Merck Veterinary Manual, The Merck Manual
of Geriatrics and The Merck Index. These titles are widely considered to be
among the most trusted resources for medical and scientific information.
Higher Education:
Dollars in thousands 2004 2003 % change
- --------------------------------------------------------------------------------
Revenue $152,861 $148,220 3%
Direct Contribution $41,749 $39,938 5%
Contribution Margin 27.3% 26.9%
Wiley's U.S. Higher Education revenue increased 3% over fiscal year 2003 to $153
million in fiscal year 2004. Programs in the sciences and the social sciences
did especially well. Sales of engineering and computer science titles continued
to reflect sluggish market conditions. In the fourth quarter, which is
seasonally the least significant for Higher Education, revenue declined from the
same period in the previous year, principally due to sluggish market conditions.
The improvement in margin was principally due to higher sales and the benefits
of selling P/T products through the Higher Education sales force.
Year-on-year growth was driven by top-selling titles such as Tortora/Principles
of Anatomy and Physiology, 10th edition; Kieso/Intermediate Accounting, 11th
edition; Kimmel, Weygandt, and Kieso/Financial Accounting, 3rd edition;
Solomons/Organic Chemistry, 8th edition; Huffman/Psychology in Action, 7th
edition; Connally, Hughes-Hallett and Gleason/Functions Modeling Change, 2nd
edition; and Cutnell and Johnson/Physics, 6th edition.
During fiscal year 2004, the Company launched eGrade Plus, which is the first
product built on Wiley's Edugen technology platform. This platform enables Wiley
to deliver integrated content that is organized around teaching and learning
activities. Several pricing options are available to students. eGrade Plus is an
innovative service which is being well received by our customers.
Europe:
Dollars in thousands 2004 2003 % change % excluding FX
- --------------------------------------------------------------------------------
Revenue $238,436 $210,482 13% 5%
Direct Contribution $74,585 $69,191 8% 5%
Contribution Margin 31.3% 32.9%
Full-year revenue of Wiley Europe advanced 13% over the prior year to $238
million, including foreign exchange gains, or 5% excluding exchange effects.
Fourth quarter revenue was up 19% to $69 million, including foreign currency
gains, or 10% excluding currency. Several factors contributed to the revenue
growth of Wiley Europe's journal program, including a full year's results of the
British Journal of Surgery and Ultrasound in Obstetrics and Gynecology,
excellent reprint sales, healthy subscription and license renewals, and growth
in Article Select sales. In Germany, Wiley-VCH launched a number of new
journals, including Engineering in Life Sciences, Laser Physics Letters, Laser
Technik Journal and Applied Numerical Analysis and Computational Mathematics.
Direct contribution improved principally due to higher journal revenue.
Excluding foreign exchange, the contribution margin percentage was on par with
the prior year.
Asia, Australia, and Canada:
Dollars in thousands 2004 2003 % change % excluding FX
- --------------------------------------------------------------------------------
Revenue $98,986 $87,314 13% 1%
Direct Contribution $22,218 $16,278 36% 1%
Contribution Margin 22.4% 18.6%
Wiley's combined revenue for its operations in Asia, Australia and Canada
advanced 13% to $99 million in fiscal year 2004 or 1% excluding foreign
exchange. Foreign exchange gains, P/T sales growth in India, Taiwan and
Indonesia and higher sales of indigenous products in Australia were partially
offset by lower sales in Canada due to a weak retail book market. The
improvement in direct contribution is principally due to revenue. Contribution
margin, excluding foreign exchange was on par with the prior year.
The indigenous Asian publishing program finished fiscal year 2004 on a high
note, bolstered by strong global sales of key frontlist titles and a robust
backlist performance. Wiley formed an alliance with Citibank to develop personal
finance books in Asia. In addition, Wiley Asia launched the For Dummies
franchise in China, publishing 20 consumer and business titles.
Wiley Canada's Higher Education performance during the quarter and the full year
improved, in part, due to the introduction of adaptations of U.S. Higher
Education titles. Growth in Higher Education did not, however, compensate for
P/T sales, which were depressed by the weak economy and unusually high
industry-wide returns.
In Australia, indigenous P/T publishing performed well, while Higher Education
and School sales were sluggish, reflecting market conditions. During the fourth
quarter, the Company signed publishing agreements with the Australian Stock
Exchange and the Australian Institute of Management.
Liquidity and Capital Resources
The Company's cash and cash equivalents balance was $89.4 million at the end of
fiscal year 2005, compared with $82.0 million a year earlier. Cash provided by
operating activities in fiscal year 2005 was $243.5 million compared with $212.2
million in the prior year. The improvement was mainly due to improved trade
receivable collections and settlements; increased accounts payable reflecting
timing of payments; higher journal subscription collections; lower pension plan
contributions and effective inventory management partly offset by higher author
royalty payments; and increased annual performance compensation payments.
Pension contributions in fiscal year 2005 were $16.6 million, compared to $21.2
million in the prior year. The Company anticipates making pension contributions
in fiscal year 2006 of approximately $7 million. The change in operating assets
and liabilities also includes a higher net taxes payable this fiscal year due
primarily to an increased current tax provision.
Cash used for investing activities for fiscal year 2005 was $123.8 million
compared to $91.7 million in fiscal year 2004. The Company invested $22.5
million in acquisitions of publishing assets and rights compared to $3.1 million
in the prior year primarily to acquire certain publication rights. The current
year acquisitions included a controlled circulation journal, The Journal of
Microscopy and Analysis for $5.4 million; the life science reference portfolio
of the MacMillan Nature Publishing Group for $4.5 million; the $4.6 million
acquisition of Whurr Publishers Limited, a London-based publisher of books and
journals in health sciences and special education; and rights to publish various
finance professional trade titles from Marketplace Books, Inc. for approximately
$1.7 million.
Lower cash used for property, equipment and technology spending was partially
offset by higher investments in product development and investments in
short-term marketable securities. Additions to property, plant and equipment in
fiscal years 2005 and 2004 are principally computer hardware and software to
support customer products and improve productivity. Additions to property, plant
and equipment in fiscal year 2003 included $33 million for the purchase of a
building in the United Kingdom, additions to a building in Germany, and
leasehold improvements at the Company's new Hoboken, N.J. headquarters.
Cash used for financing activities was $113.5 million in fiscal year 2005, as
compared to $72.4 million in fiscal year 2004. Current year financing activities
included the continuation of the Company's stock repurchase program as 2,877,200
shares were repurchased at an average price of approximately $32.94. On February
4, 2005, the Company repurchased one million shares of its Class A stock at a
price of $32.45 per share from several entities associated with the Bass group
of Fort Worth, Texas. The transaction was paid for out of existing cash
balances.
Under the current stock repurchase program, the Company has remaining
authorization to purchase up to approximately 900,000 shares of its Class A
Common Stock as of April 30, 2005. The Company paid quarterly dividends of
$0.075 per share versus $0.065 per share in the prior year. A $50 million
prepayment was made on the term loan facility during fiscal 2005 while the
Company's European subsidiaries entered into a new multicurrency revolving
credit facility under which $46 million was borrowed during fiscal 2005. Fiscal
year 2004 included a $35 million scheduled installment payment of long-term
debt.
The Company's operating cash flow is affected by the seasonality of its U.S.
Higher Education business and receipts from its journal subscriptions. Journal
receipts occur primarily during November and December from companies commonly
referred to as journal subscription agents. Reference is made to the Credit Risk
section, which follows, for a description of the impact on the Company as it
relates to journal agents' financial position and liquidity. Sales in the U.S.
higher education market tend to be concentrated in June through August, and
again in November through January.
The Company normally requires increased funds for working capital from May
through September. Subject to variations that may be caused by fluctuations in
inventory levels or in patterns of customer payments, the Company's operating
cash flow is not expected to vary materially in the near term.
Working capital at April 30, 2005 was negative $2.4 million. Current liabilities
include $142.8 million of deferred subscription revenue related to journals for
which the cash has been received and will be recognized into income as the
journals are shipped or made available to the customers online, or over the term
of the subscription as product is delivered. Working capital at April 30, 2004
was $17.6 million, including $127.2 million of deferred subscription revenue.
The decrease in working capital over the prior year was mainly due to the higher
income taxes payable and deferred subscription revenue offset by additional cash
on hand and higher accounts receivable.
The Company has adequate cash and cash equivalents available, as well as
short-term lines of credit to finance its short-term seasonal working capital
requirements. The Company does not have any off-balance-sheet debt.
Projected product development and property, equipment and technology capital
spending for fiscal year 2006 is forecast to be approximately $70 million and
$35 million, respectively. These investments will be funded primarily from
internal cash generation, the liquidation of cash equivalents, and the use of
short-term lines of credit.
A summary of contractual obligations and commercial commitments is as follows:
Dollars in millions Payments due by period
- --------------------------------------------------------------------------------
Contractual Within 2-3 4-5 After
Obligations Total Year 1 Years Years 5 years
- --------------------------------------------------------------------------------
Total debt $196.2 $ - $167.5 $28.7 $ -
Non cancelable Leases 235.2 26.4 49.1 44.3 115.4
Minimum royalty obligations 43.3 9.0 15.6 7.5 11.2
Other long term commitments 15.2 4.9 10.3 - -
--------------------------------------------------
Total $489.9 $40.3 $242.5 $80.5 $126.6
--------------------------------------------------
Market Risk
The Company is exposed to market risk primarily related to interest rates,
foreign exchange, and credit risk. It is the Company's policy to monitor these
exposures and to use derivative financial investments and/or insurance contracts
from time to time to reduce fluctuations in earnings and cash flows when it is
deemed appropriate to do so. The Company does not use derivative financial
instruments for trading or speculative purposes.
Copyrights, Patents, Trademarks, and Environment
Substantially all of the Company's publications are protected by copyright,
either in its own name, in the name of the author of the work, or in the name of
the sponsoring professional society. Such copyrights protect the Company's
exclusive right to publish the work in the United States and in many countries
abroad for specified periods: in most cases the author's life plus 70 years, but
in any event a minimum of 28 years for works published prior to 1978 and 35
years for works published thereafter.
The Company does not own any other material patents, franchises, or concessions,
but does have registered trademarks and service marks in connection with its
publishing businesses. The Company's operations are generally not affected by
environmental legislation.
Interest Rates
The Company had $196.2 million of variable rate loans outstanding at April 30,
2005, which approximated fair value. The Company did not use any derivative
financial investments to manage this exposure. A hypothetical 1% change in
interest rates for this variable rate debt would affect net income and cash flow
by approximately $1.3 million.
Foreign Exchange Rates
The Company is exposed to foreign exchange movements primarily in sterling,
euros, Canadian and Australian dollars, and certain Asian currencies. Under
certain circumstances, the Company may enter into derivative financial
instruments in the form of forward contracts as a hedge against foreign currency
fluctuation of specific transactions, including inter-company purchases. The
Company does not use derivative financial instruments for trading or speculative
purposes.
During the first quarter of fiscal year 2004 the Company entered into derivative
contracts to hedge potential foreign currency volatility on a portion of fiscal
year 2004 inventory purchases in Australia and Canada. The contracts were
designated as cash flow hedges. All of the derivative foreign exchange contracts
settled during fiscal year 2004 resulting in a pretax cost of approximately
$300,000, which was recognized in cost of sales as the related inventory was
sold. The Company did not enter into any derivative contracts during fiscal year
2005.
Credit Risk
The Company's business is not dependent upon a single customer; however, the
industry has experienced a significant concentration in national, regional, and
online bookstore chains in recent years. Although no one book customer accounts
for more than 5% of total consolidated revenue, the top 10 book customers
account for approximately 25% of total consolidated revenue and approximately
47% of total gross trade accounts receivable at April 30, 2005.
In the journal publishing business, subscriptions are primarily sourced through
journal subscription agents who, acting as agents for library customers,
facilitate ordering by consolidating the subscription orders/billings of each
subscriber with various publishers. Cash is generally collected in advance from
subscribers by the subscription agents and is remitted to the journal publisher,
including the Company, generally prior to the commencement of the subscriptions.
Although at fiscal year-end the Company had minimal credit risk exposure to
these agents, future calendar-year subscription receipts from these agents are
highly dependent on their financial condition and liquidity. Subscription agents
account for approximately 23% of total consolidated revenue and no one agent
accounts for more than 6% of total consolidated revenue. Insurance for these
accounts is not commercially feasible and/or available. A journal subscription
agent, Rowecom Inc., filed for bankruptcy in January 2003. The bankruptcy had no
material effect on the Company's consolidated financial statements.
Effects of Inflation and Cost Increases
The Company, from time to time, experiences cost increases reflecting, in part,
general inflationary factors. To mitigate the effect of cost increases, the
Company has implemented a number of initiatives, including various steps to
reduce production and manufacturing costs. In addition, selling prices have been
selectively increased as competitive conditions have permitted. The Company
anticipates that it will be able to continue this approach in the future.
Critical Accounting Policies
The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the U.S. requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and reported amounts of revenue and expenses during the
reporting period. Management continually evaluates the basis for its estimates;
however, actual results could differ from those estimates, which could affect
the reported results from operations. Set forth below is a discussion of the
Company's critical accounting policies and the basis for estimates used.
Revenue Recognition: In accordance with SEC Staff Accounting Bulletin No. 104,
"Revenue Recognition in Financial Statements," the Company recognizes revenue
when the following criteria are met: persuasive evidence that an arrangement
exists; delivery has occurred or services have been rendered; the price to the
customer is fixed or determinable; and collectibility is reasonably assured. If
all of the above criteria have been met, revenue is principally recognized upon
shipment of products or when services have been rendered. Subscription revenue
is generally collected in advance, and is deferred and recognized as earned when
the related issue is shipped or made available online over the term of the
subscription. Where a product has been sold with multiple deliverables the
Company follows EITF No. 00-21 "Accounting for Revenue Relationships with
Multiple Deliverables" to determine the timing of revenue recognition.
Collectibility is evaluated based on the amount involved, the credit history of
the customer, and the status of the customer's account with the Company.
Allowance for Doubtful Accounts: The estimated allowance for doubtful accounts
is based on a review of the aging of the accounts receivable balances, the
historical write-off experience, and a credit evaluation of the customer. A
change in the evaluation of a customer's credit could affect the estimated
allowance. The allowance for doubtful accounts is shown as a reduction of
accounts receivable in the accompanying consolidated balance sheets and amounted
to $7.3 million and $11.4 million at April 30, 2005 and 2004, respectively.
Sales Return Reserve: The estimated allowance for sales returns is based on a
review of the historical return patterns associated with the various sales
outlets, as well as current market trends in the businesses in which we operate.
Sales return reserves, net of estimated inventory and royalty costs, are
reported as a reduction of accounts receivable in the Consolidated Statement of
Financial Position and amounted to $56.7 million and $63.8 million at April 30,
2005 and 2004, respectively. A one percent change in the estimated sales return
rate could affect net income by approximately $3.0 million. A change in the
pattern or trends in returns could affect the estimated allowance.
Reserve for Inventory Obsolescence: Inventories are carried at cost or market
whichever is lower. A reserve for inventory obsolescence is estimated based on a
review of damaged, obsolete, or otherwise unsaleable inventory. The review
encompasses historical unit sales trends by title; current market conditions,
including estimates of customer demand; and publication revision cycles. A
change in sales trends could affect the estimated reserve. The inventory
obsolescence reserve is reported as a reduction of the inventory balance in the
Consolidated Statement of Financial Position and amounted to $24.2 million and
$25.9 million as of April 30, 2005 and 2004, respectively.
Allocation of Acquisition Purchase Price to Assets Acquired and Liabilities
Assumed: In connection with acquisitions, the Company allocates the cost of the
acquisition to the assets acquired and the liabilities assumed based on
estimates of the fair value of such items including goodwill, other intangible
assets with indefinite lives, and other intangible assets and the related useful
lives. Such estimates include expected cash flows to be generated by those
assets and the expected useful lives based on historical experience, current
market trends, and synergies to be achieved from the acquisition and expected
tax basis of assets acquired. For major acquisitions, the Company uses
independent appraisers to confirm the reasonableness of such estimates.
Goodwill and Other Intangible Assets: Goodwill is the excess of the purchase
price paid over the fair value of the net assets of the business acquired. Other
intangible assets principally consist of branded trademarks, acquired
publication rights and non-compete agreements. In accordance with SFAS 142,
goodwill and indefinite-lived intangible assets are no longer amortized but are
reviewed at least annually for impairment, or more often if events or
circumstances occur which would more likely than not reduce the fair value of a
reporting unit below its carrying amount. Other finite-lived intangible assets
continue to be amortized over their useful lives.
Acquired publication rights with definitive lives are amortized on a
straight-line basis over periods ranging from 5 to 30 years. Noncompete
agreements are amortized over the terms of the individual agreement. Impairment
of Long-Lived Assets: The Company follows Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS 144). Under SFAS 144, long-lived assets, except goodwill and
indefinite-lived intangible assets, are reviewed for impairment when
circumstances indicate the carrying value of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of the assets to future net cash flows estimated by the Company
to be generated by such assets. If such assets are considered to be impaired,
the impairment to be recognized is the amount by which the carrying amount of
the assets exceeds the fair value of the assets. Assets to be disposed of are
recorded at the lower of carrying value or estimated net realizable value.
Recent Accounting Standards
In October 2004, Congress passed the American Jobs Creation Act of 2004 (the
"Act"). In addition to a number of other changes in the tax law, the Act
provides a deduction from taxable income equal to a stipulated percentage of
qualified income from Companies that pay U.S income taxes on manufacturing
activities in the U.S. In December 2004, the Financial Accounting Standards
Board ("FASB") issued a FASB Staff Position ("FSP") regarding the accounting
implications of the Act. The FSP requires that the deduction for qualified
domestic property be accounted for as a special deduction in accordance with
FASB Statement No. 109, Accounting for Income Taxes, thus reducing a company's
tax expense in the period or periods the amounts are deductible on its tax
return. The net impact of the Act is expected to be favorable to the Company's
income tax rate.
In December 2004, the FASB issued Statement No. 123 (revised 2004) ("SFAS
123R"), Share-Based Payments. SFAS 123R will require the Company to measure the
cost of all employee stock-based compensation awards based on the
grant-date-fair-value and to record that cost as compensation expense over the
period during which the employee is required to perform service under the terms
of the award. The statement eliminates the alternative method of accounting for
the employee share-based payments previously available under Accounting
Principles Board Opinion No. 25. SFAS 123R will be effective beginning in the
Company's first quarter of fiscal year 2007. The Company currently discloses the
pro forma effect of SFAS 123 in the notes to the financial statements. The
impact of SFAS 123R adoption is expected to approximate the proforma effect
disclosed in the notes to these financial statements.
"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 level of investment in new technologies
and products; (ii) subscriber renewal rates for the Company's journals; (iii)
the financial stability and liquidity of journal subscription agents; (iv) the
consolidation of book wholesalers and retail accounts; (v) the market position
and financial stability of key online retailers; (vi) the seasonal nature of the
Company's educational business and the impact of the used-book market; (vii)
worldwide economic and political conditions; and (viii) the Company's ability to
protect its copyrights and other intellectual property worldwide (ix) 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.
Results by Quarter (Unaudited)
Dollars in millions except per share data
2005 2004
- --------------------------------------------------------------------------------
Revenue
First Quarter $ 226.9 $ 219.7
Second Quarter 247.1 228.9
Third Quarter 258.4 242.4
Fourth Quarter 241.6 232.0
- --------------------------------------------------------------------------------
Fiscal Year $ 974.0 $ 923.0
- --------------------------------------------------------------------------------
Operating Income
First Quarter $ 30.8 $ 33.2
Second Quarter 40.1 36.9
Third Quarter 50.4 43.9
Fourth Quarter 20.1 15.4
- --------------------------------------------------------------------------------
Fiscal Year $ 141.4 $ 129.4
- --------------------------------------------------------------------------------
Net Income
First Quarter $ 19.9 $ 21.8
Second Quarter 26.5 25.6
Third Quarter (a) 32.8 31.3
Fourth Quarter (b) 4.6 10.1
- --------------------------------------------------------------------------------
Fiscal Year (a) (b) $ 83.8 $ 88.8
- --------------------------------------------------------------------------------
Income Per Share Diluted Basic Diluted Basic
--------------------------------------------------------
First Quarter $.32 $.32 $.35 $.35
Second Quarter .42 .43 .41 .41
Third Quarter (a) .53 .54 .50 .51
Fourth Quarter (b) .08 .08 .16 .16
Fiscal Year (a)(b) 1.35 1.38 1.41 1.44
- --------------------------------------------------------------------------------
(a) In the third quarter of fiscal year 2004, the Company recognized a net tax
benefit of $3.0 million, equal to $0.05 per diluted share, related to the
resolution of certain state and federal tax matters, and an adjustment to
accrued foreign taxes.
(b) In fiscal year 2005, the Company elected to repatriate approximately $94
million of dividends from its European subsidiaries under the American Jobs
Creation Act of 2004, which became law on October 2004. The law provides
for a favorable one-time tax rate on dividends from foreign subsidiaries.
The tax accrual on the dividend included approximately $7.5 million, or
$0.12 per diluted share of tax, which will have no cash impact on the
Company. The income statement effect recorded in the fourth quarter of
fiscal year 2005 will be fully offset by a tax benefit that will be
recognized by the Company in the first quarter of fiscal year 2006.
Quarterly Share Prices, Dividends, and Related Stockholder Matters
The Company's Class A and Class B shares are listed on the New York Stock
Exchange under the symbols JWa and JWb, respectively. Dividends per share and
the market price range by fiscal quarter for the past two fiscal years were as
follows:
Class A Common Stock Class B Common Stock
----------------------------------------------------------------
Market Price Market Price
--------------- ---------------
Dividends High Low Dividends High Low
- --------------------------------------------------------------------------------
2005
First Quarter $.075 $32.77 $29.27 $.075 $32.90 $29.19
Second Quarter .075 33.05 31.00 .075 33.30 31.20
Third Quarter .075 35.25 32.44 .075 35.22 32.36
Fourth Quarter .075 36.91 33.52 .075 36.84 33.55
- --------------------------------------------------------------------------------
2004
First Quarter $.065 $27.21 $24.07 $.065 $27.10 $24.13
Second Quarter .065 28.26 25.80 .065 28.25 25.70
Third Quarter .065 26.83 24.24 .065 26.77 24.40
Fourth Quarter .065 31.58 26.28 .065 31.50 26.26
As of April 30, 2005, the approximate number of holders of the Company's Class A
and Class B Common Stock were 1,190 and 133 respectively, based on the holders
of record and other information available to the Company.
During the fourth quarter ending on April 30, 2005 the Company purchased the
following Common Stock under its stock repurchase program. The program was
approved by the Company's Board of Directors and publicly announced in December
2002.
Number of Average Maximum Shares Yet
Shares Price Paid to be Purchased
Month Purchased Per Share Under the Repurchase Plan
- --------------------------------------------------------------------------------
February 1,054,700 $32.60 2,169,600
March 202,300 $35.74 1,114,900
April 216,700 $35.81 898,200
- --------------------------------------------------------------------------------
Total 1,473,700 $33.50
The Company's credit agreement contains certain restrictive covenants related to
the payment of dividends and share repurchases. Under the most restrictive
covenant, approximately $172.4 million was available for such restricted
payments. Subject to the foregoing, the Board of Directors considers quarterly
the payment of cash dividends based upon its review of earnings, the financial
position of the Company, and other relevant factors.
Selected Financial Data
For the years ended April 30
----------------------------------------------------------------------------------------------
Dollars in thousands except per
share data 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue $974,048 $922,962 $853,971 $734,396 $613,790
Operating Income 141,381 129,379 120,261 (a) 87,763 (a)(b) 95,424
Net Income 83,841 (c) 88,840 (d) 87,275 (a)(e) 57,316 (a)(b) 58,918
Working Capital (f) (2,393) 17,641 (60,814) (66,915) (82,564)
Total Assets 1,032,569 998,946 972,240 896,145 588,002
Long-Term Debt 196,214 200,000 200,000 235,000 65,000
Shareholders' Equity 396,574 415,064 344,004 276,650 220,023
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share Data
Income Per Share
Diluted $1.35 (c) $1.41 (d) $1.38 (a)(e) $.91 (a)(b) $.93
Basic 1.38 (c) 1.44 (d) 1.42 (a)(e) .94 (a)(b) .97
Cash Dividends
Class A Common .30 .26 .20 .18 .16
Class B Common .30 .26 .20 .18 .16
(a) In the fourth quarter of fiscal year 2002 Wiley finalized its commitment to
relocate the Company's headquarters to Hoboken, N.J. The relocation was
completed in the first quarter of fiscal year 2003. The amounts reported
above include an unusual charge associated with the relocation of
approximately $2.5 million, or $1.5 million after tax equal to $0.02 per
diluted share in fiscal year 2003, and $12.3 million, or $7.7 million after
tax equal to $0.12 per diluted share, in fiscal year 2002.
(b) At the beginning of fiscal year 2003, the Company adopted Statement of
Financial Accounting Standard (SFAS) No. 142: "Goodwill and Other
Intangible Assets." In accordance with SFAS No. 142, amortization of
goodwill and indefinite life intangibles is discontinued. Fiscal year 2002
includes amortization, which is no longer recorded of $9.6 million ($7.8
million after-tax).
(c) During the fourth quarter of fiscal year 2005, the Company elected to
repatriate approximately $94 million of dividends from its European
subsidiaries under the American Jobs Creation Act of 2004, which became law
on October 2004. The law provides for a favorable one-time tax rate on
dividends from foreign subsidiaries. The tax accrual on the dividend
included approximately $7.5 million, or $0.12 per diluted share of tax that
will have no cash impact on the Company. The income statement effect
recorded in the fourth quarter of fiscal year 2005 will be fully offset by
a tax benefit that will be recognized by the Company in the first quarter
of fiscal year 2006.
(d) In fiscal year 2004, the Company recognized a net tax benefit of $3.0
million, equal to $0.05 per diluted share, related to the resolution of
certain state and federal tax matters, and an adjustment to accrued foreign
taxes.
(e) Fiscal year 2003 includes a one-time tax benefit of $12 million, equal to
$0.19 per diluted share, relating to an increase in the tax-deductible net
asset basis of a European subsidiary's assets.
(f) Working capital is reduced or negative as a result of including in current
liabilities the deferred subscription revenue related to journal
subscriptions for which the cash has been received and that will be
recognized into income as the journals are shipped or made available online
to the customers over the term of the subscription.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To our Shareholders
John Wiley and Sons, Inc.:
The management of John Wiley and Sons, Inc. and subsidiaries is responsible for
establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
Under the supervision and with the participation of our management, we conducted
an evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on our evaluation under the framework in Internal Control -
Integrated Framework issued by COSO, our management concluded that our internal
control over financial reporting was effective as of April 30, 2005.
Our management's assessment of the effectiveness of our internal control over
financial reporting as of April 30, 2005 has been audited by KPMG LLP, an
independent registered public accounting firm, as stated in their report which
is included herein.
/s/ William J. Pesce
- -------------------------------------------------------------------------
William J. Pesce
President and Chief Executive Officer
/s/ Ellis E. Cousens
- -------------------------------------------------------------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial and Operations Officer
/s/ Edward J. Melando
- -------------------------------------------------------------------------
Edward J. Melando
Vice President, Controller and
Chief Accounting Officer
June 30, 2005
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Shareholders
of John Wiley & Sons, Inc.:
We have audited the accompanying consolidated statements of financial position
of John Wiley & Sons, Inc. (the "Company") and subsidiaries as of April 30, 2005
and 2004, and the related consolidated statements of income, shareholders'
equity and comprehensive income, and cash flows for each of the years in the
three-year period ended April 30, 2005. In connection with our audits of the
consolidated financial statements, we also have audited the financial statement
schedule (as listed in the index to Item 8). These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of John Wiley & Sons,
Inc. and subsidiaries as of April 30, 2005 and 2004, and the results of their
operations and their cash flows for each of the years in the three-year period
ended April 30, 2005, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the Company's
internal control over financial reporting as of April 30, 2005, based on
criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated June 30, 2005 expressed an unqualified opinion on management's
assessment of, and the effective operation of, internal control over financial
reporting.
/s/ KPMG LLP
New York, New York
June 30, 2005
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board of Directors and Stockholders
John Wiley & Sons, Inc.:
We have audited management's assessment, included in the accompanying
Management's Report on Internal Control over Financial Reporting that John Wiley
and Sons, Inc. (the "Company") and subsidiaries maintained effective internal
control over financial reporting as of April 30, 2005, based on criteria
established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). The Company's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment, and an opinion on the effectiveness of the Company's
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, management's assessment that the Company maintained effective
internal control over financial reporting as of April 30, 2005, is fairly
stated, in all material respects, based on criteria established in Internal
Control - Integrated Framework issued by COSO. Also, in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of April 30, 2005, based on criteria established in Internal
Control - Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated statements of
financial position of the Company as of April 30, 2005 and 2004, and the related
consolidated statements of income, shareholders' equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
April 30, 2005, and our report dated June 30, 2005 expressed an unqualified
opinion on those consolidated financial statements.
/s/ KPMG LLP
New York, New York
June 30, 2005
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
John Wiley & Sons, Inc.:
We consent to the incorporation by reference in the Registration Statement Nos.
333-123359, 333-93591, 33-60268, 2-65296, 2-95104, 33-29372 and 33-62605 of John
Wiley & Sons, Inc. (the "Company") of our reports dated June 30, 2005, with
respect to the consolidated statements of financial position of John Wiley &
Sons, Inc. as of April 30, 2005 and 2004, and the related consolidated
statements of income, shareholders' equity and comprehensive income, and cash
flows, for each of the years in the three-year period ended April 30, 2005, and
the related financial statement schedule, management's assessment of the
effectiveness of internal control over financial reporting as of April 30, 2005
and the effectiveness of internal control over financial reporting as of April
30, 2005, which reports appear in the April 30, 2005 annual report on Form 10-K
of John Wiley & Sons, Inc.
/s/ KPMG LLP
New York, New York
July 7, 2005
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
John Wiley & Sons, Inc., and Subsidiaries April 30
----------------------------------------------------
Dollars in thousands 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $ 89,401 $ 82,027
Marketable securities 10,000 -
Accounts receivable 137,787 127,224
Taxes receivable 398 2,768
Inventories 83,372 83,789
Deferred income tax benefits 5,921 12,392
Prepaid and other 12,039 10,085
----------------------------------------------------
Total Current Assets 338,918 318,285
----------------------------------------------------
Product Development Assets 61,511 60,755
Property, Equipment and Technology 115,383 117,305
Intangible Assets 291,041 276,440
Goodwill 195,563 194,893
Deferred Income Tax Benefits 4,285 9,061
Other Assets 25,868 22,207
----------------------------------------------------
Total Assets $ 1,032,569 $ 998,946
====================================================
Liabilities and Shareholders' Equity
Current Liabilities
Accounts and royalties payable 70,958 68,338
Deferred subscription revenue 142,766 127,224
Accrued income taxes 36,376 19,338
Accrued pension liability 6,229 4,563
Other accrued liabilities 84,982 81,181
----------------------------------------------------
Total Current Liabilities 341,311 300,644
----------------------------------------------------
Long-Term Debt 196,214 200,000
Accrued Pension Liability 62,116 48,505
Other Long-Term Liabilities 34,652 31,757
Deferred Income Taxes 1,702 2,976
Shareholders' Equity
Preferred Stock, $1 par value: Authorized - 2 million, Issued - zero - -
Class A Common Stock, $1 par value: Authorized - 180 million,
Issued - 68,983,503 and 68,465,302 68,984 68,465
Class B Common Stock, $1 par value: Authorized - 72 million,
Issued - 14,206,759 and 14,724,960 14,207 14,725
Additional paid-in capital 55,478 45,887
Retained earnings 507,249 441,533
Accumulated other comprehensive gain (loss):
Foreign currency translation adjustment 28,531 18,123
Minimum liability pension adjustment (26,549) (15,926)
Unearned deferred compensation (3,074) (2,134)
----------------------------------------------------
644,826 570,673
Less Treasury Shares At Cost (Class A - 20,374,692 and 18,011,826;
Class B - 3,484,096 and 3,484,096) (248,252) (155,609)
----------------------------------------------------
Total Shareholders' Equity 396,574 415,064
----------------------------------------------------
Total Liabilities and Shareholders' Equity $ 1,032,569 $ 998,946
====================================================
CONSOLIDATED STATEMENTS OF INCOME
John Wiley & Sons, Inc., and Subsidiaries For the years ended April 30
----------------------------------------------------
Dollars in thousands except per share data 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue $974,048 $922,962 $853,971
Costs and Expenses
Cost of sales 325,061 308,905 288,925
Operating and administrative expenses 496,726 474,902 432,700
Amortization of intangibles 10,880 9,776 9,620
Relocation-related expenses - - 2,465
----------------------------------------------------
Total Costs and Expenses 832,667 793,583 733,710
----------------------------------------------------
Operating Income 141,381 129,379 120,261
Interest Income and Other, Net 1,505 890 262
Interest Expense (7,223) (5,159) (7,964)
----------------------------------------------------
Net Interest Expense and Other (5,718) (4,269) (7,702)
----------------------------------------------------
Income Before Taxes 135,663 125,110 112,559
Provision for Income Taxes 51,822 36,270 25,284
----------------------------------------------------
Net Income $83,841 $88,840 $87,275
====================================================
Income Per Share
Diluted $1.35 $1.41 $1.38
Basic $1.38 $1.44 $1.42
Cash Dividends Per Share
Class A Common $0.30 $0.26 $0.20
Class B Common $0.30 $0.26 $0.20
Average Shares
Diluted 62,093 63,226 63,086
Basic 60,721 61,771 61,504
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
John Wiley & Sons, Inc., and Subsidiaries For the years ended April 30
----------------------------------------------------
Dollars in thousands 2005 2004 2003
----------------------------------------------------
Operating Activities
- --------------------
Net Income $ 83,841 $ 88,840 $ 87,275
Noncash Items
Amortization of intangibles 10,881 9,776 9,620
Amortization of composition costs 36,026 31,852 29,923
Depreciation of property, equipment and technology 31,447 29,739 23,420
Reserves for returns, doubtful accounts, and obsolescence 1,250 9,012 11,219
Deferred income taxes 17,283 26,685 11,224
Pension expense, net of contributions (3,914) (8,603) 5,178
Other 25,035 23,518 24,552
Changes in Operating Assets and Liabilities
Decrease (increase) in accounts receivable (3,072) (17,339) (9,092)
Decrease (increase) in net taxes payable 21,362 (3,795) 732
Decrease (increase) in inventories 3,994 788 (14,594)
Increase (decrease) in deferred subscription revenues 14,044 8,077 (4,960)
Increase (decrease) in other accrued liabilities 5,493 12,834 (19,451)
Net change in other operating assets and liabilities (184) 828 14,082
----------------------------------------------------
Cash Provided by Operating Activities 243,486 212,212 169,128
----------------------------------------------------
Investing Activities
- --------------------
Additions to product development assets (64,407) (59,426) (51,835)
Additions to property, equipment and technology (26,826) (29,222) (63,221)
Acquisition of publishing assets and rights (22,527) (3,070) (10,500)
Purchase of marketable securities (15,203) - -
Sale of marketable securities 5,203 - -
----------------------------------------------------
Cash Used for Investing Activities (123,760) (91,718) (125,556)
----------------------------------------------------
Financing Activities
- --------------------
Repayment of long-term debt (50,000) (35,000) (30,000)
Borrowings of long-term debt 45,992 - -
Purchase of treasury stock (94,786) (26,126) (11,661)
Cash dividends (18,125) (16,270) (12,344)
Proceeds from exercise of stock options and other 3,444 4,958 1,500
----------------------------------------------------
Cash Used for Financing Activities (113,475) (72,438) (52,505)
----------------------------------------------------
Effects of Exchange Rate Changes on Cash 1,123 730 2,469
----------------------------------------------------
Cash and Cash Equivalents
Increase (decrease) for year 7,374 48,786 (6,464)
Balance at beginning of year 82,027 33,241 39,705
----------------------------------------------------
Balance at end of year $ 89,401 $ 82,027 $ 33,241
====================================================
Supplemental Information
Business/Rights Acquired:
Fair value of assets acquired $ 22,527 $ 3,070 $ 10,530
Liabilities assumed - - (30)
----------------------------------------------------
Cash Paid for Businesses/Rights Acquired $ 22,527 $ 3,070 $ 10,500
----------------------------------------------------
Cash Paid During the Year for
Interest $ 5,611 $ 4,620 $ 7,496
Income taxes, net $ 12,094 $ 11,801 $ 3,859
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
Unearned Other Comp- Total
Common Common Additional Deferred rehensive Share-
John Wiley & Sons, Inc., and Subsidiaries Stock Stock Paid-in Retained Treasury Comp- Income holder's
Dollars in thousands Class A Class B Capital Earnings Stock ensation (Loss) Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at May 1, 2002 $ 68,067 $ 15,124 $ 26,838 $ 294,032 $ (123,334) $ (1,375) $ (2,702) $ 276,650
Shares Issued Under Employee Benefit Plans 4,990 656 5,646
Purchase of Treasury Shares (11,661) (11,661)
Exercise of Stock Options, Net of Tax 2,275 540 2,815
Class A Common Stock Dividends Declared (10,024) (10,024)
Class B Common Stock Dividends Declared (2,320) (2,320)
Other 83 (83) 92 92
Comprehensive Income, Net of Tax:
Net income 87,275 87,275
Foreign currency translation adjustments 12,668 12,668
Derivative cash flow hedges 168 168
Minimum liability pension adjustment,
net of a $9,299 tax benefit (17,305) (17,305)
----------
Total Comprehensive Income 82,806
-------------------------------------------------------------------------------------
Balance at May 1, 2003 $ 68,150 $ 15,041 $ 34,103 $ 368,963 $ (133,799) $ (1,283) $ (7,171) $ 344,004
Shares Issued Under Employee Benefit Plans 4,203 1,371 5,574
Purchase of Treasury Shares (26,126) (26,126)
Exercise of Stock Options, Net of Tax 7,581 2,945 10,526
Class A Common Stock Dividends Declared (13,318) (13,318)
Class B Common Stock Dividends Declared (2,952) (2,952)
Other 315 (316) (851) (852)
Comprehensive Income, Net of Tax:
Net income 88,840 88,840
Foreign currency translation adjustments 7,989 7,989
Minimum liability pension adjustment,
net of a $741 tax charge 1,379 1,379
----------
Total Comprehensive Income 98,208
-------------------------------------------------------------------------------------
Balance at May 1, 2004 $ 68,465 $ 14,725 $ 45,887 $ 441,533 $ (155,609) $(2,134) $ 2,197 $ 415,064
Shares Issued Under Employee Benefit Plans 5,753 1,353 7,106
Purchase of Treasury Shares (94,786) (94,786)
Exercise of Stock Options, Net of Tax 3,838 790 4,628
Class A Common Stock Dividends Declared (14,938) (14,938)
Class B Common Stock Dividends Declared (3,187) (3,187)
Other 519 (518) (940) (939)
Comprehensive Income, Net of Tax:
Net income 83,841 83,841
Foreign currency translation adjustments 10,408 10,408
Minimum liability pension adjustment,
net of a $5,770 tax benefit (10,623) (10,623)
----------
Total Comprehensive Income 83,626
-------------------------------------------------------------------------------------
Balance at April 30, 2005 $ 68,984 $ 14,207 $ 55,478 $ 507,249 $ (248,252) $(3,074) $ 1,982 $ 396,574
=====================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Notes to Consolidated Financial Statements
The Company, founded in 1807, was incorporated in the state of New York on
January 15, 1904. (As used herein the term "Company" means John Wiley & Sons,
Inc., and its subsidiaries and affiliated companies, unless the context
indicates otherwise).
The Company is a global publisher of print and electronic products, providing
must-have content to customers worldwide. Core businesses include professional
and consumer books and subscription products; scientific, technical, and medical
journals, encyclopedias, books, and online products; and educational materials
for undergraduate and graduate students and lifelong learners. The Company has
publishing, marketing, and distribution centers in the United States, Canada,
Europe, Asia, and Australia.
Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company. Investments in entities in which the Company has at
least a 20%, but less than a majority interest, are accounted for using the
equity method of accounting. Investments in entities in which the Company has
less than a 20% ownership and in which it does not exercise significant
influence are accounted for using the cost method of accounting. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain prior-year amounts have been reclassified to conform to the current
year's presentation.
Use of Estimates: The preparation of the Company's financial statements in
conformity with accounting principles generally accepted in the United States
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
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue Recognition: In accordance with SEC Staff Accounting Bulletin No. 104,
"Revenue Recognition in Financial Statements," the Company recognizes revenue
when the following criteria are met: persuasive evidence that an arrangement
exists; delivery has occurred or services have been rendered; the price to the
customer is fixed or determinable; and collectibility is reasonably assured. If
all of the above criteria have been met, revenue is principally recognized upon
shipment of products or when services have been rendered. Subscription revenue
is generally collected in advance, and is deferred and recognized as earned when
the related issue is shipped or made available online over the term of the
subscription. Where a product has been sold with multiple deliverables the
Company follows EITF No. 00-21 "Accounting for Revenue Relationships with
Multiple Deliverables" to determine the timing of revenue recognition.
Collectibility is evaluated based on the amount involved, the credit history of
the customer, and the status of the customer's account with the Company.
Allowance for Doubtful Accounts: The estimated allowance for doubtful accounts
is based on a review of the aging of the accounts receivable balances, the
historical write-off experience, and a credit evaluation of the customer. A
change in the evaluation of a customer's credit could affect the estimated
allowance. The allowance for doubtful accounts is shown as a reduction of
accounts receivable in the accompanying consolidated balance sheets and amounted
to $7.3 million and $11.4 million at April 30, 2005 and 2004, respectively.
Sales Return Reserves: The estimated allowance for sales returns is based on a
review of the historical return patterns associated with the various sales
outlets, as well as current market trends in the businesses in which the Company
operates. Sales return reserves, net of estimated inventory and royalty costs,
are reported as a reduction of accounts receivable in the Consolidated Statement
of Financial Position and amounted to $56.7 million and $63.8 million at April
30, 2005 and 2004, respectively.
Reserve for Inventory Obsolescence: Inventories are carried at cost or market,
whichever is lower. A reserve for inventory obsolescence is estimated based on a
review of damaged, obsolete, or otherwise unsaleable inventory. The review
encompasses historical unit sales trends by title; current market conditions,
including estimates of customer demand; and publication revision cycles. The
inventory obsolescence reserve is reported as a reduction of the inventory
balance in the Consolidated Statement of Financial Position and amounted to
$24.2 million and $25.9 million as of April 30, 2005 and 2004, respectively.
Allocation of Acquisition Purchase Price to Assets Acquired and Liabilities
Assumed: In connection with acquisitions, the Company allocates the cost of the
acquisition to the assets acquired and the liabilities assumed based on
estimates of the fair value of such items including goodwill, other intangible
assets with indefinite lives, and other intangible assets with related useful
lives. Such estimates include expected cash flows to be generated by those
assets and the expected useful lives based on historical experience, current
market trends, and synergies to be achieved from the acquisition and expected
tax basis of assets acquired. For major acquisitions, the Company uses
independent appraisers to confirm the reasonableness of such estimates.
Inventories: Inventories are stated at cost or market, whichever is lower. U.S.
book inventories aggregating $62.1 million and $66.7 million at April 30, 2005
and 2004, respectively, are valued using the last-in, first-out (LIFO) method.
All other inventories are valued using the first-in, first-out (FIFO) method.
Product Development Assets: Product development assets consist of composition
costs and royalty advances to authors. Costs associated with developing any
publication are expensed until the product is determined to be commercially
viable. Composition costs, primarily representing the costs incurred to bring an
edited commercial manuscript to publication including typesetting, proofreading,
design and illustration, etc., are capitalized and generally amortized on a
double-declining basis over estimated useful lives, ranging from 1 to 3 years.
Royalty advances to authors are capitalized and, upon publication, are recovered
as royalties are earned by the authors based on sales of the published works.
Author advances are periodically reviewed for recoverability and a reserve for
loss is maintained, if appropriate.
Advertising Expense: Advertising costs are expensed as incurred.
Property, Equipment and Technology: Property, equipment and technology is
recorded at cost. Major renewals and improvements are capitalized, while
maintenance and repairs are expensed as incurred.
Costs incurred for computer software developed or obtained for internal use are
capitalized for application development activities and expensed as incurred for
preliminary project activities and post-implementation activities. Costs
incurred during the application development stage to obtain or develop computer
software for internal use including costs of materials and services, and payroll
and payroll-related costs for employees who are directly associated with the
software project, are capitalized and amortized over the expected useful life of
the related software. Costs incurred during the preliminary project stage, as
well as maintenance, training, and upgrades that do not result in additional
functionality, are expensed as incurred.
Buildings, leasehold improvements, and capital leases are amortized over the
lesser of the estimated useful lives of the assets up to 40 years, or the
duration of the various leases, using the straight-line method. Furniture and
fixtures are depreciated principally on the straight-line method over estimated
useful lives ranging from 3 to 10 years. Computer equipment and capitalized
software are amortized on a straight-line basis over estimated useful lives
ranging from 3 to 5 years.
Goodwill and Other Intangible Assets: Goodwill is the excess of the purchase
price paid over the fair value of the net assets of the business acquired. Other
intangible assets principally consist of branded trademarks, acquired
publication rights and non-compete agreements. In accordance with SFAS No. 142,
"Goodwill and Other Intangible Assets," goodwill and indefinite-lived intangible
assets are not amortized but are reviewed at least annually for impairment, or
more often if events or circumstances occur. The Company evaluates the
recoverability of goodwill and indefinite lived intangible assets using a
two-step impairment test approach at the reporting unit level. In the first step
the fair value for the reporting unit is compared to its book value including
goodwill. In the case that the fair value of the reporting unit is less than the
book value, a second step is performed which compares the implied fair value of
the reporting unit's goodwill to the book value of the goodwill. The fair value
for the goodwill is determined based on the difference between the fair values
of the reporting units and the net fair values of the identifiable assets and
liabilities of such reporting units. If the fair value of the goodwill is less
than the book value, the difference is recognized as an impairment. Other
finite-lived intangible assets continue to be amortized over their useful lives.
Acquired publication rights with definitive lives are amortized on a
straight-line basis over periods ranging from 5 to 30 years. Non-compete
agreements are amortized over the terms of the individual agreement.
Impairment of Long-Lived Assets: The Company follows Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144). Under SFAS No. 144, long-lived assets, except
goodwill and indefinite-lived intangible assets, are reviewed for impairment
when circumstances indicate the carrying value of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
estimated by the Company to be generated by such assets. If such assets are
considered to be impaired, the impairment to be recognized is the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are recorded at the lower of carrying value or
estimated net realizable value.
Derivative Financial Instruments - Foreign Exchange Contracts: The Company, from
time to time, enters into forward exchange contracts as a hedge against foreign
currency asset and liability commitments, and anticipated transaction exposures.
The Company does not use financial instruments for trading or speculative
purposes.
The Company accounts for its derivative instruments in accordance with SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," as amended.
Accordingly, all derivatives are recognized as assets or liabilities and
measured at fair value. Derivatives that are not determined to be effective
hedges are adjusted to fair value with a corresponding effect on earnings.
Changes in the fair value of derivatives that are designated and determined to
be effective as part of a hedge transaction have no immediate effect on earnings
and, depending on the type of hedge, are recorded either as part of other
comprehensive income and will be included in earnings in the period in which
earnings are affected by the hedged item, or are included in earnings as an
offset to the earnings impact of the hedged item. Any ineffective portions of
hedges are reported in earnings as they occur.
For a derivative to qualify as a hedge at inception and throughout the hedged
period, the Company formally documents the nature and relationships between the
hedging instruments and hedged items, as well as its risk-management objectives,
strategies for undertaking the various hedge transactions, and method of
assessing hedge effectiveness. For hedges of forecasted transactions, the
significant characteristics and expected terms of a forecasted transaction are
specifically identified, and it must be probable that each forecasted
transaction will occur. If it is deemed probable that the forecasted transaction
will not occur, the gain or loss is recognized in earnings currently.
During the first quarter of fiscal year 2004 the Company entered into derivative
contracts to hedge potential foreign currency volatility on a portion of fiscal
year 2004 inventory purchases. The contracts were designated as cash flow hedges
and were considered by management to be highly effective. All of the derivative
foreign exchange contracts settled during fiscal year 2004 resulting in a loss
of approximately $300,000, which was recognized in cost of sales as the related
inventory was sold.
The Company did not enter into any derivative contracts during fiscal year 2005.
Included in operating and administrative expenses were net foreign exchange
transaction (gains)/losses of approximately $(1.8) million, $1.4 million, and
$.7 million in fiscal years 2005, 2004, and 2003, respectively.
Foreign Currency Translation: The Company translates the results of operations
of its international subsidiaries using average exchange rates during each
period, whereas balance sheet accounts are translated using exchange rates at
the end of each period. Currency translation adjustments are recorded as a
component of accumulated other comprehensive income (loss) in stockholders'
equity.
Stock-Based Compensation: Stock options and restricted stock grants are
accounted for in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and the disclosure-only provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure."
Accordingly, the Company recognizes no compensation expense for fixed stock
option grants since the exercise price is equal to the fair value of the shares
at date of grant. For restricted stock grants, compensation cost is generally
recognized ratably over the vesting period based on the fair value of shares.
The fair value of the awards was estimated at the date of grant using the Black
Scholes option-pricing model. The per share value of options granted in
connection with the Company's stock option plans has been estimated with the
following weighted average assumptions:
2005 2004 2003
- --------------------------------------------------------------------------------
Expected Life of Options (Years) 8.1 8.1 8.0
Risk-Free Interest Rate 4.5% 2.9% 4.9%
Volatility 26.2% 30.7% 34.3%
Dividend Yield 0.9% 1.0% 0.8%
Per share fair value of options granted $11.00 $8.97 $11.09
For purposes of the following pro forma disclosure, the estimated fair value of
the options is amortized to expense over the options' vesting periods. The
Company's pro forma information under SFAS No. 123 and SFAS No. 148 was as
follows:
2005 2004 2003
--------------------------------------
Net Income as Reported $83,841 $88,840 $87,275
Stock-Based Compensation, Net of Tax,
Included in the Determination of
Net Income as Reported:
Restricted stock plans 3,575 2,642 1,436
Director stock plan 57 42 230
Stock-Based Compensation Costs, Net of Tax,
that would have been included in the
determination of net income had the fair
value-based method been applied (8,991) (7,145) (5,521)
--------------------------------------
Pro Forma Net Income $78,482 $84,379 $83,420
======================================
Reported Earnings Per Share
Diluted $1.35 $1.41 $1.38
Basic $1.38 $1.44 $1.42
Pro Forma Earnings Per Share
Diluted $1.26 $1.34 $1.32
Basic $1.29 $1.37 $1.36
Cash Equivalents: Cash equivalents consist primarily of highly liquid
investments that mature within three months or less and are stated at cost plus
accrued interest, which approximates market value.
Recent Accounting Standards
In October 2004, Congress passed the American Jobs Creation Act of 2004 (the
"Act"). In addition to a number of other changes in the tax law, the Act
provides a deduction from taxable income equal to a stipulated percentage of
qualified income from Companies that pay U.S income taxes on manufacturing
activities in the U.S. In December 2004, the Financial Accounting Standards
Board ("FASB") issued a FASB Staff Position ("FSP") regarding the accounting
implications of the Act. The FSP requires that the deduction for qualified
domestic property be accounted for as a special deduction in accordance with
FASB Statement No. 109, "Accounting for Income Taxes," thus reducing a company's
tax expense in the period or periods the amounts are deductible on its tax
return. The net impact of the Act is expected to be favorable to the Company's
income tax rate.
In December 2004, the FASB issued Statement No. 123 (revised 2004) ("SFAS 123R")
"Share-Based Payments." SFAS 123R will require the Company to measure the cost
of all employee stock-based compensation awards based on the
grant-date-fair-value and to record that cost as compensation expense over the
period during which the employee is required to perform service under the terms
of the award. The statement eliminates the alternative method of accounting for
the employee share-based payments previously available under Accounting
Principles Board Opinion No. 25. SFAS 123R will be effective beginning in the
Company's first quarter of fiscal year 2007. The Company currently discloses the
pro forma effect of SFAS 123 in the notes to these financial statements. The
impact of SFAS 123R adoption is expected to approximate the proforma effect as
disclosed in the notes to the financial statements.
Income Per Share
A reconciliation of the shares used in the computation of net income per share
for the years ended April 30 follows:
In thousands 2005 2004 2003
- -------------------------------------------------------------------------------------------------------
Weighted Average Shares Outstanding 60,886 62,009 61,675
Less: Unearned Deferred Compensation Shares (165) (238) (171)
- -------------------------------------------------------------------------------------------------------
Shares Used for Basic Income Per Share 60,721 61,771 61,504
Dilutive Effect of Stock Options and Other Stock Awards 1,372 1,455 1,582
- -------------------------------------------------------------------------------------------------------
Shares Used for Diluted Income Per Share 62,093 63,226 63,086
- -------------------------------------------------------------------------------------------------------
For the years ended April 30, 2005, 2004, and 2003 options to purchase Class A
Common Stock of zero, zero and .9 million respectively, have been excluded from
the shares used for diluted income per share as their inclusion would have been
antidilutive.
Acquisitions
In the first quarter of fiscal year 2005, the Company acquired the Journal of
Microscopy and Analysis, a controlled circulation journal, for approximately
$5.4 million, which is recorded as acquired publication rights.
In the third quarter of fiscal year 2005, the Company acquired the rights to the
life sciences reference portfolio of the Macmillan Nature Publishing Group for
approximately $4.5 million, which is recorded as acquired publication rights.
During the fourth quarter of fiscal year 2005, the Company completed the
acquisition of Whurr Publishers Limited for approximately $4.6 million. Whurr is
a leading publisher for the Nursing, Speech and Language Therapy and Audiology,
Psychology and Special Education communities in the U.K. In addition, the
Company acquired the rights to publish various finance professional trade titles
from Marketplace Books, Inc. for approximately $1.7 million. The majority of the
cost of both acquisitions are recorded as acquired publication rights.
During fiscal year 2004, the Company invested $3.1 million in acquisitions
including payments to complete prior year acquisitions, the purchase of
publishing rights to higher education titles and publishing rights to several
scientific, technical, and medical journals.
During fiscal year 2003, the Company acquired publishing assets aggregating
$10.5 million, which include teacher-education titles from Prentice Hall
Direct/Pearson Education, turf grass management and golf-course design titles
from Sleeping Bear Press/Ann Arbor Press, technology titles from Peer
Information Ltd. published under the Wrox Press Ltd. and Friends of Ed Ltd.
imprints, life-science textbooks from Fitzgerald Science Press, Inc., and the
Book of Yields from Chef Desk. The cost of these investments were principally
allocated to acquired publication rights and noncompete agreements that are
being amortized on a straight-line basis over estimated average useful lives
ranging from 5 to 20 years.
In April 2005, Wiley signed an agreement to acquire substantially all the assets
of Sybex, Inc., a global publisher of computer books and software for
information technology professionals for approximately $11 million. The sale
closed on May 31, 2005.
Headquarters Relocation
The Company completed the relocation of its headquarters to Hoboken, N.J. in the
first quarter of fiscal year 2003. The first quarter of fiscal year 2003
includes charges for costs associated with the relocation of approximately $2.5
million, or $1.5 million after tax equal to $0.02 per diluted share.
Marketable Securities
Marketable securities at April 30, 2005 consist entirely of shares of variable
rate securities issued by closed-end funds that invest in a diversified
portfolio of government and corporate securities. Generally, these securities do
not have a stated maturity date and reset their dividends every 28 days. The
Company accounts for these securities as available-for-sale in accordance with
SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities."
In fiscal year 2005, the Company purchased $15.2 million of these securities and
subsequently sold $5.2 million. For the year ended April 30, 2005, $0.1 million
was recognized as interest income on these securities. There were no comparable
investments at April 30, 2004 and April 30, 2003. The carrying value of these
securities approximates fair value.
Inventories
Inventories at April 30 were as follows (in thousands):
2005 2004
- --------------------------------------------------------------------------------
Finished Goods $72,931 $74,310
Work-in-Process 6,743 7,582
Paper, Cloth, and Other 6,028 4,397
- --------------------------------------------------------------------------------
85,702 86,289
LIFO Reserve (2,330) (2,500)
- --------------------------------------------------------------------------------
Total Inventories $83,372 $83,789
- --------------------------------------------------------------------------------
Product Development Assets
Product development assets consisted of the following at April 30 (in
thousands):
2005 2004
- --------------------------------------------------------------------------------
Composition Costs $34,296 $32,379
Royalty Advances 27,215 28,376
- --------------------------------------------------------------------------------
Total $61,511 $60,755
- --------------------------------------------------------------------------------
Composition costs are net of accumulated amortization of $84,719 in 2005 and
$76,248 in 2004.
Property, Equipment and Technology
Property, equipment and technology consisted of the following at April 30 (in
thousands):
2005 2004
- --------------------------------------------------------------------------------
Land and Land Improvements $ 4,773 $ 5,027
Buildings and Leasehold Improvements 66,491 62,188
Furniture and Fixtures 53,528 49,506
Computer Equipment and Capitalized Software 144,812 122,581
- --------------------------------------------------------------------------------
269,604 239,302
Accumulated Depreciation (154,221) (121,997)
- --------------------------------------------------------------------------------
Total $115,383 $117,305
- --------------------------------------------------------------------------------
The net book value of capitalized software costs was $27.7 million and $30.0
million as of April 30, 2005 and 2004, respectively. The depreciation expense
recognized in 2005, 2004, and 2003 for capitalized software costs was
approximately $14.8 million, $10.8 million, and $6.0 million, respectively.
Goodwill and Other Intangible Assets
The following table summarizes the activity in goodwill by segment (in
thousands):
Acquisitions
As of and Cumulative Translation As of
April 30, 2004 Dispositions and Other Adjustments April 30, 2005
- -------------------------------------------------------------------------------------------
P/T $ 147,256 - (376) $ 146,880
STM 23,193 - - 23,193
European 22,271 730 223 23,224
Other 2,173 - 93 2,266
- -------------------------------------------------------------------------------------------
Total $ 194,893 730 (60) $ 195,563
===========================================================================================
The following table summarizes intangibles subject to amortization as of April
30 (in thousands):
2005 2004
- --------------------------------------------------------------------------------
Acquired Publication Rights $171,430 $155,054
Accumulated Amortization (59,073) (53,505)
- --------------------------------------------------------------------------------
Net Acquired Publication Rights $112,357 $101,549
Covenants Not to Compete $1,690 $890
Accumulated Amortization (1,332) (483)
- --------------------------------------------------------------------------------
Net Covenants Not to Compete $358 $407
- --------------------------------------------------------------------------------
Total $112,715 $101,956
================================================================================
Based on the current amount of intangible assets subject to amortization, the
estimated amortization expense for each of the succeeding 5 fiscal years are as
follows: 2006 - $11.3 million; 2007 - $11.1 million; 2008 - $10.9 million; 2009
- - $10.7 million; and 2010 - $8.7 million.
The following table summarizes other intangibles not subject to amortization as
of April 30 (in thousands):
2005 2004
- --------------------------------------------------------------------------------
Acquired Publication Rights $120,426 $116,584
Branded Trademarks 57,900 57,900
- --------------------------------------------------------------------------------
Total $178,326 $174,484
================================================================================
Other Accrued Liabilities
Other accrued liabilities as of April 30 consisted of the following (in
thousands):
2005 2004
- --------------------------------------------------------------------------------
Accrued Compensation $47,300 $42,053
Rent 3,088 2,313
Employee Benefits 3,393 3,471
Advertising 5,388 5,517
Other 25,813 27,827
- --------------------------------------------------------------------------------
Total $84,982 $81,181
================================================================================
Income Taxes
The provision for income taxes for the year ended April 30 was as follows (in
thousands):
2005 2004 2003
- --------------------------------------------------------------------------------
Current Provision(Benefit)
US - federal $ 22,078 $ (1,198) $ 4,946
International 11,335 9,425 8,186
State and local 1,126 1,358 928
- --------------------------------------------------------------------------------
Total Current Provision 34,539 9,585 14,060
- --------------------------------------------------------------------------------
Deferred Provision(Benefit)
US - federal 11,156 21,529 16,923
International 4,656 2,600 (8,159)
State and local 1,471 2,556 2,460
- --------------------------------------------------------------------------------
Total Deferred Provision 17,283 26,685 11,224
- --------------------------------------------------------------------------------
Total Provision $ 51,822 $ 36,270 $ 25,284
- --------------------------------------------------------------------------------
Included in the Company's cash provided by operating activities under the
caption changes in other operating assets and liabilities are tax benefits
related to the exercise of stock options and restricted stock held by employees
amounting to $4.6 million, $7.9 million, and $3.0 million for fiscal years 2005,
2004, and 2003, respectively, which reduce current income taxes payable.
International and United States pretax income for the year ended April 30 was as
follows (in thousands):
2005 2004 2003
- --------------------------------------------------------------------------------
International $45,491 $41,853 $37,015
United States 90,172 83,257 75,544
- --------------------------------------------------------------------------------
Total $135,663 $125,110 $112,559
================================================================================
The Company's effective income tax rate as a percentage of pretax income
differed from the U.S. federal statutory rate as shown below:
2005 2004 2003
- --------------------------------------------------------------------------------
U.S. Federal Statutory Rate 35.0% 35.0% 35.0%
State and Local Income Taxes,
Net of Federal Income Tax Benefit 1.3 2.0 2.0
Tax Benefit Derived from FSC/EIE
Income (1.5) (1.6) (2.1)
Foreign Source Earnings Taxed at
Other than U.S. Statutory Rate (1.0) (2.9) (.8)
Foreign Reorganization - - (10.7)
Tax on Repatriated Foreign Dividends 5.5 - -
Tax Benefit - (2.4) -
Other - Net (1.1) (1.1) (.9)
- --------------------------------------------------------------------------------
Effective Income Tax Rate 38.2% 29.0% 22.5%
- --------------------------------------------------------------------------------
Tax on Repatriated Foreign Dividends: During the fourth quarter of fiscal year
2005, the Company elected to repatriate approximately $94 million of dividends
from its European subsidiaries under the American Jobs Creation Act of 2004,
which became law in October 2004. The law provides for a favorable one-time tax
rate on dividends from foreign subsidiaries. The tax accrual on the dividend
included approximately $7.5 million, or $0.12 per diluted share of tax which
will have no cash impact on the Company. The Company has provided the $7.5
million tax liability based on the enacted law in effect at April 30, 2005 and
will be reducing its liability by a corresponding amount based upon changes in
regulatory guidance issued in May 2005. The income statement effect recorded in
the fourth quarter of fiscal year 2005 will be fully offset by a tax benefit
that will be recognized by the Company in the first quarter of fiscal year 2006.
Tax Benefit: In fiscal year 2004 the Company reported a tax benefit related to
the favorable resolution of certain federal, state and foreign tax matters. The
tax benefit reduced the fiscal year 2004 effective tax rate by 2.4%
Foreign Reorganization: During the second quarter of fiscal year 2003 the
Company merged several of its European subsidiaries into a new entity, which
enabled the Company to increase the tax-deductible net asset basis of the merged
subsidiaries to fair market value creating a tax asset greater than the related
book value. The $12 million benefit attributable to the increase tax basis
reduced the Company's fiscal year 2003 effective tax rate by 10.7%. The $12
million benefit includes the release of $7.8 million of valuation allowance
recorded in prior years.
Deferred taxes result from temporary differences in the recognition of revenue
and expense for tax and financial reporting purposes. The significant components
of deferred tax assets and liabilities at April 30 were as follows (in
thousands):
2005 2004
----------------------------------------------
Current Long-Term Current Long -Term
- --------------------------------------------------------------------------------
Reserve for Sales Returns
and Doubtful Accounts $12,124 $484 $17,617 $438
Inventory (6,336) - (5,358) -
Accrued Expenses 133 9,290 133 7,689
Capitalized Costs - 4,850 - 5,657
Retirement and Post-
employment Benefits - 14,271 - 10,130
Depreciation and Amortization - (29,347) - (20,602)
Long-Term Liabilities - 3,035 - 2,773
- --------------------------------------------------------------------------------
Net Deferred Tax Assets $5,921 $2,583 $12,392 $6,085
- --------------------------------------------------------------------------------
In general, the Company plans to continue to invest the undistributed earnings
of its international subsidiaries in those businesses, and therefore no
provision other than the provision associated with the current year dividend
repatriated under the American Jobs Creation Act is made for taxes that would be
payable if such earnings were distributed. At April 30, 2005, the undistributed
earnings of international subsidiaries approximated $16 million and, if remitted
currently, would not result in additional taxes.
Debt and Available Credit Facilities
At April 30, 2005 2004
- --------------------------------------------------------------------------------
$200 million Term Loan Agreement - Due $150,000 $200,000
September 2006
$100 million Revolving Credit Facility - Due - -
September 2006
Sterling 50 million Revolving Credit Facility 46,214 -
- --------------------------------------------------------------------------------
Total Debt $196,214 $200,000
- --------------------------------------------------------------------------------
The Company maintains a bank credit facility with 13 banks, consisting of a $200
million five-year term loan facility and a $100 million revolving credit
facility. The Company prepaid $50 million of the term loan in April 2005. The
Company has the option of borrowing at the following floating interest rates:
(i) at a rate based on the London Interbank Offered Rate (LIBOR) plus an
applicable margin ranging from .625% to 1.375% depending on the coverage ratio
of debt to EBITDA; or (ii) at the higher of (a) the Federal Funds Rate plus .5%
or (b) UBS's prime rate, plus an applicable margin ranging from 0% to .375%
depending on the coverage ratio of debt to EBITDA. In addition, the Company pays
a commitment fee ranging from .125% to .225% on the unused portion of the
facility, depending on the coverage ratio of debt to EBITDA.
On April 21, 2005, the Company's subsidiaries in the United Kingdom and Germany
became co-borrowers under a multi-currency revolving credit agreement with a
face value of Sterling 50 million (approximately $96 million) with the Royal
Bank of Scotland that expires in April 2009. The bank's commitment decreases
each year on the anniversary of the agreement so that amounts outstanding cannot
exceed the following (in millions):
Fiscal Year Sterling US Dollar Equivalent
- --------------------------------------------------------------------------------
2006 42.5 $81.4
2007 30.0 $57.5
2008 15.0 $28.7
Above amounts have been translated at the April 30, 2005 US dollar/Sterling
exchange rate of 1.916
The interest rate on each borrowing under the multi-currency revolving credit
agreement is based on the London Interbank Offered Rate (or, for any loan in
euros, the Euro Interbank Offered Rate) plus an applicable margin ranging from
..50% to 1.25% depending on the coverage ratio of debt to EBITDA. In addition, a
commitment fee ranging from .125% to .3125% on the unused portion of the
facility, depending on the coverage ratio of debt to EBITDA, is incurred.
Borrowings under the agreement are guaranteed by John Wiley and Sons, Inc.
In the event of a change of control, as defined, the banks have the option to
terminate the agreements and require repayment of any amounts outstanding.
The credit agreements contain certain restrictive covenants related to minimum
net worth, funded debt levels, an interest coverage ratio, and restricted
payments, including a cumulative limitation for dividends paid and share
repurchases. Under the most restrictive covenant, approximately $172.4 million
was available for such restricted payments as of April 30, 2005.
The Company and its subsidiaries have other short-term lines of credit
aggregating $33 million at various interest rates. No amounts were outstanding
at April 30, 2005, 2004 or 2003. Information relating to all short-term lines of
credit follows (in thousands):
2005 2004 2003
- --------------------------------------------------------------------------------
Maximum amount outstanding during the year $ - $65,000 $95,000
Average amount outstanding $ - $14,241 $29,500
The Company's total available lines of credit as of April 30, 2005 were $228
million. The weighted average interest rates on long term debt outstanding
during fiscal years 2005 and 2004 were 2.77% and 1.87%, respectively. As of
April 30, 2005 and 2004, the weighted average interest rates for the long term
debt were 3.30% and 2.00% respectively. Based on estimates of interest rates
currently available to the Company for loans with similar terms and maturities,
the fair value of notes payable and long-term debt approximates the carrying
value.
Commitments and Contingencies
The following schedule shows the composition of rent expense for operating
leases (in thousands):
2005 2004 2003
- --------------------------------------------------------------------------------
Minimum Rental $ 25,897 $ 25,063 $ 24,819
Less: Sublease Rentals (1,248) (392) (156)
- --------------------------------------------------------------------------------
Total $ 24,649 $ 24,671 $ 24,663
- --------------------------------------------------------------------------------
Future minimum payments under operating leases aggregated $235.2 million at
April 30, 2005. Future annual minimum payments under these leases are
approximately $26.4 million, $25.3 million, $23.8 million, $22.9 million, and
$21.4 million for fiscal years 2006 through 2010, respectively. Future minimum
rentals to be received under non-cancelable subleases aggregate $10.7 million at
April 30, 2005. Rent expense associated with operating leases that include
scheduled rent increases and tenant incentives, such as rent holidays, is
recorded on a straight-line basis over the term of the lease.
The Company is involved in routine litigation in the ordinary course of its
business. In the opinion of management, the ultimate resolution of all pending
litigation will not have a material effect upon the financial condition or
results of operations of the Company.
Retirement Plans
The Company and its principal subsidiaries have contributory and noncontributory
retirement plans that cover substantially all employees. The plans generally
provide for employee retirement between the ages of 60 and 65, and benefits
based on length of service and compensation, as defined.
In fiscal year 2005, the U.S. retirement plan was amended to change the method
used to compute retirement benefits. The new formula will apply to current
compensation (as defined) whereas the previous formula was based upon the
highest average compensation for the three consecutive years ended December 31,
1997. Benefits accrued through December 31, 2004 under the "previous" plan were
frozen as of that date, and will be supplemented annually by additions
calculated under a new formula. The effect of this change was to increase
pre-tax pension expense for fiscal year 2005 by $0.5 million, $0.2 million
after-tax. The estimated pre-tax effect, for fiscal year 2006 is approximately
$1.5 million, $1.0 million after-tax.
In fiscal year 2003, certain international plans were amended to require
participants to make annual contributions to their plan. This amendment did not
have a material impact on pension expense for the year. The net pension expense
included below for the international plans amounted to approximately $6.7
million, $6.3 million, and $5.4 million for 2005, 2004, and 2003, respectively.
The Company has agreements with certain officers and senior management personnel
that provide for the payment of supplemental retirement benefits during each of
the 10 years after the termination of employment. Under certain circumstances,
including a change of control as defined, the payment of such amounts could be
accelerated on a present value basis.
The components of net pension expense for the defined benefit plans were as
follows (in thousands):
2005 2004 2003
- --------------------------------------------------------------------------------
Service Cost $8,492 $6,962 $6,519
Interest Cost 10,791 9,651 9,350
Expected Return on Plan Assets (9,146) (6,830) (6,889)
Net Amortization of Prior
Service Cost 591 666 645
Net Amortization of Unrecognized
Transition Asset (27) (25) (39)
Recognized Net Actuarial Loss 2,017 2,177 885
- --------------------------------------------------------------------------------
Net Pension Expense $12,718 $12,601 $10,471
- --------------------------------------------------------------------------------
The weighted-average assumptions used to determine net pension expense for the
years ended April 30 were as follows:
2005 2004 2003
- --------------------------------------------------------------------------------
Discount rate 6.1% 6.3% 7.1%
Rate of Compensation Increase 3.6% 3.7% 5.8%
Expected Return on Plan Assets 8.0% 7.9% 7.9%
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the retirement plans with accumulated benefit obligations in
excess of plan assets were $209.0 million, $190.8 million, and $127.7 million,
respectively, as of April 30, 2005, and $170.1 million, $158.8 million, $106.4
million, respectively, as of April 30, 2004.
The following table sets forth the changes in and the status of the plans'
assets and benefit obligations. The unfunded plans relate primarily to a non-US
subsidiary, which is governed by local statutory requirements, and the domestic
supplemental retirement plans for certain officers and senior management
personnel.
Dollars in thousands 2005 2004
-------------------------------------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS Funded Unfunded Funded Unfunded
------ -------- ------ --------
Fair Value of Plan Assets, Beginning of Year $ 110,897 $ - $ 78,608 $ -
Actual Return on Plan Assets 7,450 - 13,038 -
Employer Contributions 14,748 1,875 19,633 1,571
Participants' Contributions 724 - 472 -
Benefits Paid (4,410) (1,875) (4,984) (1,571)
Foreign Currency Rate Changes 3,920 - 4,130 -
-------------------------------------------------------------------------------------------------------------------------------
Fair Value, End of Year $ 133,329 $ - $ 110,897 $ -
-------------------------------------------------------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit Obligation, Beginning of Year $ (139,909) $ (34,367) $ (118,264) $ (31,832)
Service Cost (7,145) (1,346) (5,842) (1,120)
Interest Cost (8,656) (2,135) (7,689) (1,962)
Employees' Contributions (724) - (416) -
Amendments - 633 - -
Actuarial Gain (Loss) (16,923) (3,568) (6,260) 16
Benefits Paid 4,410 1,875 4,984 1,571
Foreign Currency Rate Changes (5,994) (1,577) (6,422) (1,040)
-------------------------------------------------------------------------------------------------------------------------------
Benefit Obligation, End of Year $ (174,941) $ (40,485) $ (139,909) $ (34,367)
-------------------------------------------------------------------------------------------------------------------------------
Funded Status $ (41,612) $ (40,485) $ (29,012) $ (34,367)
Unrecognized Net Asset 0 0 210 6
Unrecognized Prior Service Cost (Benefit) 3,931 (212) 4,419 404
Unrecognized Net Actuarial Loss 50,839 6,233 31,960 2,818
-------------------------------------------------------------------------------------------------------------------------------
Prepaid (Accrued) Pension Cost $ 13,158 $ (34,464) $ 7,577 $ (31,139)
-------------------------------------------------------------------------------------------------------------------------------
AMOUNTS RECOGNIZED IN THE STATEMENT OF
FINANCIAL POSITION
Deferred Pension Asset $ 1,397 $ - $ 992 $ -
Accrued Pension Liability (30,838) (37,507) (21,669) (31,395)
Other Asset 3,415 1,350 3,891 135
Accumulated Other Comprehensive Income 39,184 1,693 24,363 121
-------------------------------------------------------------------------------------------------------------------------------
Net Amount Recognized $ 13,158 $ (34,464) $ 7,577 $ (31,139)
-------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE ASSUMPTIONS USED IN
DETERMINING ASSETS AND LIABILITIES
Discount Rate 5.6% 5.3% 6.1% 6.1%
Expected Return on Plan Assets 8.4% - 8.0% -
Rate of Compensation Increase 3.8% 3.7% 3.6% 3.7%
-------------------------------------------------------------------------------------------------------------------------------
Accumulated Benefit Obligations $ (162,761) $ (32,260) $ (131,212) $ (30,668)
Increase/(Decrease) in Minimum Liability Included in
Accumulated Other Comprehensive Income (Above) $ 14,821 $ 1,572 $ (2,063) $ (37)
-------------------------------------------------------------------------------------------------------------------------------
The table below represents the asset mix of the investment portfolio of the
post-retirement benefit plan as of April 30:
Percentage of
Plan Assets
-------------------
Asset Category 2005 2004
- --------------------------------------------------------
U.S. Equities 25% 25%
International Equities 32% 35%
Debt Securities 37% 36%
Real Estate 5% 3%
Other 1% 1%
- --------------------------------------------------------
Total 100% 100%
- --------------------------------------------------------
The investment goal for the defined benefit pension plans is to generate an
above-average return in a diversified portfolio of stocks, bonds, and real
estate. The plans' risk management practices provide guidance to the investment
managers, including guidelines for asset concentration, credit rating and
liquidity. Asset allocation favors a balanced portfolio, with a target
allocation of approximately 55% equity securities, 40% fixed income securities,
and 5% real estate. Due to volatility in the market, the target allocation is
not always desirable and asset allocations will fluctuate between acceptable
ranges.
The expected long-term rates of return were estimated using market benchmarks
for equities, real estate, and bonds applied to each plan's target asset
allocation. Expected returns are estimated by asset class and represent the sum
of expected real rates of return plus anticipated inflation. The expected
long-term rates are then compared to actual historic investment performance of
the plan assets and evaluated through consultation with investment advisors.
Expected employer contributions in fiscal year 2006 to the defined benefit
pension plans are $7 million, consisting primarily of the minimum legal amounts
required for its international plans. Wiley does not anticipate making a
contribution to its domestic defined benefit pension plan as, currently, none is
statutorily required. From time to time, the Company may elect to make voluntary
contributions to its defined benefit plans to improve their funded status.
Expected benefit payments from all plans are expected to approximate $6.5
million in fiscal year 2006, $6.9 million in fiscal year 2007, $7.3 million in
fiscal year 2008, $7.8 million in fiscal year 2009, $8.3 million in fiscal year
2010, and $48.5 million for fiscal years 2011 through 2015.
The Company provides contributory life insurance and health care benefits,
subject to certain dollar limitations for substantially all of its retired U.S.
employees. The cost of such benefits is expensed over the years the employee
renders service and is not funded in advance. The accumulated post-retirement
benefit obligation as of April 30, 2005 and 2004 was $2.0 million and $1.4
million, respectively. Annual expenses for these plans for all years were
immaterial.
The Company has a defined contribution 401(k) savings plan. The Company
contribution is based on employee contributions and the level of Company match.
The expense for this plan amounted to approximately $2.7 million, $2.9 million,
and $2.5 million in 2005, 2004, and 2003, respectively.
Equity Compensation Plans
All equity compensation plans have been approved by security holders. In fiscal
year 2005, the shareholders approved the 2004 Key Employee Stock Plan ("2004
Plan") to replace the Company's prior Long Term Incentive Plan. Under the 2004
Plan, qualified employees are eligible to receive awards that may include stock
options, performance-based stock awards, and restricted stock awards. Under the
2004 Plan, a maximum number of 8,000,000 shares of Company Class A stock may be
issued. No more than 600,000 shares to any one individual may be issued in a
year. As of April 30, 2005, there were no remaining securities to be issued
under the Company's prior Long Term Incentive Plan and 7,985,000 securities
remaining available for future issuance under the 2004 Plan.
The exercise price of options granted under the plan may not be less than 100%
of the fair market value of the stock at the date of grant. Options are
exercisable, in part or in full, over a maximum period of 10 years from the date
of grant, and generally vest within five years from the date of the grant. Under
certain circumstances relating to a change of control, as defined, the right to
exercise options outstanding could be accelerated.
A summary of the activity and status of the Company's stock option plans was as
follows:
2005 2004 2003
------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at Beginning of Year 5,047,980 $20.12 5,034,904 $16.98 4,599,704 $14.44
Granted 993,145 $31.84 928,834 $25.32 900,809 $24.90
Exercised (425,066) $12.12 (881,013) $7.63 (427,356) $ 5.78
Canceled (53,000) $25.29 (34,745) $21.77 (38,253) $23.17
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at End of Year 5,563,059 $22.77 5,047,980 $20.12 5,034,904 $16.98
- ------------------------------------------------------------------------------------------------------------------------------------
Exercisable at End of Year 2,246,068 $16.80 2,104,909 $14.22 2,161,372 $10.08
- ------------------------------------------------------------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding and
options exercisable at April 30, 2005:
Options Outstanding Options Exercisable
------------------- -------------------
Range of Exercise Number of Weighted Average Weighted Average Number of Weighted Average
Prices Options Remaining Term Exercise Price Options Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
$ 7.06 to $ 8.63 367,438 1.7 years $ 8.17 367,438 $ 8.17
$13.75 to $14.59 831,036 3.1 years 13.90 831,036 13.90
$17.25 to $20.54 93,895 6.1 years 19.49 82,145 19.34
$20.56 to $23.40 969,174 5.3 years 22.25 535,874 21.39
$23.56 to $25.32 2,323,513 6.9 years 24.77 429,575 23.57
$31.89 to $31.89 978,003 9.1 years 31.89 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total 5,563,059 6.1 years $22.77 2,246,068 $16.80
- ------------------------------------------------------------------------------------------------------------------------------------
Under the terms of the Company's executive long-term incentive plans, upon the
achievement of certain three-year financial performance-based targets, awards
will be payable in restricted shares of the Company's Class A Common Stock. The
restricted shares vest 50% on the first and second anniversary date after the
award is earned. Compensation expense is charged to earnings over the respective
three-year period.
The Company also grants restricted shares of the Company's Class A Common Stock
to key executive officers and others in connection with their employment. The
restricted shares generally vest one half at the end of the fourth and fifth
years following the date of the grant. Under certain circumstances relating to a
change of control or termination, as defined, the restrictions would lapse and
shares would vest earlier.
Compensation expense is charged to earnings ratably over five years, or sooner
if vesting is accelerated, from the dates of grant. Restricted shares issued in
connection with the above plans amounted to 129,647, 177,605 and 84,376 shares
at weighted average fair values of $32.13, $25.16, and $26.08 per share in 2005,
2004, and 2003, respectively.
Under the terms of the Company's 1990 Director Stock Plan (the "1990 Plan"), as
amended and restated as of June 2001, each member of the Board of Directors who
is not an employee of the Company was awarded either (a) Class A Common Stock
equal to 50% of the board member's annual fee, based on the stock price on the
date of grant, or (b) stock options equal to 150% of the annual fee divided by
the stock price on the date of grant. Directors' stock options were 100%
exercisable at date of grant. In fiscal year 2003, 13,224 stock options were
granted under the 1990 Plan at an exercise price of $21.44. In fiscal years 2005
and 2004, 4,498 and 4,109 shares of common stock were issued under the 1990
Plan, respectively.
In September 2004 the shareholders approved the Director Stock Plan (the
"Director Plan"). No further shares or options will be granted under the 1990
Plan. Under the terms of the Director Plan, each non-employee director will
receive an award of Class A Common Stock equal in value to 100% of the annual
director fee, based on the stock price on the date of grant. The granted shares
may not be sold or transferred during the time the non-employee director remains
a director.
Directors may also elect to receive all or a portion of their director fees in
Company stock. No shares were issued in lieu of cash compensation for any of the
years presented.
Capital Stock and Changes in Capital Accounts
Each share of the Company's Class B Common Stock is convertible into one share
of Class A Common Stock. The holders of Class A stock are entitled to elect 30%
of the entire Board of Directors and the holders of Class B stock are entitled
to elect the remainder. On all other matters, each share of Class A stock is
entitled to one tenth of one vote and each share of Class B stock is entitled to
one vote.
Under the Company's current stock repurchase program, up to four million shares
of its Class A common stock may be purchased from time to time in the open
market and through privately negotiated transactions. During fiscal year 2005,
the Company repurchased 2,877,200 shares at an average price of $32.94 per share
under the current and previous programs. As of April 30, 2005, the Company has
authorization from its Board of Directors to purchase up to approximately
900,000 additional shares.
Segment Information
The Company is a global publisher of print and electronic products, providing
must-have content and services to customers worldwide. Core businesses include
professional and consumer books and subscription services; scientific, technical
and medical journals, encyclopedias, books, and online products and services;
and educational materials for advanced placement, undergraduate, and graduate
students, teachers and 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, which is also used to evaluate performance. Other segments
include the Company's operating divisions in Asia, Australia and Canada. Segment
information is as follows (in thousands):
2005
- ------------------------------------------------------------------------------------------------------------------------------------
Eliminations
European Other & Corporate
U.S. Segments Segment Segments Items Total
---------------------------------------------------- ------------ ------------ ------------ ----------
Scientific,
Professional/ Technical, Higher Total
Trade and Medical Education U.S.
------------ ------------ ------------ ----------
Revenue
External Customers $313,655 $182,412 $124,062 $620,129 $247,016 $106,903 $ - $974,048
Intersegment Sales 36,683 8,103 26,843 71,629 21,841 1,746 (95,216) -
------------ ------------ ------------ ---------- ------------ ------------ ------------ ----------
Total Revenue $350,338 $190,515 $150,905 $691,758 $268,857 $108,649 $(95,216) $974,048
------------ ------------ ------------ ---------- ------------ ------------ ------------ ----------
Direct Contribution
to Profit $102,326 $88,899 $38,221 $229,446 $86,226 $24,175 - $339,847
------------ ------------ ------------ ---------- ------------ ------------ ------------
Shared Services and
Admin. Costs (a) ($198,466)
----------
Operating Income 141,381
Interest Expense and
Other, Net (5,718)
----------
Income Before Taxes $135,663
==========
Total Assets $395,397 $62,207 $101,596 $559,200 $269,792 $46,417 $157,160 $1,032,569
Expenditures for Other
Long-Lived Assets $33,283 $12,038 $13,341 $58,662 $29,404 $4,971 $20,723 $113,760
Depreciation and
Amortization $16,814 $5,083 $16,083 $37,980 $13,916 $3,662 $22,796 $78,354
- ------------------------------------------------------------------------------------------------------------------------------------
2004
- ------------------------------------------------------------------------------------------------------------------------------------
Eliminations
European Other & Corporate
U.S. Segments Segment Segments Items Total
---------------------------------------------------- ------------ ------------ ------------ ----------
Scientific,
Professional/ Technical, Higher Total
Trade and Medical Education U.S.
------------ ------------ ------------ ----------
Revenue
External Customers $306,042 $170,526 $128,067 $604,635 $220,756 $97,571 $ - $922,962
Intersegment Sales 34,210 7,574 24,794 66,578 17,680 1,415 (85,673) -
------------ ------------ ------------ ---------- ------------ ------------ ------------ ----------
Total Revenue $340,252 $178,100 $152,861 $671,213 $238,436 $98,986 $(85,673) $922,962
------------ ------------ ------------ ---------- ------------ ------------ ------------ ----------
Direct Contribution
to Profit $93,945 $86,310 $41,749 $222,004 $74,585 $22,218 - $318,807
------------ ------------ ------------ ---------- ------------ ------------ ------------
Shared Services and
Admin. Costs (a) ($189,428)
----------
Operating Income 129,379
Interest Expense and
Other, Net (4,269)
----------
Income Before Taxes $125,110
==========
Total Assets $395,550 $56,277 $113,614 $565,441 $237,976 $39,146 $156,383 $998,946
Expenditures for
Long-Lived Assets $26,822 $11,620 $11,150 $49,592 $15,642 $4,445 $22,039 $91,718
Depreciation and
Amortization $16,728 $4,276 $13,904 $34,908 $13,013 $3,037 $20,409 $71,367
- ------------------------------------------------------------------------------------------------------------------------------------
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Eliminations
European Other & Corporate
U.S. Segments Segment Segments Items Total
---------------------------------------------------- ------------ ------------ ------------ ----------
Scientific,
Professional/ Technical, Higher Total
Trade and Medical Education U.S.
------------ ------------ ------------ ----------
Revenue
External Customers $289,090 $160,017 $124,017 $573,124 $194,326 $86,521 $ - $853,971
Intersegment Sales 32,873 8,191 24,203 65,267 16,156 793 (82,216) -
------------ ------------ ------------ ---------- ------------ ------------ ------------ ----------
Total Revenue $321,963 $168,208 $148,220 $638,391 $210,482 $87,314 $(82,216) $853,971
------------ ------------ ------------ ---------- ------------ ------------ ------------ ----------
Direct Contribution
to Profit $87,354 $77,937 $39,938 $205,229 $69,191 $16,278 - $290,698
------------ ------------ ------------ ---------- ------------ ------------ ------------
Shared Services and
Admin. Costs (a) ($167,972)
Unusual Items (b) (2,465)
----------
Operating Income 120,261
Interest Expense and
Other, Net (7,702)
----------
Income Before Taxes $112,559
==========
Total Assets $391,075 $55,868 $117,165 $564,108 $228,013 $36,565 $143,554 $972,240
Expenditures for Other
Long-Lived Assets $35,218 $9,258 $13,812 $58,288 $26,150 $3,602 $37,516 $125,556
Depreciation and
Amortization $16,849 $4,130 $12,650 $33,629 $10,054 $2,403 $16,877 $62,963
(a) Shared Services and Administrative Costs ( in thousands):
2005 2004 2003
---------------------------------------------------------------------------------------------------------
Distribution $47,631 $47,570 $45,680
Information Technology 55,147 51,918 42,427
Finance 33,880 29,900 27,919
Other Administration 61,808 60,040 51,946
---------------------------------------------------------------------------------------------------------
Total $198,466 $189,428 $167,972
=========================================================================================================
(b) Relocation related expenses
Intersegment sales are generally made at a fixed discount from list price.
Shared services costs are not allocated, as they support the Company's worldwide
operations. Corporate assets primarily consist of cash and cash equivalents,
deferred tax benefits, and certain property and equipment. Export sales,
principally STM journals, from the United States to unaffiliated international
customers amounted to approximately $67.7 million, $68.8 million, and $75.6
million in fiscal years 2005, 2004, and 2003, respectively. The pretax income
for consolidated operations outside the United States was approximately $45.5
million, $41.9 million, and $37.0 million in 2005, 2004, and 2003, respectively.
Worldwide revenue for the Company's core businesses was as follows (in
thousands):
2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------
Professional/Trade $411,432 $393,134 $369,115
Scientific, Technical, and Medical 372,122 340,235 308,554
Higher Education 190,494 189,593 176,302
- -------------------------------------------------------------------------------------------------------------------
Total $974,048 $922,962 $853,971
===================================================================================================================
Revenue from external customers based on the location of the customer and
long-lived assets by geographic area was as follows:
Dollars in thousands
-------------------- Revenue Long-Lived Assets
------------------------------------------- ------------------------------------------
2005 2004 2003 2005 2004 2003
------------- ----------- ----------- ----------- ------------ ------------
United States $576,521 $567,341 $524,394 $450,159 $461,039 $468,763
United Kingdom 73,428 67,821 56,285 81,041 61,712 55,941
Germany 69,964 57,018 56,826 143,349 138,311 135,553
Australia 38,025 34,241 27,849 9,640 6,699 5,690
Canada 37,994 33,918 33,063 3,543 2,097 1,651
Other Countries 178,116 162,623 155,554 1,634 1,742 1,730
------------- ----------- ----------- ----------- ------------ ------------
Total $974,048 $922,962 $853,971 $689,366 $671,600 $669,328
============= =========== =========== =========== ============ ============
Schedule II
-----------
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 2005, 2004, AND 2003
(Dollars in thousands)
Additions/(Deductions)
----------------------------
Balance at Charged to From Deductions Balance at
Description Beginning Cost & Acquisitions From Reserves End of Period
of Period Expenses (3)
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended April 30, 2005
Allowance for sales returns(1) $ 63,752 $ 101,030 $ - $ 108,121 $ 56,661
Allowance for doubtful accounts $ 11,378 $ 1,861 $ - $ 5,959(2) $ 7,280
Allowance for inventory obsolescence $ 25,915 $ 20,342 $ 341 $ 22,429 $ 24,169
Year Ended April 30, 2004
Allowance for sales returns(1) $ 65,130 $ 107,956 $ - $ 109,334 $ 63,752
Allowance for doubtful accounts $ 9,546 $ 2,861 $ - $ 1,029(2) $ 11,378
Allowance for inventory obsolescence $ 25,719 $ 23,301 $ (18) $ 23,087 $ 25,915
Year Ended April 30, 2003
Allowance for sales returns(1) $ 67,816 $ 105,404 $ - $ 108,090 $ 65,130
Allowance for doubtful accounts $ 17,008 $ 1,590 $ (7,326) $ 1,726(2) $ 9,546
Allowance for inventory obsolescence $ 32,090 $ 18,822 $ (298) $ 24,895 $ 25,719
- ---------------------------------------
(1) Allowance for sales returns represents anticipated returns net of inventory
and royalty costs.
(2) Accounts written off, less recoveries.
(3) Subsequent purchase accounting adjustment primarily associated with the
acquisition of Hungry Minds.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
------------------------------------------------------------------
None
Item 9A. Controls and Procedures
-----------------------
Disclosure Controls and Procedures: As of the end of the period
covered by this report, an evaluation was performed under the
supervision and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of the Company's
disclosure controls and procedures as such term is defined in Rule
13a-15(e) of the Exchange Act. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective in
alerting them on a timely basis to information required to be included
in our submissions and filings with the SEC.
Management's Report on Internal Control over Financial Reporting: Our
Management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in
Rule 13a-15(f) of the Exchange Act. Under the supervision and with the
participation of our management, including our Chief Executive Officer
and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based
upon the framework in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on that evaluation, our management concluded that
our internal control over financial reporting is effective as of April
30, 2005.
KPMG LLP, an independent registered public accounting firm, has
audited the consolidated financial statements included in this Annual
Report on Form 10-K and, as part of their audit, has issued their
report, included herein, (1)on our management's assessment of the
effectiveness of our internal controls over financial reporting and
(2) on the effectiveness of our internal control over financial
reporting.
Changes in Internal Control over Financial Reporting: There were no
changes in our internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting during our fourth fiscal
quarter of 2005.
Item 9B. Other Information
-----------------
None
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The name, age and background of each of our directors nominated for
election are contained under the caption "Election of Directors" in
our Proxy Statement for our 2005 Annual Meeting of Shareholders and
are incorporated herein by reference.
Information on the beneficial ownership reporting for our directors
and executive officers is contained under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance" in our Proxy Statement for
our 2005 Annual Meeting of Shareholders and is incorporated herein by
reference.
Information on our audit committee financial experts is contained in
our Proxy Statement for our 2005 Annual Meeting of Shareholders under
the caption "Report of the Audit Committee" and is incorporated herein
by reference.
Information on the Audit Committee Charter is contained in our Proxy
Statement for our 2005 Annual Meeting of Shareholders under the
caption "Audit Committee Charter - Exhibit A" and is incorporated
herein by reference.
Information with respect to the Company's corporate governance
principles is contained in our Proxy Statement for our 2005 Annual
Meeting of Shareholders under the caption "Corporate Governance
Principles" and is incorporated herein by reference.
The Company's Corporate Governance Principles, Committee Charters,
Business Conduct and Ethics Policy and the Code of Ethics for Senior
Financial Officers are published on our web site at www.wiley.com
under the "About Wiley--Investor Relations--Corporate Governance"
captions. Copies are also available free of charge to shareholders on
request to the Corporate Secretary, John Wiley & Sons, Inc., 111 River
Street, Hoboken, NJ 07030-5774.
Executive Officers
------------------
Set forth below as of April 30, 2005 are the names and ages of all
executive officers of the Company, the period during which they have
been officers, and the offices presently held by each of them.
Name and Age Officer Since Present Office
Peter Booth Wiley 2002 Chairman of the Board since September 2002
62 and a Director
William J. Pesce 1989 President and Chief Executive Officer
54 and a Director since May 1, 1998 (previously
Chief Operating Officer; Executive Vice
President, Educational and International Group)
Ellis E. Cousens 2001 Executive Vice President and Chief Financial
53 and Operations Officer since March 2001 (previously Senior Vice
President, Chief Financial Officer of Bookspan, a Bertelsmann AG
joint venture, from March 2000; Vice President, Finance and
Strategic Planning, of Bertelsmann AG from March 1999; Vice
President, Chief Financial Officer of BOL.com, a subsidiary of
Bertelsmann AG, from August 1998)
Stephen A. Kippur 1986 Executive Vice President; and President,
58 Professional and Trade Publishing, since July
1998 (previously Executive Vice President and Group President,
Professional, Reference and Trade)
William Arlington 1990 Senior Vice President, Human Resources, since
56 June 1996
John Jarvis 1996 Senior Vice President, Wiley Europe, since 1996
58
Timothy B. King 1996 Senior Vice President, Planning and
65 Development, since June 1996
Bonnie E. Lieberman 1990 Senior Vice President, Higher Education, since 1996
57
Gary M. Rinck 2004 Senior Vice President, General Counsel, since March 2004
53 (previously Group General Counsel of Pearson PLC, from 2000,
Managing Partner of the London office of Morrison & Foerster
from 1995.)
Stephen M. Smith 1995 Senior Vice President, International Development and Director of
50 Professional and Trade Publishing, since 1995
Eric Swanson 1989 Senior Vice President, Scientific, Technical and Medical, since 1996
Deborah E. Wiley 1982 Senior Vice President, Corporate
59 Communications, since June 1996
Walter Conklin 1988 Vice President, Treasurer, since 1988
61
Edward J. Melando 2002 Vice President, Corporate Controller, since April 2002
49 (previously Vice President, Corporate Controller of
Journal Register Company from August 2000; Corporate
Controller of Asarco Incorporated, from April 1999)
Josephine Bacchi 1992 Corporate Secretary, since 1992
58
Each of the other officers listed above will serve until the next
organizational meeting of the Board of Directors of the Company and
until each of the respective successors is duly elected and qualified.
Deborah E. Wiley is the sister of Peter Booth Wiley. There is no other
family relationship among any of the aforementioned individuals.
Item 11. Executive Compensation
----------------------
Information on compensation of our directors and executive officers is
contained in our Proxy Statement for our 2005 Annual Meeting of
Shareholders under the captions "Directors' Compensation" and
"Executive Compensation," respectively, and is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
------------------------------------------------------------------
Information required by this item is contained in the Company's Proxy
Statement for our 2005 Annual Meeting of Shareholders under the
caption "Beneficial Ownership of Directors and Management" and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
None.
Item 14. Principal Accountant Fees and Services
--------------------------------------
Information required by this item is contained in the Company's Proxy
Statement for our 2005 Annual Meeting of Shareholders under the
caption "Report of the Audit Committee" and is incorporated herein by
reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a) Financial Statements and Schedules
Financial Statements and Schedules are listed in the
attached index on page 6 and are filed as part of this
Report.
(b) Reports on Form 8-K
Earnings release on the third quarter fiscal 2005 results
issued on form 8-K dated March 4, 2005, which included
certain condensed financial statements of the Company.
Earnings release on the fiscal year 2005 results issued on
form 8-K dated June 14, 2005, which included certain
condensed financial statements of the Company.
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of August 12, 2001, among
the Company, HMI Acquisition Corp. and Hungry Minds, Inc.
(incorporated by reference to the Company's Report on Form 8-K
dated as of August 12, 2001).
3.1 Restated Certificate of Incorporation (incorporated by reference
to the Company's Report on Form 10-K for the year ended April 30,
1992).
3.2 Certificate of Amendment of the Certificate of Incorporation
dated October 13, 1995 (incorporated by reference to the
Company's Report on Form 10-K for the year ended April 30, 1997).
3.3 Certificate of Amendment of the Certificate of Incorporation
dated as of September 1998 (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended
October 31, 1998).
3.4 Certificate of Amendment of the Certificate of Incorporation
dated as of September 1999 (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended
October 31, 1999).
3.5 By-Laws as Amended and Restated dated as of September 1998
(incorporated by reference to the Company's Report on Form 10-Q
for the quarterly period ended October 31, 1998).
10.1 $300,000,000 Credit Agreement dated as of September 21, 2001,
among the Company and the Lenders From Time to Time Parties
Hereto, UBS AG Stamford Branch, as Administrative Agent and UBS
Warburg LLC, as Arranger (incorporated by reference to the
Company's Report on Schedule TO/A Amendment No. 5 dated September
21, 2001).
10.2 Credit Agreement dated as of November 15, 1996 among the Company,
the Banks from time to time parties hereto, and Morgan Guaranty
Trust Company of New York, as Agent (incorporated by reference to
the Company's report on Form 10-Q for the quarterly period ended
October 31, 1996).
10.3 Agreement of Lease dated as of August 4, 2000, between, Block A
South Waterfront Development L.L.C., as Landlord, and the
Company, as Tenant (incorporated by reference to the Company's
Report on Form 10-Q for the quarterly period ended July 31,
2000).
10.4 Summary of Lease Agreement dated as of March 4, 2005, between,
Investa Properties Limited L.L.C. as Landlord, and the Company,
as Tenant (filed as an exhibit to the Company's Report on Form
10-K for the year ended April 30, 2005).
10.5 Director Stock Plan (incorporated by reference to the Company's
Definitive Proxy Statement date August, 2004).
10.6 Executive Annual Incentive Plan (incorporated by reference to the
Company's Definitive Proxy Statement dated August 5, 2004).
10.7 2004 Key Employee Stock Plan (incorporated by reference to the
Company's Definitive Proxy Statement dated August 5, 2004).
10.9 Senior executive employment Agreement to Arbitrate dated as of
April 29, 2003.
10.10 Senior executive Non-competition and Non-disclosure
Agreement dated as of April 29, 2003
10.11 1990 Director Stock Plan as Amended and Restated as of June 22,
2001 (incorporated By reference to the Company's Definitive Proxy
Statement dated August 8, 2001)
10.12 1989 Supplemental Executive Retirement Plan (incorporated by
reference to the Company's Report on Form 10-K for the year ended
April 30, 1989).
10.13 Form of the Fiscal Year 2005 Qualified Executive Long Term
Incentive Plan (filed as an exhibit to the Company's Report on
Form 10-K).
10.14 Form of the Fiscal Year 2005 Qualified Executive Annual
Incentive Plan (filed as an exhibit to the Company's Report on
Form 10-K).
10.15 Form of the Fiscal Year 2005 Executive Annual Strategic
Milestones Incentive Plan (filed as an exhibit to the Company's
Report on Form 10-K).
10.16 Form of the Fiscal Year 2004 Qualified Executive Long Term
Incentive Plan (filed as an exhibit to the Company's Report on
Form 10-K).
10.17 Form of the Fiscal Year 2004 Qualified Executive Annual
Incentive Plan (filed as an exhibit to the Company's Report on
Form 10-K).
10.18 Form of the Fiscal Year 2004 Executive Annual Strategic
Milestones Incentive Plan (filed as an exhibit to the Company's
Report on Form 10-K).
10.19 Form of the Fiscal Year 2003 Qualified Executive Long Term
Incentive Plan (filed as an exhibit to the 10K report).
10.20 Form of the Fiscal Year 2003 Qualified Executive Annual
Incentive Plan (filed as an exhibit to the 10K report).
10.21 Form of the fiscal year 2003 Executive Annual Strategic
Milestones Incentive Plan (filed as an exhibit to the 10K
report).
10.22 Senior executive Employment Agreement dated as of March 1, 2003,
between William J. Pesce and the Company.
10.23 Senior executive Employment Agreement dated as of March 1, 2003,
between Stephen A. Kippur and the Company.
10.24 Senior executive Employment Agreement dated as of March 1, 2003,
between Ellis E. Cousens and the Company.
10.25 Senior executive Employment Agreement letter dated as of March
1, 2003, between Timothy B. King and the Company.
10.26 Senior executive Employment Agreement letter dated as of March
15, 2004, between Gary M. Rinck and the Company (filed as an
exhibit to the fiscal year 2004 10K report).
22 List of Subsidiaries of the Company.
23 Consent of Independent Registered Public Accounting Firm
(included in this report as listed in the attached index).
98 Certifications by the CEO and CFO pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
99 Certifications by the CEO and CFO pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
JOHN WILEY & SONS, INC.
--------------------------------------
(Company)
By: /s/ William J. Pesce
--------------------------------------
William J. Pesce
President and Chief Executive Officer
By: /s/ Ellis E. Cousens
--------------------------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial and Operations Officer
By: /s/ Edward J. Melando
--------------------------------------
Edward J. Melando
Vice President, Controller and
Chief Accounting Officer
Dated: July 7, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons constituting directors of the
Company on July 7, 2005.
/s/ Warren J. Baker /s/ Henry A. McKinnell
- ------------------------------ -----------------------------
Warren J. Baker Henry A. McKinnell
/s/ Larry Franklin /s/ William J. Pesce
- ------------------------------ -----------------------------
Larry Franklin William J. Pesce
/s/ Kim Jones /s/ William B. Plummer
- ------------------------------ -----------------------------
Kim Jones William B. Plummer
/s/ Mathew S. Kissner /s/ Bradford Wiley II
- ------------------------------ -----------------------------
Mathew S. Kissner Bradford Wiley II
/s/ John L. Marion, Jr. /s/ Peter Booth Wiley
- ------------------------------ -----------------------------
John L. Marion, Jr. Peter Booth Wiley
Exhibit 10.4
Summary of Lease Agreement
--------------------------
Dated March 4 , 2005
--------------------
Landlord:
- ---------
Investa Properties Limited in care of Investa Asset Management (Qld) Pty
Ltd, Level 10, 410 Ann Street Brisbane, Queensland
Tenant:
- -------
JOHN WILEY & SONS AUSTRALIA, LTD of Level 3, 33 Park Road, Milton QLD 4064
Leased Property:
- ----------------
Buildings constructed on Lot 5 on RP 217071, County Stanley, Parish
Enoggera, Title Reference 18365011 and known as 42 McDougall Street, Milton
and 40 McDougall Street, Milton
Size of Leased Property:
- ------------------------
3,027 square meters (approx. 33,000 square feet)
Commencement Date:
- ------------------
July 17, 2005
Term:
- -----
15 years
Termination Date:
- -----------------
July 16, 2020
Base Rent:
- ----------
$320 Australian dollars per square meter per annum
Escalating Rent:
- ----------------
4% per annum,subject to readjustment in years 5 & 10. In years 5 & 10 a
comparison of the annual base rent will be made to market rental rates
published. Annual rental payments will be prosectively adjusted up or down
by no more than 5% to align the base rent with the current market terms.
Car Parking License:
- --------------------
$108,000 Australian dollars per annum for 60 cars
Incentives Paid to Tenant:
- --------------------------
$3.6 million Australian dollars to be used for leasehold improvements,
payment of expiring lease obligation under previously leased facilities
and/or reduction of new lease obligation
Early Termination Provision:
- --------------------------
Tenant can terminate the lease in year 12 (2017) subject to an early
termination payment equal to the $.8 Australian dollars million less any
incentive payments received by the lessee for reimbursement of lease
obligations under previously leased facilities. The termination payment
will be subject to 10.5% compond annual interest computed from the
commencement date.
Sublease Rights:
- ----------------
The tenant has sublease rights subject to certain provisions (sublease rent
and space amounts) within the lease
Renewal Options:
- ----------------
There are no renewal options stated within the lease agreement.
Exhibit 10.13
JOHN WILEY & SONS, INC.
-----------------------
FY 2005 QUALIFIED EXECUTIVE LONG TERM INCENTIVE PLAN
----------------------------------------------------
PLAN DOCUMENT
-------------
CONFIDENTIAL
------------
MAY 1, 2004
-----------
CONTENTS
--------
Section Subject Page
- ------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Targets and Measurement 3
V. Performance Evaluation 3
VI. Restricted Performance Shares Award Provisions 4
VII. Stock Options 5
VIII. Payouts 5
IX. Administration and Other Matters 5
I. DEFINITIONS
-----------
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
Company: John Wiley & Sons, Inc.
business unit: The Company, a division or subsidiary of the Company, or a global
unit of the Company.
plan: This FY 2005 Qualified Executive Long Term Incentive Plan.
shareholder plan: The Company's 2004 Key Employee Stock Plan.
plan period: The three year period from May 1, 2004 to April 30, 2007, or a
portion of this period, at the discretion of the CC.
Compensation Committee (CC): The committee of the Company's Board of Directors
responsible for the review and approval of executive compensation.
performance target: A participant's objective to achieve specific financial
goals for the plan period, as approved by the CC. A performance target comprises
all of the financial goals for a business unit.
business criteria: An indicator of financial performance, chosen from the
business criteria listed in Section 7(b)(ii)(B) of the shareholder plan. The
following business criteria are used in this plan:
cumulative cash flow: The cumulative for the plan period of net income,
excluding unusual items not related to the period being measured,
plus/minus any non-cash items included in net income and changes in
operating assets and liabilities, minus normal investments in product
development assets and property and equipment.
earnings per share: Earnings per share, excluding unusual items not related
to the period being measured. Actual results shall be increased by one cent
for VCH tax basis step-up recovery.
financial goal: A targeted level of attainment of a given business criteria.
financial results: The published, audited financial results of the Company.
participant: A person selected to participate in the plan.
performance levels:
threshold: The minimum acceptable level of achievement of a financial goal
in order to earn a payout, expressed as a percentage of target ( e.g., 95%
of target.)
target: Achievement of the assigned financial goal-100%.
outstanding: Superior achievement of a financial goal, earning the maximum
payout, expressed as a percentage of target (e.g., 115% of target.)
target incentive: An award of restricted performance shares that a participant
is eligible to receive if 100% of his/her applicable award period objectives are
achieved and the participant remains an employee of the Company through April
30, 2009, except as otherwise provided in Section VIII.
stock: Class A Common Stock of the Company.
restricted performance share: A share of stock issued pursuant to this plan and
the shareholder plan that is subject to forfeiture. In the shareholder plan,
such stock is referred to as "Performance-Based Stock."
restricted period: The period during which the restricted performance shares
shall be subject to forfeiture in whole or in part, as defined in the
shareholder plan, in accordance with the terms of the award.
Plan-end adjusted restricted performance shares award: The number of restricted
performance shares awarded to a participant at the end of the plan cycle after
adjustments, if any, are made, as set forth in Sections V and VIII.
II. PLAN OBJECTIVES
---------------
The plan is intended to provide the officers and other key employees of the
Company and of its subsidiaries, affiliates and certain joint venture companies,
upon whose judgement, initiative and efforts the Company depends for its growth
and for the profitable conduct of its business, with additional incentive to
promote the success of the Company.
III. ELIGIBILITY
-----------
A participant is selected by the CEO and recommended for participation to the
CC, which has sole discretion for determining eligibility, from among those
employees in key management positions deemed able to make the most significant
contributions to the growth and profitability of the Company. The President and
CEO of the Company is a participant.
IV. PERFORMANCE TARGETS AND MEASUREMENT
-----------------------------------
The CEO recommends and the CC adopts, in its sole discretion, performance
targets and performance levels for each participant, not later than 90 days from
the commencement of the plan period. No performance target or performance level
may be modified after 90 days from the commencement of the plan period.
A. Performance targets, comprising one or more financial goals, are
defined for each business unit. Each financial goal is assigned a
weight, such that the sum of the weights of all financial goals for a
business unit equals 100%.
B. Each participant is assigned performance targets for one or more
business units, based on the participant's position, responsibilities,
and his ability to affect the results of the assigned business unit.
For each participant, each business unit is assigned a weight, such
that the sum of the weights of all business units for a participant
equals 100%. Collectively, all business unit performance targets
constitute the participant's plan period objectives.
C. Each financial goal is assigned performance levels (threshold, target
and outstanding).
V. PERFORMANCE EVALUATION
----------------------
A. Financial Results
-----------------
1. At the end of the plan period, the financial results for each
business unit are compared with that unit's financial goals to
determine the payout for each participant.
2. In determining the attainment of financial goals, the impact of
any of the events (a) through (i) listed in Section 7(b)(ii)(B)
of the shareholder plan, if dilutive (causes a reduction in the
financial result) will be excluded from the financial results for
any affected business unit.
3. Award Determination
a. Achievement of threshold performance of at least one
financial goal of a performance target is necessary for a
participant to receive a payout for that performance target.
b. The unweighted payout factor for each financial goal is
determined as follows:
1. For performance at the below threshold level, the
payout factor is zero.
2. For performance at the threshold level, the payout
factor is 25%.
3. For performance between the threshold and target
levels, the payout factor is between 25% and 100%,
determined on a pro-rata basis.
4. For performance at the target level, the payout factor
is 100%.
5. For performance between the target and outstanding
levels, the payout factor is between 100% and 200%,
determined on a pro-rata basis.
6. For performance at or above the outstanding level, the
payout factor is 200%.
c. A participant's plan-end adjusted restricted performance
shares award is determined as follows:
1. Each financial goal's unweighted payout factor
determined above times the weighting of that financial
goal equals the weighted payout factor for that
financial goal
2. The sum of the weighted payout factors for a business
unit's performance target equals the payout factor for
that performance target.
3. The participant's target incentive
times
the business unit weight
times
the performance target payout factor
equals
the participant's payout for that business unit
4. The sum of the payouts for all the business units
assigned to a participant equals the participant's
total plan-end adjusted restricted performance shares
award.
d. The CC may, in its sole discretion, reduce a participant's
payout to any level it deems appropriate.
VI. RESTRICTED PERFORMANCE SHARES AWARD PROVISIONS
----------------------------------------------
A. Restricted performance shares, equal to a participant's target
incentive, shall be awarded at the beginning of the plan period. In
addition to the terms and conditions set forth in the shareholder
plan, the restricted period for restricted performance shares awarded
shall be as follows: subject to continued employment except as
otherwise set forth in the shareholder plan, the lapse of restrictions
on one-half of the restricted performance shares awarded will occur on
the first anniversary of the plan period end date (April 30, 2008) at
which time the participant will receive a stock certificate in a
number of shares equal to one-half of the restricted performance
shares awarded with the restrictive legend deleted, and the lapse of
restrictions on the remaining half will occur on the second
anniversary of the plan period end date (April 30, 2009) at which time
the participant will receive a new stock certificate in a number of
shares equal to the remaining half with the restrictive legend
deleted.
B. The plan-end adjusted restricted performances share award will be
compared to the restricted performance shares awarded at the beginning
of the plan period, and the appropriate amount of restricted
performance shares will be awarded or forfeited, as required, to bring
the restricted performance shares award to the number of shares
designated as the plan-end adjusted restricted performance shares
award.
VII. STOCK OPTIONS
-------------
The participant may be granted a stock option pursuant to the shareholder plan
at the beginning of the plan period, representing another incentive vehicle by
which the participant is able to share in the equity growth of the Company. The
terms and conditions of the award of the stock option are contained in the
shareholder plan and in the stock option award.
VIII. PAYOUTS
-------
A. Payouts will be made within 90 days after the end of the plan period.
B. In the event of a participant's death, disability, retirement or leave
of absence prior to payout, the payout, if any, will be determined by
the CC.
C. A participant who resigns, or whose employment is terminated by the
Company, with or without cause before payout from the plan is
distributed, will not receive a payout. Exception to this provision
shall be made with the approval of the CC, in its sole discretion.
D. In the event of a Change of Control, as that term is defined in the
shareholder plan, all "target" restricted performance shares awarded
to Executive under the plan vest to the participant, or at the CC's
option, payment will be made of the value of the "target" restricted
performance shares based on the fair market value on the effective
date of the Change of Control.
E. A participant who is hired or promoted into an eligible position
during the plan period may receive a prorated payout as determined by
the CC, in its sole discretion.
IX. ADMINISTRATION AND OTHER MATTERS
--------------------------------
A. The plan will be administered by the CC, which shall have authority in
its sole discretion to interpret and administer this plan, including,
without limitation, all questions regarding eligibility and status of
any participant, and no participant shall have any right to receive a
payout or payment of any kind whatsoever, except as determined by the
CC hereunder.
B. The Company will have no obligation to reserve or otherwise fund in
advance any amount which may become payable under the plan.
C. This plan may not be modified or amended except with the approval of
the CC.
D. In the event of a conflict between the provisions of this plan and the
provisions of the shareholder plan, the provisions of the shareholder
plan shall apply.
E. No awards of any type under this plan shall be considered as
compensation for purposes of defining compensation for retirement,
savings or supplemental executive retirement plans, or any other
benefit.
Exhibit 10.14
JOHN WILEY & SONS, INC.
-----------------------
FY 2005 QUALIFIED EXECUTIVE ANNUAL INCENTIVE PLAN
-------------------------------------------------
PLAN DOCUMENT
-------------
CONFIDENTIAL
------------
MAY 1, 2004
-----------
CONTENTS
--------
Section Subject Page
- ------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Targets and Measurement 3
V. Performance Evaluation 4
VI. Payouts 5
VII. Administration and Other Matters 5
I. DEFINITIONS
-----------
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
Company: John Wiley & Sons, Inc.
business unit: The Company, a division or subsidiary of the Company, or a global
unit of the Company.
plan: This FY 2005 Qualified Executive Annual Incentive Plan.
shareholder plan: The Company's 2004 Executive Annual Incentive Plan.
plan period: The twelve-month period from May 1, 2004 to April 30, 2005, or a
portion of this period, at the discretion of the CC.
Compensation Committee (CC): The committee of the Company's Board of Directors
responsible for the review and approval of executive compensation.
performance target: A participant's objective to achieve specific financial
goals for the plan period, as approved by the CC. A performance target comprises
all of the financial goals for a business unit.
business criteria: An indicator of financial performance, chosen from the
business criteria listed in Section 4(b)(ii) of the shareholder plan. The
following business criteria are used in this plan:
revenue (corporate): Gross annual revenue, net of provision for returns.
cash flow: Net income, excluding unusual items not related to the period
being measured, plus/minus any non-cash items included in net income and
changes in operating assets and liabilities, minus normal investments in
product development assets and property and equipment.
earnings per share: Earnings per share, excluding unusual items not related
to the period being measured. Actual results shall be increased by one cent
for VCH tax basis step-up recovery.
revenue (divisional): Gross annual revenue, net of actual returns.
divisional EBITA: Operating income before amortization of intangibles.
divisional cash flow: divisional operating income, plus/minus any non-cash
items included in divisional operating income (other than provisions for
bad debts), and changes in controllable assets and liabilities, less normal
investments in product development assets and direct property and equipment
additions. Controllable assets and liabilities are inventory, composition,
author advances, other deferred publication costs, and deferred
subscription revenues.
GPC EBITA: divisional operating income before amortization of intangibles
as adjusted for profit earned by other divisions on intercompany
transactions.
GPC cash flow: divisional cash flow as adjusted for the profit earned by
other divisions on intercompany transactions.
financial goal: A targeted level of attainment of a given business criteria.
financial results: The published, audited financial results of the Company and
the divisional financial results derived therefrom.
participant: A person selected to participate in the plan.
performance levels:
threshold: The minimum acceptable level of achievement of a financial goal
in order to earn a payout, expressed as a percentage of target ( e.g., 95%
of target.)
target: Achievement of the assigned financial goal-100%.
outstanding: Superior achievement of a financial goal, earning the maximum
payout, expressed as a percentage of target (e.g., 115% of target.)
base salary: A participant's base salary as of July 1, 2004, or the date of
hire, or promotion into the plan, if later, adjusted for any amount of time the
participant may not be in the plan for reasons of hire, death, disability,
retirement and/or termination.
payout: Actual gross dollar amount paid to a participant under the plan, if any,
for achievement of assigned performance targets, as further discussed in this
plan.
total annual incentive opportunity: The total amount that a participant is
eligible to receive from all annual incentive plans, including this plan,
expressed as a percent of base salary.
target incentive percent: The percent applied to the participant's total annual
incentive opportunity to determine the target incentive amount for this plan.
Generally, for the plan period 2005, the target incentive percent for this plan
is 75%.
target incentive amount: The amount that a participant is eligible to receive if
he/she achieves 100% of his/her performance target for a business unit. The sum
of the target incentive amounts for all business units assigned to a participant
is the total target incentive amount.
II. PLAN OBJECTIVES
---------------
The plan is intended to provide the officers and other key employees of the
Company and of its subsidiaries, affiliates and certain joint venture companies,
upon whose judgement, initiative and efforts the Company depends for its growth
and for the profitable conduct of its business, with additional incentive to
promote the success of the Company.
III. ELIGIBILITY
-----------
A participant is selected by the CEO and recommended for participation to the
CC, which has sole discretion for determining eligibility, from among those
employees in key management positions deemed able to make the most significant
contributions to the growth and profitability of the Company. The President and
CEO of the Company is a participant.
IV. PERFORMANCE TARGETS AND MEASUREMENT
-----------------------------------
The CEO recommends and the CC adopts, in its sole discretion, performance
targets and performance levels for each participant, not later than 90 days from
the commencement of the plan period. No performance target or performance level
may be modified after 90 days from the commencement of the plan period.
A. Performance targets, comprising one or more financial goals, are
defined for each business unit. Each financial goal is assigned a
weight, such that the sum of the weights of all financial goals for a
business unit equals 100%.
B. Each participant is assigned performance targets for one or more
business units , based on the participant's position,
responsibilities, and his ability to affect the results of the
assigned business unit. For each participant, each business unit is
assigned a weight, such that the sum of the weights of all business
units for a participant equals 100%. Collectively, all business unit
performance targets constitute the participant's plan period
objectives.
C. Each financial goal is assigned performance levels (threshold, target
and outstanding).
V. PERFORMANCE EVALUATION
----------------------
A. Financial Results
-----------------
1. At the end of the plan period, the financial results for each
business unit are compared with that unit's financial goals to
determine the payout for each participant
2. In determining the attainment of financial goals,
a. the impact of foreign exchange gains or losses will be
excluded from revenue and divisional EBITA and divisional
cash flow criteria.
b. the impact of any of the events (1) through (9) listed in
Section 4(b)(ii) of the shareholder plan, if dilutive
(causes a reduction in the financial result), will be
excluded from the financial results of any affected business
unit.
3. Award Determination
a. Achievement of threshold performance of at least one
financial goal of a performance target is necessary for a
participant to receive a payout for that performance target.
b. The unweighted payout factor for each financial goal is
determined as follows:
1. For performance at the below threshold level, the
payout factor is zero.
2. For performance at the threshold level, the payout
factor is 25%.
3. For performance between the threshold and target
levels, the payout factor is between 25% and 100%,
determined on a pro-rata basis.
4. For performance at the target level, the payout factor
is 100%.
5. For performance between the target and outstanding
levels, the payout factor is between 100% and 200%,
determined on a pro-rata basis.
6. For performance at or above the outstanding level, the
payout factor is 200%.
c. A participant's payout is determined as follows:
1. Each financial goal's unweighted payout factor
determined above times the weighting of that financial
goal equals the weighted payout factor for that
financial goal.
2. The sum of the weighted payout factors for a business
unit's performance target equals the payout factor for
that performance target.
3. The participant's base salary
times
the participant's target incentive percent
times
the business unit weight
times
the performance target payout factor
equals
the participant's payout for that business unit.
4. The sum of the payouts for all the business units
assigned to a participant equals the participant's
total payout.
d. The CC may, in its sole discretion, reduce a participant's
payout to any level it deems appropriate.
VI. PAYOUTS
-------
A. Payouts will be made within 90 days after the end of the plan period.
B. In the event of a participant's death, disability, retirement or leave
of absence prior to payout, the payout, if any, will be determined by
the CC.
C. A participant who resigns, or whose employment is terminated by the
Company, with or without cause, before payout from the plan is
distributed, will not receive a payout. Exception to this provision
shall be made with the approval of the CC, in its sole discretion.
D. A participant who is hired or promoted into an eligible position
during the plan period may receive a prorated payout as determined by
the CC, in its sole discretion.
VII. ADMINISTRATION AND OTHER MATTERS
--------------------------------
A. The plan will be administered by the CC, which shall have authority in
its sole discretion to interpret and administer this plan, including,
without limitation, all questions regarding eligibility and status of
any participant, and no participant shall have any right to receive a
payout or payment of any kind whatsoever, except as determined by the
CC hereunder.
B. The Company will have no obligation to reserve or otherwise fund in
advance any amount which may become payable under the plan.
C. This plan may not be modified or amended except with the approval of
the CC.
D. In the event of a conflict between the provisions of this plan and the
provisions of the shareholder plan, the provisions of the shareholder
plan shall apply.
Exhibit 10.15
JOHN WILEY & SONS, INC.
-----------------------
FY 2005 EXECUTIVE ANNUAL STRATEGIC MILESTONES INCENTIVE PLAN
------------------------------------------------------------
ADMINISTRATIVE DOCUMENT
-----------------------
CONFIDENTIAL
------------
MAY 1, 2004
-----------
CONTENTS
--------
Section Subject Page
- ------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Objectives and Measurement 3
V. Performance Evaluation 3
VI. Payouts 4
VII. Administration and Other Matters 5
I. DEFINITIONS
-----------
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
company: John Wiley & Sons, Inc.
plan: The company's Fiscal Year 2005 Executive Annual Strategic Milestones
Incentive Plan described in this document and any written amendments to this
document.
plan year: The twelve month period from May 1, 2004 to April 30, 2005.
Compensation Committee (CC): The committee of the company's Board of Directors
(Board) responsible for reviewing executive compensation.
strategic milestone: A participant's objective to achieve specific results for
FY 2005, including interim revised strategic milestones, if any, as approved and
communicated in writing, as described in Sections IV and V below. Strategic
milestones are leading indicators of performance.
participant: A person selected to participate in the plan.
base salary: The participant's base salary as of July 1, 2004, or the date of
hire, or promotion into the plan, if later, adjusted for any increases or
decreases during FY 2005, on a prorated basis and adjusted for any amount of
time the participant may not be in the plan for reasons of hire, death,
disability, retirement and/or termination.
payout: Actual gross dollar amount paid to a participant under the plan, if any,
for achievement of strategic milestones, as further discussed in this plan.
total annual incentive opportunity: The total target amount a participant is
eligible to receive from all annual incentive programs, including this plan.
target incentive percent: The percent applied to the participant's total annual
incentive opportunity to determine the target incentive amount for the plan.
Generally, for the plan year 2005, the target incentive percent is 25%.
target incentive amount: The amount, if any, that a participant is eligible to
receive if he/she achieves 100% of his/her strategic milestones.
summary evaluation levels:
threshold: The minimum acceptable level of achievement of strategic
milestones. If threshold performance is achieved against all strategic
milestones, a participant may earn 25% of the target incentive amount for
which he/she is eligible.
target: Achievement in aggregate of target strategic milestones. Each
individual strategic milestone is set at a level that is both challenging
and achievable. If target performance is achieved against all strategic
milestones, a participant may earn 100% of the target incentive amount for
which he/she is eligible.
outstanding: Superior achievement of strategic milestones, both in quality
and scope, with limited time and resources. If outstanding performance is
achieved against strategic milestones, the maximum amount a participant may
earn is 200% of the target incentive amount.
payout factor: Percentage of strategic milestones deemed achieved, applied to
the target incenive amount, used to determine the payout for which a participant
is eligible.
II. PLAN OBJECTIVES
---------------
The purpose of the FY 2005 Executive Annual Strategic Milestones Incentive Plan
is to enable the company to reinforce and sustain a culture devoted to excellent
performance, reward significant contributions to the success of Wiley, and
attract and retain highly qualified executives.
III. ELIGIBILITY
-----------
The participant is selected by the President and CEO of the company, from among
those employees in key management positions deemed able to make the most
significant contributions to the growth and profitability of the company, with
the approval of the CC. The President and CEO of the company is a participant.
IV. PERFORMANCE OBJECTIVES AND MEASUREMENT
--------------------------------------
A. Strategic milestones are non-financial individual objectives over
which the participant has a large measure of control, which lead to,
or are expected to lead to improved performance for the company in the
future. Strategic milestones are determined near the beginning of the
plan year by the participant, and approved by CEO or the participant's
manager, if the CEO is not the participant's manager.
B. The strategic milestones for the President and CEO are reviewed and
approved by the CC.
C. The strategic milestones for the President and CEO should be
appropriately reflected in those of all other employees at all levels.
Each participant collaborates with his/her manager in setting
strategic milestones. The strategic milestones may be revised during
the plan year, as appropriate.
D. The determination of strategic milestones includes defining a target
level of performance and the measure of such, and may include defining
threshold and outstanding levels of performance and the measures of
such.
V. PERFORMANCE EVALUATION
----------------------
A. Achievement of a participant's strategic milestones will be determined
at the end of the plan year by comparing results achieved to
previously set objectives.
B. Each participant's manager will recommend a summary evaluation level
and a payout factor for achievement of all strategic milestones,
compared with the previously set objectives. In determining the payout
factor, the overall performance on all strategic milestones will be
considered. The CEO will recommend to the CC for approval the payout
factors for all other participants. The CC will recommend to the Board
for approval the payout factor for the CEO.
Summary evaluation levels and related payout factors are as follows:
Summary Evaluation Payout factor range
------------------ -------------------
< Threshold 0
Threshold 25% - <35%
> Threshold =>35% - <50%
< Target =>50% - <90%
Target =>90% - <=110%
> Target >110% - <150%
< Outstanding =>150% - <175%
Outstanding =>175% - 200%
C. Award Determination
-------------------
STRATEGIC MILESTONES PAYOUT AMOUNT
----------------------------------
total annual incentive opportunity X plan target incentive percent X payout
factor = Strategic Milestones Payout Eligibility
1. Notwithstanding anything to the contrary, the maximum payout, if
any, a participant may receive is 200% of the target incentive
amount.
2. The foregoing Strategic Milestones payout eligibility calculation
is intended to set forth general guidelines on how awards are to
be determined. The purpose of this plan is to motivate the
participant to perform in an outstanding manner. The President
and CEO has discretion under this plan to take into consideration
the contribution of the participant, the participant's management
of his/her organizational unit and other relevant factors,
positive or negative, which impact the company's, the
participant's organizational unit(s), and the participant's
performance overall in determining whether to recommend granting
or denying an award, and the amount of the award, if any. If the
participant is the President and CEO, such discretion is
exercised by the CC and the Board.
VI. PAYOUTS
-------
A. Payouts will be made within 90 days after the end of the plan year.
B. In the event of a participant's death, disability, retirement or leave
of absence prior to payout from the plan, the payout, if any, will be
recommended by the President and CEO to the CC which shall have sole
authority for approval of the payout, subject to any required Board
approvals. If the participant is the President and CEO, such approval
is required by the Board.
C. A participant who resigns, or whose employment is terminated by the
company, with or without cause, before payout from the plan is
distributed, will not receive a payout. Exception to this provision
shall be made only with the approval of the CC, subject to any
required Board approvals. If the participant is the President and CEO,
such approval is required by the Board.
D. A participant who transfers between divisions of the company, will
have his/her payout prorated to the nearest fiscal quarter for the
time spent in each division, based on the achievement of strategic
milestones established for the position in each division, and based
upon a judgment of the participant's contribution to the achievement
of goals in each position, including interim revisions, if
appropriate.
E. A participant who is appointed to a position with a different target
incentive percent will have his/her payout prorated to the nearest
fiscal quarter for the time spent in each position, based on the
achievement of strategic milestones established for each position.
F. A participant who is hired or promoted into an eligible position
during the plan year may receive a prorated payout as determined by
the CEO, in his/her sole discretion, subject to the approval of the
CC.
VII. ADMINISTRATION AND OTHER MATTERS
--------------------------------
A. The plan is effective for the plan year. It will terminate, subject to
payout, if any, in accordance with and subject to the provisions of
this plan.
B. This plan will be administered by the CEO, who will have authority to
interpret and administer this plan, including, without limitation, all
questions regarding eligibility and status of the participant, subject
to the approval of the CC required under this plan or the by-laws of
the company.
C. This plan may be withdrawn, amended or modified at any time, for any
reason, in writing, by the company.
D. The determination of an award and payout under this plan, if any, is
subject to the approval of the President and CEO, the CC, and the
Board. This plan does not confer upon any participant the right to
receive any payout, or payment of any kind whatsoever.
E. No participant shall have any vested rights under this plan. This plan
does not constitute a contract.
F. All deductions and other withholdings required by law shall be made to
the participant's payout, if any.
Exhibit 10.16
JOHN WILEY & SONS, INC.
-----------------------
FY 2004 QUALIFIED EXECUTIVE LONG TERM INCENTIVE PLAN
----------------------------------------------------
PLAN DOCUMENT
-------------
CONFIDENTIAL
------------
MAY 1, 2003
-----------
CONTENTS
--------
Section Subject Page
- ------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 4
IV. Performance Measurement and Objectives 4
V. Performance Evaluation 4
VI. Restricted Performance Shares Award Provisions 6
VII. Stock Option 6
VIII. Payouts 6
IX. Administration and Other Matters 7
I. DEFINITIONS
-----------
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
Company: John Wiley & Sons, Inc.
business unit: The Company, a division or subsidiary of the Company, or a global
unit of the Company.
plan: This FY2004 Qualified Executive Long Term Incentive Plan.
shareholder plan: The Company's Long Term Incentive Plan
plan period: The three year period from May 1, 2003 to April 30, 2006, or a
portion of this period, at the discretion of the CC.
Compensation Committee (CC): The committee of the Company's Board of Directors
responsible for the review and approval of executive compensation.
performance target: A participant's objective to achieve specific financial
goals for the plan period, as approved by the CC. A performance target comprises
all of the financial goals for a business unit.
business criteria: An indicator of financial performance, chosen from the
business criteria listed in Section 7(b)(ii)(B) of the shareholder plan. The
following business criteria are used in this plan:
cash flow: Net income, excluding unusual items not related to the period
being measured, plus/minus any non-cash items included in net income and
changes in operating assets and liabilities, minus normal investments in
product development assets and property and equipment.
earnings per share: Earnings per share, excluding unusual items not related
to the period being measured.
financial goal: A targeted level of attainment of a given business criteria.
financial results: The published, audited financial results of the Company and
the divisional financial results derived therefrom.
participant: A person selected to participate in the plan.
performance levels:
threshold: The minimum acceptable level of achievement of a financial goal
in order to earn a payout, expressed as a percentage of target ( e.g., 95%
of target.)
target: Achievement of the assigned financial goal-100%.
outstanding: Superior achievement of a financial goal, earning the maximum
payout, expressed as a percentage of target (e.g., 115% of target.)
target incentive: An award of restricted performance shares that a participant
is eligible to receive if 100% of his/her applicable award period objectives are
achieved and the participant remains an employee of the Company through April
30, 2008, except as otherwise provided in Section VIII.
stock: Class A Common Stock of the Company.
restricted performance share: A share of stock issued pursuant to this plan and
the shareholder plan that is subject to forfeiture. In the shareholder plan,
such stock is referred to as Performance-Based Stock.
restricted period: The period during which the restricted performance shares
shall be subject to forfeiture in whole or in part, as defined in the
shareholder plan, in accordance with the terms of the award.
plan end adjusted restricted performance share award: The amount of restricted
performance shares awarded to a participant at the end of the plan cycle after
adjustments, if any, are made, as set forth in Section VIII.
II. PLAN OBJECTIVES
---------------
The plan is intended to provide the officers and other key employees of the
Company and of its subsidiaries, affiliates and certain joint venture companies,
upon whose judgement, initiative and efforts the Company depends for its growth
and for the profitable conduct of its business, with additional incentive to
promote the success of the Company.
III. ELIGIBILITY
-----------
A participant is selected by the CEO and recommended for participation to the
CC, which has sole discretion for determining eligibility, from among those
employees in key management positions deemed able to make the most significant
contributions to the growth and profitability of the Company. The President and
CEO of the Company is a participant.
IV. PERFORMANCE TARGETS AND MEASUREMENT
-----------------------------------
The CEO recommends and the CC adopts, in its sole discretion, performance
targets and performance levels for each participant, not later than 90 days from
the commencement of the plan period. No performance target or performance level
may be modified after 90 days from the commencement of the plan period.
A. Performance targets, comprising one or more financial goals, for each
business unit are defined for each participant. Each financial goal is
assigned a weight, such that the sum of the weights of all financial goals
for a business unit equals 100%.
B. Each participant is assigned performance targets for one or more business
units , based on the participants position, responsibilities, and his
ability to affect the results of the assigned business unit. For each
participant, each business unit is assigned a weight, such that the sum of
the weights of all business units for a participant equals 100%.
Collectively, all business unit performance targets together constitute the
participants plan period objectives.
C. Each financial goal is assigned performance levels (threshold, target and
outstanding).
V. PERFORMANCE EVALUATION
----------------------
A. Financial Results
-----------------
1. At the end of the plan period, the financial results for each business
unit are compared with that units financial goals to determine the
payout for each participant.
2. Award Determination
a. Achievement of threshold performance of at least one financial
goal of a performance target is necessary for a participant to
receive a payout for that performance target.
b. The unweighted payout factor for each financial goal is
determined as follows:
1. For performance at the below threshold level, the payout
factor is zero.
2. For performance at the threshold level, the payout factor is
25%.
3. For performance between the threshold and target levels, the
payout factor is between 25% and 100%, determined on a
pro-rata basis.
4. For performance at the target level, the payout factor is
100%.
5. For performance between the target and outstanding levels,
the payout factor is between 100% and 200%, determined on a
pro-rata basis.
6. For performance at or above the outstanding level, the
unweighted payout factor is 200%.
c. A participants plan end adjusted restricted performance shares
award is determined as follows:
1. Each financial goals unweighted payout factor determined
above times the weighting of that financial goal equals the
weighted payout factor for that financial goal.
2. The sum of the weighted payout factors for a business units
performance target equals the payout factor for that
performance target.
3. The participants target incentive
times
the performance target payout factor
times
the business unit weight
equals
the participants payout for that business unit.
4. The sum of the payouts for all the business units assigned
to a participant equals the participants total plan end
adjusted restricted performance shares award.
d. The CC may, in its sole discretion, reduce a participants payout
to any level it deems appropriate.
3. In determining the attainment of financial goals,
a. the impact of any acquisition or divestiture which closes in the
final year of a plan period and which is valued at greater than
$5,000,000 and which is dilutive, will be excluded in determining
the financial results for any affected business unit.
b. the impact of foreign exchange gains or losses will be removed
from divisional EBITA and divisional cash flow criteria.
c. the impact of any of the events (a) through (e) listed in Section
7(b)(ii)(B) of the shareholder plan, if dilutive (causes a
reduction in the financial result), will be excluded from the
financial results for any affected business unit.
VI. RESTRICTED PERFORMANCE SHARES AWARD PROVISIONS
----------------------------------------------
A. Restricted performance shares, equal to a participants target shares shall
be awarded at the beginning of the plan period. In addition to the terms
and conditions set forth in the shareholder plan, the restricted period for
restricted performance shares awarded shall be as follows: subject to
continued employment except as otherwise set forth in the shareholder plan,
the lapse of restrictions on one-half of the restricted performance shares
awarded will occur on the first anniversary of the plan period end date
(April 30, 2007) at which time the participant will receive a stock
certificate in a number of shares equal to one-half of the restricted
performance shares awarded with the restrictive legend deleted, and the
lapse of restrictions on the remaining half will occur on the second
anniversary of the plan period end date (April 30, 2008) at which time the
participant will receive a new stock certificate in a number of shares
equal to the remaining half with the restrictive legend deleted.
B. The plan end adjusted restricted performances share award will be
determined as follows: The restricted performance shares awarded by the CC
at the beginning of the plan period multiplied times the payout factor
equals the number of shares for the plan end adjusted restricted
performance shares award. The result of this calculation will be compared
to the restricted performance shares awarded at the beginning of the plan
period, and the appropriate amount of restricted performance shares will be
awarded or forfeited, as required, to bring the restricted performance
shares award to the number of shares designated as the plan end adjusted
restricted performance shares award.
VII. STOCK OPTIONS
-------------
The participant may be granted a stock option pursuant to the shareholder plan
at the beginning of the plan period, representing another incentive vehicle by
which the participant is able to share in the equity growth of the Company. The
terms and conditions of the award of the stock option are contained in the
shareholder plan and in the stock option award.
VIII. PAYOUTS
-------
A. Payouts will be made within 90 days after the end of the plan period.
B. In the event of a participant's death, disability, retirement or leave of
absence prior to payout, the payout, if any, will be determined by the CC.
C. A participant who resigns, or whose employment is terminated by the
Company, with or without cause before payout from the plan is distributed,
will not receive a payout. Exception to this provision shall be made with
the approval of the CC, in its sole discretion.
D. In the event of a Change of Control, as that term is defined in the
shareholder plan, all target restricted performance shares awarded to
Executive under the plan vest to the participant, or at the CCs option,
payment will be made of the value of the target restricted performance
shares based on the fair market value on the effective date of the Change
of Control.
E. A participant who transfers between business units of the Company will have
his/her payout prorated to the nearest fiscal quarter for the time spent in
each business unit, based on the achievement of performance targets
established for the position in each business unit.
F. A participant who is appointed to a position with a different target
incentive percent will have his/her payout prorated to the nearest fiscal
quarter for the time spent in each position, based on the achievement of
performance target established for each position.
G. A participant who is hired or promoted into an eligible position during the
plan period may receive a prorated payout as determined by the CC, in its
sole discretion.
IX. ADMINISTRATION AND OTHER MATTERS
--------------------------------
A. The plan will be administered by the CC, which shall have authority in its
sole discretion to interpret and administer this plan, including, without
limitation, all questions regarding eligibility and status of any
participant, and no participant shall have any right to receive a payout or
payment of any kind whatsoever, except as determined by the CC hereunder.
B. The Company will have no obligation to reserve or otherwise fund in advance
any amount which may become payable under the plan.
C. This plan may not be modified or amended except with the approval of the
CC.
D. In the event of a conflict between the provisions of this plan and the
provisions of the shareholder plan, the provisions of the shareholder plan
shall apply.
E. No awards of any type under this plan shall be considered as compensation
for purposes of defining compensation for retirement, savings or
supplemental executive retirement plans, or any other benefit.
Exhibit 10.17
JOHN WILEY & SONS, INC.
-----------------------
FY 2004 QUALIFED EXECUTIVE ANNUAL INCENTIVE PLAN
PLAN DOCUMENT
-------------
CONFIDENTIAL
------------
MAY 1, 2003
-----------
CONTENTS
--------
Section Subject Page
- ------- ------- ----
I. Definitions 2
II. Plan Objectives 4
III. Eligibility 4
IV. Performance Measurement and Objectives 4
V. Performance Evaluation 5
VI. Payouts 6
VII. Administration and Other Matters 6
I. DEFINITIONS
-----------
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
Company: John Wiley & Sons, Inc.
business unit: The Company, a division or subsidiary of the Company, or a global
unit of the Company.
plan: This FY2004 Qualified Executive Annual Incentive Plan.
shareholder plan: The Companys Executive Annual Incentive Plan.
plan period: The twelve-month period from May 1, 2003 to April 30, 2004, or a
portion of this period, at the discretion of the CC.
Compensation Committee (CC): The committee of the Company's Board of Directors
responsible for the review and approval of executive compensation.
performance target: A participant's objective to achieve specific financial
goals for the plan period, as approved by the CC. A performance target comprises
all of the financial goals for a business unit.
business criteria: An indicator of financial performance, chosen from the
business criteria listed in Section 4(b)(ii) of the shareholder plan. The
following business criteria are used in this plan:
revenue: (corporate) Gross annual revenue, net of provision for returns.
cash flow: Net income, excluding unusual items not related to the period
being measured, plus/minus any non-cash items included in net income and
changes in operating assets and liabilities, minus normal investments in
product development assets and property and equipment.
earnings per share: Earnings per share, excluding unusual items not related
to the period being measured. Actual results shall be increased by one cent
for VCH tax basis step-up recovery.
revenue (divisional): Gross annual revenue, net of actual returns.
divisional EBITA: Operating income before amortization of intangibles.
divisional cash flow: divisional operating income, plus/minus any non-cash
items included in divisional operating income (other than provisions for
bad debts), and changes in controllable assets and liabilities, less normal
investments in product development assets and direct property and equipment
additions. Controllable assets and liabilities are inventory, composition,
author advances, other deferred publication costs, and deferred
subscription revenues.
GPC EBITA: divisional operating income before amortization of intangibles
as adjusted for profit earned by other divisions on intercompany
transactions.
GPC cash flow: divisional cash flow as adjusted for the profit earned by
other divisions on intercompany transactions.
financial goal: A targeted level of attainment of a given business criteria.
financial results: The published, audited financial results of the Company and
the divisional financial results derived therefrom.
participant: A person selected to participate in the plan.
performance levels:
threshold: The minimum acceptable level of achievement of a financial goal
in order to earn a payout, expressed as a percentage of target ( e.g., 95%
of target.)
target: Achievement of the assigned financial goal-100%.
outstanding: Superior achievement of a financial goal, earning the maximum
payout, expressed as a percentage of target (e.g., 115% of target.)
base salary: A participant's base salary as of July 1, 2003, or the date of
hire, or promotion into the plan, if later, adjusted for any increases or
decreases during FY 2004, on a prorated basis and adjusted for any amount of
time the participant may not be in the plan for reasons of hire, death,
disability, retirement and/or termination.
payout: Actual gross dollar amount paid to a participant under the plan, if any,
for achievement of assigned performance targets, as further discussed in this
plan.
total annual incentive opportunity: The total amount that a participant is
eligible to receive from all annual incentive plans, including this plan,
expressed as a percent of base salary.
target incentive percent: The percent applied to the participant's total annual
incentive opportunity to determine the target incentive amount for this plan.
Generally, for the plan period 2004, the target incentive percent for this plan
is 75%.
target incentive amount: The amount that a participant is eligible to receive if
he/she achieves 100% of his/her performance target for a business unit. The sum
of the target incentive amounts for all business units assigned to a participant
is the total target incentive amount.
II. PLAN OBJECTIVES
---------------
The plan is intended to provide the officers and other key employees of the
Company and of its subsidiaries, affiliates and certain joint venture companies,
upon whose judgement, initiative and efforts the Company depends for its growth
and for the profitable conduct of its business, with additional incentive to
promote the success of the Company.
III. ELIGIBILITY
-----------
A participant is selected by the CEO and recommended for participation to the
CC, which has sole discretion for determining eligibility, from among those
employees in key management positions deemed able to make the most significant
contributions to the growth and profitability of the Company. The President and
CEO of the Company is a participant.
IV. PERFORMANCE TARGETS AND MEASUREMENT
-----------------------------------
The CEO recommends and the CC adopts, in its sole discretion, performance
targets and performance levels for each participant, not later than 90 days from
the commencement of the plan period. No performance target or performance level
may be modified after 90 days from the commencement of the plan period.
A. Performance targets, comprising one or more financial goals, for each
business unit are defined for each participant. Each financial goal is
assigned a weight, such that the sum of the weights of all financial goals
for a business unit equals 100%.
B. Each participant is assigned performance targets for one or more business
units , based on the participants position, responsibilities, and his
ability to affect the results of the assigned business unit. For each
participant, each business unit is assigned a weight, such that the sum of
the weights of all business units for a participant equals 100%.
Collectively, all business unit performance targets together constitute the
participants plan period objectives.
C. Each financial goal is assigned performance levels (threshold, target and
outstanding).
V. PERFORMANCE EVALUATION
----------------------
A. Financial Results
-----------------
1. At the end of the plan period, the financial results for each business
unit are compared with that units financial goals to determine the
payout for each participant
2. Award Determination
a. Achievement of threshold performance of at least one financial
goal of a performance target is necessary for a participant to
receive a payout for that performance target.
b. The unweighted payout factor for each financial goal is
determined as follows:
1. For performance at the below threshold level, the payout
factor is zero.
2. For performance at the threshold level, the payout factor is
25%.
3. For performance between the threshold and target levels, the
payout factor is between 25% and 100%, determined on a
pro-rata basis.
4. For performance at the target level, the payout factor is
100%.
5. For performance between the target and outstanding levels,
the payout factor is between 100% and 200%, determined on a
pro-rata basis.
6. For performance at or above the outstanding level, the
unweighted payout factor is 200%.
c. A participants payout is determined as follows:
1. Each financial goals unweighted payout factor determined
above times the weighting of that financial goal equals the
weighted payout factor for that financial goal.
2. The sum of the weighted payout factors for a business units
performance target equals the payout factor for that
performance target.
3. The participants base salary
times
the participants target incentive percent
times
the performance target payout factor
times
the business unit weight
equals
the participants payout for that business unit.
4. The sum of the payouts for all the business units assigned
to a participant equals the participants total payout.
d. The CC may, in its sole discretion, reduce a participants payout
to any level it deems appropriate.
3. In determining the attainment of financial goals,
a. the impact of foreign exchange gains or losses will be excluded
from revenue and divisional EBITA and divisional cash flow
criteria.
b. the impact of any of the events (1) through (5) listed in Section
4(b)(ii) of the shareholder plan, if dilutive (causes a reduction
in the financial result), will be excluded from the financial
results of any affected business unit.
VI. PAYOUTS
-------
A. Payouts will be made within 90 days after the end of the plan period.
B. In the event of a participant's death, disability, retirement or leave
of absence prior to payout, the payout, if any, will be determined by
the CC.
C. A participant who resigns, or whose employment is terminated by the
Company, with or without cause, before payout from the plan is
distributed, will not receive a payout. Exception to this provision
shall be made with the approval of the CC, in its sole discretion.
D. A participant who transfers between business units of the Company will
have his/her payout prorated to the nearest fiscal quarter for the
time spent in each business unit, based on the achievement of
performance targets established for the position in each business
unit.
E. A participant who is appointed to a position with a different target
incentive percent will have his/her payout prorated to the nearest
fiscal quarter for the time spent in each position, based on the
achievement of performance target established for each position.
F. A participant who is hired or promoted into an eligible position
during the plan period may receive a prorated payout as determined by
the CC, in its sole discretion.
VII. ADMINISTRATION AND OTHER MATTERS
--------------------------------
A. The plan will be administered by the CC, which shall have authority in
its sole discretion to interpret and administer this plan, including,
without limitation, all questions regarding eligibility and status of
any participant, and no participant shall have any right to receive a
payout or payment of any kind whatsoever, except as determined by the
CC hereunder.
B. The Company will have no obligation to reserve or otherwise fund in
advance any amount which may become payable under the plan.
C. This plan may not be modified or amended except with the approval of
the CC.
D. In the event of a conflict between the provisions of this plan and the
provisions of the shareholder plan, the provisions of the shareholder
plan shall apply.
EXHIBIT 10.18
JOHN WILEY & SONS, INC.
-----------------------
FY 2004 EXECUTIVE ANNUAL STRATEGIC MILESTONES INCENTIVE PLAN
------------------------------------------------------------
ADMINISTRATIVE DOCUMENT
-----------------------
CONFIDENTIAL
------------
MAY 1, 2003
-----------
CONTENTS
--------
Section Subject Page
- ------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Objectives and Measurement 3
V. Performance Evaluation 3
VI. Payouts 5
VII. Administration and Other Matters 5
I. DEFINITIONS
-----------
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
company: John Wiley & Sons, Inc.
plan: The company's Fiscal Year 2004 Executive Annual Strategic Milestones
Incentive Plan described in this document and any written amendments to this
document.
plan year: The twelve month period from May 1, 2003 to April 30, 2004.
Compensation Committee (CC): The committee of the company's Board of Directors
(Board) responsible for reviewing executive compensation.
strategic milestone: A participant's objective to achieve specific results for
FY 2004, including interim revised strategic milestones, if any, as approved and
communicated in writing, as described in Sections IV and V below. Strategic
milestones are leading indicators of performance.
participant: A person selected to participate in the plan.
base salary: The participant's base salary as of July 1, 2004, or the date of
hire, or promotion into the plan, if later, adjusted for any increases or
decreases during FY 2004, on a prorated basis and adjusted for any amount of
time the participant may not be in the plan for reasons of hire, death,
disability, retirement and/or termination.
payout: Actual gross dollar amount paid to a participant under the plan, if any,
for achievement of strategic milestones, as further discussed in this plan.
total annual incentive opportunity: The total target amount a participant is
eligible to receive from all annual incentive programs, including this plan.
target incentive percent: The percent applied to the participant's total annual
incentive opportunity to determine the target incentive amount for the plan.
Generally, for the plan year 2004, the target incentive percent is 25%.
target incentive amount: The amount, if any, that a participant is eligible to
receive if he/she achieves 100% of his/her strategic milestones.
summary evaluation levels:
threshold: The minimum acceptable level of achievement of strategic
milestones. If threshold performance is achieved against all strategic
milestones, a participant may earn 25% of the target incentive amount for
which he/she is eligible.
target: Achievement in aggregate of target strategic milestones. Each
individual strategic milestone is set at a level that is both challenging
and achievable.
outstanding: Superior achievement of strategic milestones, both in quality
and scope, with limited time and resources. If outstanding performance is
achieved against strategic milestones, the maximum amount a participant may
earn is 200% of the target incentive amount.
payout factor: Percentage of strategic milestones deemed achieved, applied to
the target incenive amount, used to determine the payout for which a participant
is eligible.
II. PLAN OBJECTIVES
---------------
The purpose of the FY 2004 Executive Annual Strategic Milestones Incentive Plan
is to enable the company to reinforce and sustain a culture devoted to excellent
performance, reward significant contributions to the success of Wiley, and
attract and retain highly qualified executives.
III. ELIGIBILITY
-----------
The participant is selected by the President and CEO of the company, from among
those employees in key management positions deemed able to make the most
significant contributions to the growth and profitability of the company, with
the approval of the CC. The President and CEO of the company is a participant.
IV. PERFORMANCE OBJECTIVES AND MEASUREMENT
--------------------------------------
A. Strategic milestones are non-financial individual objectives over which the
participant has a large measure of control, which lead to, or are expected
to lead to improved performance for the company in the future. Strategic
milestones are determined near the beginning of the plan year by the
participant, and approved by CEO or the participant's manager, if the CEO
is not the participant's manager.
B. The strategic milestones for the President and CEO are reviewed and
approved by the CC.
C. The strategic milestones for the President and CEO should be appropriately
reflected in those of all other employees at all levels. Each participant
collaborates with his/her manager in setting strategic milestones. The
strategic milestones may be revised during the plan year, as appropriate.
D. The determination of strategic milestones includes defining a target level
of performance and the measure of such, and may include defining threshold
and outstanding levels of performance and the measures of such.
V. PERFORMANCE EVALUATION
----------------------
A. Achievement of a participant's strategic milestones will be determined at
the end of the plan year by comparing results achieved to previously set
objectives.
B. Each participant's manager will recommend a summary evaluation level and a
payout factor for achievement of all strategic milestones, compared with
the previously set objectives. In determining the payout factor, the
overall performance on all strategic milestones will be considered. The CEO
will recommend to the CC for approval the payout factors for all other
participants. The CC will recommend to the Board for approval the payout
factor for the CEO.
Summary evaluation levels and related payout factors are as follows:
Summary Evaluation Payout factor range
------------------ -------------------
< Threshold 0
Threshold 25% - <35%
> Threshold =>35% - <50%
< Target =>50% - <90%
Target =>90% - <=110%
> Target =>110% - <150%
< Outstanding =>150% - <175%
Outstanding =>175% - 200%
C. Award Determination
-------------------
STRATEGIC MILESTONES PAYOUT AMOUNT
----------------------------------
total annual incentive opportunity X plan target incentive percent X payout
factor = Strategic Milestones Payout Eligibility
1. Notwithstanding anything to the contrary, the maximum payout, if any, a
participant may receive is 200% of the target incentive amount.
2. The foregoing Strategic Milestones payout eligibility calculation is
intended to set forth general guidelines on how awards are to be
determined. The purpose of this plan is to motivate the participant to
perform in an outstanding manner. The President and CEO has discretion
under this plan to take into consideration the contribution of the
participant, the participant's management of his/her organizational unit
and other relevant factors, positive or negative, which impact the
company's, the participant's organizational unit(s), and the participant's
performance overall in determining whether to recommend granting or denying
an award, and the amount of the award, if any. If the participant is the
President and CEO, such discretion is exercised by the CC and the Board.
VI. PAYOUTS
-------
A. Payouts will be made within 90 days after the end of the plan year.
B. In the event of a participant's death, disability, retirement or leave of
absence prior to payout from the plan, the payout, if any, will be
recommended by the President and CEO to the CC which shall have sole
authority for approval of the payout, subject to any required Board
approvals. If the participant is the President and CEO, such approval is
required by the Board.
C. A participant who resigns, or whose employment is terminated by the
company, with or without cause, before payout from the plan is distributed,
will not receive a payout. Exception to this provision shall be made only
with the approval of the CC, subject to any required Board approvals. If
the participant is the President and CEO, such approval is required by the
Board.
D. A participant who transfers between divisions of the company, will have
his/her payout prorated to the nearest fiscal quarter for the time spent in
each division, based on the achievement of strategic milestones established
for the position in each division, and based upon a judgment of the
participant's contribution to the achievement of goals in each position,
including interim revisions, if appropriate.
E. A participant who is appointed to a position with a different target
incentive percent will have his/her payout prorated to the nearest fiscal
quarter for the time spent in each position, based on the achievement of
strategic milestones established for each position.
F. A participant who is hired or promoted into an eligible position during the
plan year may receive a prorated payout as determined by the CEO, in
his/her sole discretion, subject to the approval of the CC.
VII. ADMINISTRATION AND OTHER MATTERS
--------------------------------
A. The plan is effective for the plan year. It will terminate, subject to
payout, if any, in accordance with and subject to the provisions of this
plan.
B. This plan will be administered by the CEO, who will have authority to
interpret and administer this plan, including, without limitation, all
questions regarding eligibility and status of the participant, subject to
the approval of the CC required under this plan or the by-laws of the
company.
C. This plan may be withdrawn, amended or modified at any time, for any
reason, in writing, by the company.
D. The determination of an award and payout under this plan, if any, is
subject to the approval of the President and CEO, the CC, and the Board.
This plan does not confer upon any participant the right to receive any
payout, or payment of any kind whatsoever.
E. No participant shall have any vested rights under this plan. This plan does
not constitute a contract.
F. All deductions and other withholdings required by law shall be made to the
participant's payout, if any.
Exhibit 22
SUBSIDIARIES OF JOHN WILEY & SONS, INC.(1)
------------------------------------------
Jurisdiction
in Which
Incorporated
------------
John Wiley & Sons International Rights, Inc. Delaware
JWS HQ, LLC New Jersey
JWS DCM, LLC New Jersey
Wiley-Liss, Inc. Delaware
Wiley Publishing Services, Inc. Delaware
Wiley Periodicals, Inc. Delaware
Wiley Subscription Services, Inc. Delaware
John Wiley & Sons (Asia) Pte Ltd. Singapore
John Wiley & Sons Australia, Ltd Australia
John Wiley & Sons Canada Limited Canada
John Wiley & Sons (HK) Limited Hong Kong
Wiley Europe Limited England
Wiley Heyden Ltd England
Wiley Europe (S.A.R.L.) France
Wiley Distribution Services Limited England
John Wiley & Sons Ltd. England
InPharm-Internet Services Limited England
Wiley HMI Holdings, Inc. Delaware
Wiley Europe Investment Holdings Ltd England
Wiley Interface Ltd England
HMI Investment, Inc. Delaware
Wiley Publishing, Inc. Delaware
Wiley Dreamtech India Private Limited (65%) India
Wiley Publishing Australia Pty Ltd Australia
John Wiley & Sons GmbH Germany
Wiley InterScience GmbH Germany
Verlag Chemie GmbH Germany
Wiley-VCH Verlag GmbH & Co. KGaA Germany
Wiley-GIT Publishers GmbH Germany
GIT Verlag GmbH & Co. KG Germany
Wiley Fachverlag GmbH Germany
Wilhelm Ernst & Sohn Verlag fuer Architectur
und technische Wissenschaften GmbH & Co. KG Germany
Verlag Helvetica Chimica Acta AG Switzerland
Wiley-VCH Verlag Schweiz AG Switzerland
Physik Verlag GmbH (52%) Germany
WWL, Inc. Delaware
Wiley-Japan Y.K. Japan
- --------------------------------------------------------
(1) The names of other subsidiaries that would not constitute a significant
subsidiary in the aggregate have been omitted. All subsidiaries are wholly
owned unless indicated parenthetically.
Exhibit 98.1
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
------------------------------------------------------------------------
I, William J. Pesce, certify that:
I have reviewed this annual report on Form 10-K of John Wiley & Sons, Inc.;
- Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report; and
- Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented.
- The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f) for the Company and we have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Company's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report, based on such
evaluation; and
d. Disclosed in this report any change in the Company's internal
control over financial reporting that occurred during the
Company's most recent fiscal quarter (the Company's fourth
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
- The Company's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial
reporting, to the Company's auditors and the audit committee of the
board of directors:
a. all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting
that are reasonably likely to adversely affect the Company's
ability to record, process, summarize and report financial
information; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls.
By: /s/ William J. Pesce
----------------------------
William J. Pesce
President and Chief Executive Officer
Dated: July 7, 2005
Exhibit 98.2
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
------------------------------------------------------------------------
I, Ellis E. Cousens, certify that:
I have reviewed this annual report on Form 10-K of John Wiley & Sons, Inc.;
- Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report; and
- Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
- The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f) for the Company and we have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Company's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report, based on such
evaluation; and
d. Disclosed in this report any change in the Company's internal
control over financial reporting that occurred during the
Company's most recent fiscal quarter (the Company's fourth
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
- The Company's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial
reporting, to the Company's auditors and the audit committee of the
board of directors:
a. all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting
that are reasonably likely to adversely affect the Company's
ability to record, process, summarize and report financial
information; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls.
By: /s/ Ellis E. Cousens
----------------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial and Operations Officer
Dated: July 7, 2005
Exhibit 99
CERTIFICATION PURSUANT TO
U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, William J. Pesce and Ellis E. Cousens, certify that:
The Annual Report on Form 10-K of John Wiley & Sons, Inc. (the "Company"), for
the period ending April 30, 2005, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934, fully complies with the requirements of
those sections.
We further certify that, based on our knowledge, the information contained in
the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
/s/ William J. Pesce
- ---------------------
William J. Pesce
President and Chief Executive Officer
Dated: July 7, 2005
/s/ Ellis E. Cousens
- ---------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial & Operations Officer
Dated: July 7, 2005