SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended October 31, 2006 Commission File No. 1-11507
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from to
JOHN WILEY & SONS, INC.
-----------------------
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5593032
- --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
111 RIVER STREET, HOBOKEN NJ 07030
- --------------------------------------- ------------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (201) 748-6000
---------------------------
NOT APPLICABLE
-----------------------------------------------------------------
Former name, former address, and former fiscal year,
if changed since last report
Indicate by check mark, whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |X| Accelerated filer | | Non-accelerated filer | |
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
The number of shares outstanding of each of the Registrant's classes of common
stock as of November 30, 2006 were:
Class A, par value $1.00 - 47,083,709
Class B, par value $1.00 - 10,135,693
This is the first page of a 37-page document
JOHN WILEY & SONS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements.
Condensed Consolidated Statements of Financial Position - Unaudited
as of October 31, 2006 and 2005, and April 30, 2006........................................3
Condensed Consolidated Statements of Income - Unaudited
for the three and six months ending October 31, 2006 and 2005..............................4
Condensed Consolidated Statements of Cash Flows - Unaudited
for the six months ended October 31, 2006 and 2005........................................ 5
Notes to Unaudited Condensed Consolidated Financial Statements.............................6-16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................................17-28
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................. 29
Item 4. Controls and Procedures......................................................................30
PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..................................31
Item 5. Submission of Matters to a Vote of Security Holders..........................................31
Item 6. Exhibits and Reports on Form 8-K.............................................................31
SIGNATURES AND CERTIFICATIONS........................................................................33-35
EXHIBITS.............................................................................................36-37
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
(UNAUDITED)
October 31, April 30,
--------------------------------------- ----------------
2006 2005 2006
----------------- ------------------- ----------------
Assets:
Current Assets
Cash and cash equivalents $ 16,574 $ 17,564 $ 60,757
Accounts receivable 173,682 161,553 158,275
Inventories 90,433 87,329 88,578
Deferred Income Tax Benefit 7,508 5,921 5,536
Prepaids and other 10,904 11,360 13,162
----------------- ------------------- ----------------
Total Current Assets 299,101 283,727 326,308
Product Development Assets 65,942 63,148 65,641
Property, Equipment and Technology 104,006 104,897 102,123
Intangible Assets 304,681 303,416 302,384
Goodwill 205,090 196,938 198,416
Deferred Income Tax Benefit 8,961 4,359 3,809
Other Assets 29,289 27,231 27,328
----------------- ------------------- ----------------
Total Assets $ 1,017,070 $ 983,716 $ 1,026,009
================= =================== ================
Liabilities & Shareholders' Equity:
Current Liabilities
Accounts and royalties payable $ 85,215 $ 95,901 $ 97,231
Deferred revenue 67,381 56,416 143,923
Accrued income taxes 20,762 31,334 24,226
Accrued pension liability 6,295 6,427 6,074
Other accrued liabilities 62,025 63,942 90,655
----------------- ------------------- ----------------
Total Current Liabilities 241,678 254,020 362,109
Long-Term Debt 207,794 232,190 160,496
Accrued Pension Liability 59,846 65,160 56,068
Other Long-Term Liabilities 33,573 35,565 35,627
Deferred Income Taxes 13,350 3,895 9,869
Shareholders' Equity
Class A & Class B common stock 83,191 83,191 83,191
Additional paid-in-capital 84,328 63,261 69,587
Retained earnings 636,956 551,430 596,474
Accumulated other comprehensive gain/(loss) 11,927 (2,135) 7,669
Unearned deferred compensation - (4,190) (3,512)
Treasury stock (355,573) (298,671) (351,569)
----------------- ------------------- ----------------
Total Shareholders' Equity 460,829 392,886 401,840
----------------- ------------------- ----------------
Total Liabilities & Shareholders' Equity $ 1,017,070 $ 983,716 $ 1,026,009
================= =================== ================
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
JOHN WILEY & SONS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands except per share information)
For the Three Months For the Six Months
Ending October 31, Ending October 31,
------------------------------------- -----------------------------------
2006 2005 2006 2005
----------------- ---------------- ----------------- ----------------
Revenue $ 284,502 $ 262,683 $ 547,934 $ 499,432
Costs and Expenses
Cost of sales 93,296 86,589 178,470 163,410
Operating and administrative expenses 145,577 129,573 285,290 254,279
Amortization of intangibles 3,596 3,050 7,179 6,116
----------------- ---------------- ----------------- ----------------
Total Costs and Expenses 242,469 219,212 470,939 423,805
----------------- ---------------- ----------------- ----------------
Operating Income 42,033 43,471 76,995 75,627
Operating Margin 14.8% 16.5% 14.1% 15.1%
Interest Income and Other, net 61 (139) 538 396
Interest Expense (2,852) (2,184) (5,241) (4,227)
----------------- ---------------- ----------------- ----------------
Net Interest Expense and Other (2,791) (2,323) (4,703) (3,831)
----------------- ---------------- ----------------- ----------------
Income Before Taxes 39,242 41,148 72,292 71,796
Provision For Income Taxes 9,350 14,144 20,455 16,935
----------------- ---------------- ----------------- ----------------
Net Income $ 29,892 $ 27,004 $ 51,837 $ 54,861
================= ================ ================= ================
Income Per Share
Diluted $ 0.52 $ 0.45 $ 0.89 $ 0.91
Basic $ 0.53 $ 0.46 $ 0.91 $ 0.93
Cash Dividends Per Share
Class A Common $ 0.10 $ 0.09 $ 0.20 $ 0.18
Class B Common $ 0.10 $ 0.09 $ 0.20 $ 0.18
Average Shares
Diluted 57,971 60,497 57,928 60,568
Basic 56,777 58,578 56,763 58,746
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW - UNAUDITED
(In thousands)
For The Six Months
Ending October 31,
--------------------------------------
2006 2005
--------------- ----------------
Operating Activities
- --------------------
Net income $ 51,837 $ 54,861
Adjustments to reconcile net income to cash provided by (used for)operating activities:
Amortization of intangibles 7,179 6,116
Amortization of composition costs 18,375 17,346
Depreciation of property, equipment and technology 13,894 16,367
Stock-based compensation (net of tax) 6,198 2,026
Non-cash charges & other 32,048 28,883
Non-cash tax benefit (4,193) (7,476)
Change in deferred revenue (77,945) (86,973)
Net change in operating assets and liabilities, excluding acquisitions (59,064) (24,556)
--------------- ----------------
Cash (Used for) Provided by Operating Activities, excluding acquisitions (11,671) 6,594
--------------- ----------------
Investing Activities
- --------------------
Additions to product development assets (34,837) (33,371)
Additions to property, equipment and technology (13,019) (9,018)
Acquisitions, net of cash acquired (13,480) (24,562)
Sales of marketable securities - 10,000
--------------- ----------------
Cash Used for Investing Activities (61,336) (56,951)
--------------- ----------------
Financing Activities
- --------------------
Repayments of long-term debt - (50,000)
Borrowings of long-term debt 45,245 89,842
Purchase of treasury stock (7,278) (54,896)
Cash dividends (11,355) (10,686)
Proceeds from exercise of stock options and other 1,955 4,595
--------------- ----------------
Cash Provided by (Used for) Financing Activities 28,567 (21,145)
--------------- ----------------
Effects of Exchange Rate Changes on Cash 257 (335)
--------------- ----------------
Cash and Cash Equivalents
Decrease for Period (44,183) (71,837)
Balance at Beginning of Period 60,757 89,401
--------------- ----------------
Balance at End of Period $ 16,574 $ 17,564
=============== ================
Supplemental Information
Cash Paid During the Period for:
Interest $ 4,359 $ 3,719
Income taxes $ 25,629 $ 17,145
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the
consolidated financial position of John Wiley & Sons, Inc., and
Subsidiaries (the "Company") as of October 31, 2006 and 2005, and results
of operations and cash flows for the three and six month periods ended
October 31, 2006 and 2005. The results for the three and six months ended
October 31, 2006 are not necessarily indicative of the results expected for
the full year. These statements should be read in conjunction with the most
recent audited financial statements contained in the Company's Form 10-K
for the fiscal year ended April 30, 2006.
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Certain prior-year amounts have been reclassified to conform to the current
year's presentation.
2. Recent Accounting Standards
---------------------------
In July 2006, the FASB issued FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes" ("FIN 48"). FIN 48 clarifies the accounting
for uncertainty in income taxes recognized in a company's financial
statements in accordance with SFAS No. 109 "Accounting for Income Taxes".
FIN 48 provides guidance on recognizing, measuring, presenting and
disclosing in the financial statements uncertain tax positions that a
company has taken or expects to take on a tax return. FIN 48 is effective
for the Company as of May 1, 2007. The Company is currently assessing the
impact, if any, of FIN 48 on its consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157 "Fair Value Measurements"
("SFAS 157"). SFAS 157 provides a new single authoritative definition of
fair value and provides enhanced guidance for measuring the fair value of
assets and liabilities and requires additional disclosures related to the
extent to which companies measure assets and liabilities at fair value, the
information used to measure fair value, and the effect of fair value
measurements on earnings. SFAS 157 is effective for the Company as of May
1, 2008. The Company is currently assessing the impact, if any, of SFAS 157
on its consolidated financial statements.
In September 2006, the FASB issued SFAS No. 158 "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans - an amendment of
FASB Statements No. 87, 88, 106, and 132(R)" ("SFAS 158"). SFAS 158
requires balance sheet recognition of the funded status of pension and
postretirement benefit plans. Under SFAS 158, actuarial gains and losses,
prior service costs or credits, and any remaining transition assets or
obligations that have not been recognized under previous accounting
standards must be recognized as a component of accumulated other
comprehensive income (loss) within stockholders' equity, net of tax
effects, until they are amortized as a component of net periodic benefit
cost. In addition, the measurement date and the date at which plan assets
and the benefit obligation are measured are required to be the company's
fiscal year end, which is the date currently used by the Company. SFAS 158
is effective for the Company as of April 30, 2007. The Company is currently
assessing the impact of SFAS 158 on its consolidated financial statements.
In September 2006, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements (SAB 108), to address diversity in practice in quantifying
financial statement misstatements. SAB 108 requires that the Company
quantify misstatements based on their impact on each of our financial
statements and related disclosures. SAB 108 is effective as of April 30,
2007. The Company is currently evaluating the impact of adopting SAB 108 on
its consolidated financial statements.
3. Share-Based Compensation
------------------------
All equity compensation plans have been approved by security holders. Under
the Key Employee Stock Plan ("the Plan"), qualified employees are eligible
to receive awards that may include stock options, performance-based stock
awards, and restricted stock awards. Under the Plan, a maximum number of
8,000,000 shares of Company Class A stock may be issued. As of October 31,
2006 there were 5,614,997 securities remaining available for future
issuance under the Plan. The Company issues treasury shares to fund stock
options and performance-based and restricted stock awards.
Accounting for Share-Based Compensation:
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" ("SFAS 123R"). SFAS 123R requires that companies recognize
share-based compensation to employees in the Statement of Income based on
the fair value of the share-based awards. The Company adopted SFAS 123R on
May 1, 2006, the beginning of the Company's 2007 fiscal year.
Prior to the adoption of SFAS 123R, the Company accounted for stock-based
compensation using the "intrinsic value" method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and using the disclosure-only provisions of SFAS 123, as
amended by SFAS 148. Under this approach, the value of restricted stock
awards was expensed over their requisite service periods and the imputed
cost of stock options were disclosed only in footnotes to the financial
statements.
The Company adopted SFAS 123R effective May 1, 2006 using the modified
prospective approach. Under this approach, awards that are granted,
modified or settled after May 1, 2006 are measured and expensed in
accordance with SFAS 123R. Unvested awards that were granted prior to May
1, 2006 are expensed and recognized in the Company's results of operations,
prospectively. No previous periods are restated.
Pursuant to the provisions of SFAS 123R, the Company records share-based
compensation as a charge to earnings reduced by the estimated cost of
anticipated forfeited awards. As such, share-based compensation expense is
only recognized for those awards that are expected to ultimately vest.
Stock-based compensation expense associated with performance restricted
share awards is recognized based on management's best estimates of the
achievement of the performance goals specified in such awards and the
estimated number of shares that will be earned. The cumulative effect on
current and prior periods of a change in the estimated number of
performance share awards, or estimated forfeiture rate is recognized as an
adjustment to earnings in the period of the revision.
Concurrent with the adoption of SFAS 123R the Company accelerated the
recognition of compensation expense related to post-adoption awards granted
to near-retirement and retirement-eligible employees to reflect accelerated
vesting as provided in the Company's Key Employee Stock Plan. The impact of
the change was not significant.
The adoption of SFAS 123R resulted in the recognition of an incremental
share-based compensation expense of $3.0 million ($1.9 million after taxes)
and $5.4 million ($3.3 million after taxes) for the three and six months
ended October 31, 2006, which is reflected in operating and administrative
expenses. For the prior year periods, this portion of stock-based
compensation was reflected in the Company's disclosures, but was not
recognized in the consolidated income statements. For comparative purposes,
the following adjusted net income and earnings per share for the three and
six months ended October 31, 2005 reflect the amounts which would have been
reported in the income statement if the provisions of SFAS 123R were in
effect at that time.
For the Three Months For the Six Months
(in thousands, except per share amounts) Ending October 31, Ending October 31,
------------------------------------ ----------------------------------
2006 2005 2006 2005
---------------- ---------------- -------------- ---------------
Net income, as reported $29,892 $27,004 $51,837 $54,861
Add: Stock-based compensation expense
included in reported net income, net of taxes 2,943 688 6,198 2,026
Deduct: Total stock-based compensation expense
determined under fair-value based
method for all awards, net of taxes (1) (2,943) (2,204) (6,198) (5,070)
---------------- ---------------- -------------- ---------------
Adjusted net income $29,892 $25,488 $51,837 $51,817
================ ================ ============== ===============
Reported earnings per share:
Diluted $0.52 $0.45 $0.89 $0.91
Basic $0.53 $0.46 $0.91 $0.93
Adjusted earnings per share:
Diluted $0.52 $0.42 $0.89 $0.86
Basic $0.53 $0.44 $0.91 $0.88
(1) Total stock-based compensation expense for all awards presented in the
table above is net of taxes of $1.7 million and $1.4 million for the three
months ended October 31, 2006 and 2005, respectively, and net of taxes of
$3.7 million and $3.1 million for the six months ended October 31, 2006 and
2005, respectively.
Stock Option Activity:
Under the terms of the Company's stock option plan the exercise price of
stock 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,
over a maximum period of 10 years from the date of grant, and generally
vest 50% on the fourth and fifth anniversary date after the award is
granted. Under certain circumstances relating to a change of control, as
defined, the right to exercise options outstanding could be accelerated.
The following table provides the estimated weighted average fair value,
under the Black-Scholes option-pricing model, for each option granted
during the periods and the significant weighted average assumptions used in
their determination. The expected life represents an estimate of the period
of time stock options are outstanding based on the historical exercise
behavior of the employees. The risk-free interest rate is based on the
corresponding U.S. Treasury yield curve in effect at the time of the grant.
Similarly, the volatility is estimated based on the expected volatility
over the estimated life, while the dividend yield is based on expected
dividend payments to be made by the Company.
For the Three and Six
Months Ending October 31,
------------------------------------------
2006 2005
------------------ -----------------
Expected life of options (years) 7.8 8.0
Risk-free interest rate 5.2% 3.9%
Expected volatility 29.1% 27.1%
Expected dividend yield 1.2% 0.9%
Per share fair value of options granted $12.65 $13.61
A summary of the activity and status of the Company's stock option plans was as
follows:
Weighted
Average
Weighted Remaining Aggregate
Shares Average Contractual Intrinsic Value
Stock Options (in thousands) Exercise Price Term (in years) (in millions)
- ------------- -------------------- ------------------- ------------------ -----------------
Outstanding at April 30, 2006 6,084 $25.95
Granted 640 $33.05
Exercised (60) $18.51
Expired or forfeited (33) $30.35
--------------------
Outstanding at October 31, 2006 6,631 $26.68 5.9 $60.4
====================
Vested and expected to vest in the future 6,525 $26.66 5.9 $59.6
at October 31, 2006
Exercisable at October 31, 2006 2,720 $19.72 3.3 $42.4
The intrinsic value is the difference between the Company's common stock
price and the option exercise price. Total intrinsic value of options
exercised during the six months ended October 31, 2006 and 2005 were $0.9
million and $6.7 million, respectively. The Aggregate Intrinsic Value in
the table above represents the value option holders would have received on
options that were exercisable as of October 31, 2006.
As of October 31, 2006, there was $25.1 million of unrecognized share-based
compensation expense related to stock options, which is expected to be
recognized over a period up to 5 years, or 2.7 years on a weighted average
basis.
Performance-Based and Other Restricted Stock Activity:
Under the terms of the Company's long-term incentive plans, upon the
achievement of certain three-year financial performance-based targets,
awards are payable in restricted shares of the Company's Class A common
stock. During each three-year period the Company adjusts compensation
expense based upon its best estimate of expected performance. The
restricted shares vest 50% on the first and second anniversary date after
the award is earned.
The Company also grants restricted shares of the Company's Class A Common
Stock to key employees in connection with their employment. The restricted
shares generally vest 50% 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.
Non-vested performance-based and other restricted stock awards activity
during the six months ended October 31, 2006 was as follows:
Shares Weighted Average
(in thousands) Grant Date Value
---------------------- ------------------------
Nonvested shares at April 30, 2006 609 $30.47
Shares granted 338 $32.82
Shares vested (21) $24.43
----------------------
Nonvested shares at October 31, 2006 926 $31.46
======================
As of October 31, 2006, there was $14.7 million of unrecognized share-based
compensation cost related to nonvested performance-based and other
restricted stock awards, which is expected to be recognized over a period
up to 5 years, or 3.0 years on a weighted average basis. Compensation
expense for performance-based and restricted stock awards is computed using
the closing market price of the Company's Class A Common Stock at the date
of grant. Total grant date value of shares vested during the six months
ended October 31, 2006 and 2005 was $0.5 million and $0.5 million,
respectively.
Director Stock Awards:
Under the terms of the Company's Director Stock Plan (the "Director Plan"),
each non-employee director receives an annual 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. There were
6,642 shares and 7,608 shares awarded under the Director Plan for the six
months ending October 31, 2006 and 2005, respectively.
4. Comprehensive Income
--------------------
Comprehensive income was as follows (in thousands):
For the Three Months Ending For the Six Months
October 31, Ending October 31,
--------------------------------- -----------------------------
2006 2005 2006 2005
-------------- --------------- -------------- ------------
Net income $29,892 $27,004 $51,837 $54,861
Change in other comprehensive income, net of taxes:
Foreign currency translation adjustment 1,124 1,445 4,258 (4,117)
-------------- --------------- -------------- ------------
Comprehensive income $31,016 $28,449 $56,095 $50,744
============== =============== ============== ============
A reconciliation of accumulated other comprehensive gain (loss) follows (in
thousands):
July 31, Change for October 31,
2006 Period 2006
----------------- ---------------- ---------------
Foreign currency translation adjustment $28,874 1,124 $29,998
Minimum pension liability, net of tax (18,071) - (18,071)
----------------- ---------------- ---------------
Total $10,803 1,124 $11,927
================= ================ ===============
April 30, Change for October 31,
2006 Period 2006
----------------- ---------------- ---------------
Foreign currency translation adjustment $25,740 4,258 $29,998
Minimum pension liability, net of tax (18,071) - (18,071)
----------------- ---------------- ---------------
Total $7,669 4,258 $11,927
================= ================ ===============
5. Weighted Average Shares for Earnings Per Share
----------------------------------------------
A reconciliation of the shares used in the computation of income per share
follows (in thousands):
For the Three Months For the Six Months
Ending October 31, Ending October 31,
--------------------------------- -------------------------------
2006 2005 2006 2005
-------------- --------------- ------------- -------------
Weighted average shares outstanding 57,178 58,925 57,121 59,050
Less: Unvested shares outstanding (401) (347) (358) (304)
-------------- --------------- ------------- -------------
Shares used for basic income per share 56,777 58,578 56,763 58,746
Dilutive effect of stock options and other stock awards 1,194 1,919 1,165 1,822
-------------- --------------- ------------- -------------
Shares used for diluted income per share 57,971 60,497 57,928 60,568
============== =============== ============= =============
For the three and six months ended October 31, 2006 and 2005, options to
purchase Class A Common Stock of 2,597,669 and zero, respectively, have
been excluded from the shares used for diluted income per share, as their
inclusion would have been anti-dilutive.
6. Inventories
-----------
Inventories were as follows (in thousands):
As of
As of October 31, April 30,
---------------------------------------- -------------------
2006 2005 2006
------------------ ------------------ -------------------
Finished goods $79,534 $76,516 $79,389
Work-in-process 6,577 6,776 6,704
Paper, cloth and other 8,061 6,567 6,024
------------------ ------------------ -------------------
94,172 89,859 92,117
LIFO reserve (3,739) (2,530) (3,539)
------------------ ------------------ -------------------
Total inventories $90,433 $87,329 $88,578
================== ================== ===================
7. Acquisitions
------------
Fiscal Year 2007:
During the first half of fiscal year 2007, the Company acquired certain
businesses, assets and rights for $13.5 million, including acquisition
costs plus liabilities assumed. Approximately $7.7 million of brands,
trademarks and acquired publishing rights and $6.2 million of goodwill were
recorded in the aggregate. The brands, trademarks and acquired publishing
rights are being amortized over a weighted average period of approximately
9 years. The Company is in the process of completing valuations necessary
to finalize the purchase price allocation. The acquisitions consist
primarily of the following:
On July 20, 2006, the Company acquired the assets of a publisher of two
controlled circulation advertising based journals. The acquisition has been
recorded as acquired publication rights and is being amortized over a
10-year period.
On October 18, 2006, Wiley acquired a U.K.-based provider of travel-related
online content, technology, and services. The acquisition cost was
allocated to goodwill, branded trademarks and the net tangible assets
acquired, which consisted primarily of computer software. The branded
trademarks are being amortized over a 10-year period.
Fiscal Year 2006:
During the first half of fiscal year 2006, the Company acquired certain
businesses, assets and rights for $24.6 million, including acquisition
costs plus liabilities assumed. Approximately $22.3 million of brands,
trademarks and acquired publishing rights and $3.6 million of goodwill were
recorded in the aggregate. The brands, trademarks and acquired publishing
rights are being amortized over a weighted average period of approximately
10 years. The acquisitions consist primarily of the following:
On May 31, 2005, Wiley acquired substantially all the assets of a global
publisher of computer books and software, specializing in IT business
certification materials. The acquisition cost was allocated to branded
trademarks and the net tangible assets acquired, which consisted primarily
of accounts receivable, inventory, accrued royalties, accounts payable and
other accrued liabilities. The branded trademarks are being amortized over
a 10-year period.
On July 11, 2005, the Company acquired the rights to a newsletter
publishing division of a leading publisher of mental health and addiction
information. The majority of the acquisition was recorded as acquired
publication rights and is being amortized over a 10-year period.
On October 6, 2005, the Company acquired a leading provider of
evidence-based medicine content and web-based search tools. The acquisition
cost was primarily allocated to goodwill, trademarks, customer
relationships and the net tangible assets acquired, which consisted
primarily of accounts receivable, capitalized software and deferred
revenues. The trademarks and customer relationships are being amortized
over a 10-year period.
8. Segment Information
-------------------
The Company is a global publisher of print and electronic products,
providing 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 undergraduate
and graduate students, 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 used to evaluate performance. Segment
information is as follows:
For The Three Months Ending October 31,
--------------------------------------------------------------------------------------------
2006 2005
-------------------------------------------- -------------------------------------------
(thousands)
Inter- Inter-
External segment External segment
Customers Sales Total Customers Sales Total
-------------- -------------- ------------- -------------- -------------- --------------
Revenue
-------
U.S. segments:
Professional/Trade $94,017 $10,264 $104,281 $83,851 $11,092 $94,943
Scientific, Technical, and Medical 50,470 2,423 52,893 47,151 2,204 49,355
Higher Education 32,737 9,240 41,977 32,304 9,496 41,800
European segment 75,627 5,209 80,836 69,679 7,103 76,782
Asia, Australia & Canada 31,651 585 32,236 29,698 481 30,179
Eliminations - (27,721) (27,721) - (30,376) (30,376)
-------------- -------------- ------------- -------------- -------------- --------------
Total Revenue $284,502 - $284,502 $262,683 - $262,683
============== ============== ============= ============== ============== ==============
Direct Contribution to Profit
-----------------------------
U.S. segments:
Professional/Trade $29,163 $25,561
Scientific, Technical, and Medical 23,114 23,472
Higher Education 11,969 11,701
European segment 28,160 25,265
Asia, Australia & Canada 5,930 6,464
------------- --------------
Total Direct Contribution to Profit 98,336 92,463
Shared Services and
Administrative Costs
--------------------
Distribution (13,092) (12,609)
Information technology (15,318) (15,106)
Finance (9,299) (8,284)
Other administrative (18,594) (12,993)
------------- --------------
Total Shared Services and
Administrative Costs (56,303) (48,992)
------------- --------------
Operating Income $42,033 $43,471
---------------- ============= ==============
For The Six Months Ending October 31,
--------------------------------------------------------------------------------------------
2006 2005
-------------------------------------------- -------------------------------------------
(thousands)
Inter- Inter-
External segment External segment
Customers Sales Total Customers Sales Total
-------------- -------------- ------------- -------------- ------------- --------------
Revenue
-------
U.S. segments:
Professional/Trade $171,475 $18,460 $189,935 $154,289 $19,170 $173,459
Scientific, Technical, and Medical 102,049 4,411 106,460 93,590 4,518 98,108
Higher Education 72,911 16,807 89,718 69,996 17,346 87,342
European segment 142,203 10,553 152,756 128,106 11,802 139,908
Asia, Australia & Canada 59,296 1,006 60,302 53,451 884 54,335
Eliminations - (51,237) (51,237) - (53,720) (53,720)
-------------- -------------- ------------- ------------- -------------- --------------
Total Revenue $547,934 - $547,934 $499,432 - $499,432
============== ============== ============= ============= ============== ==============
Direct Contribution to Profit
-----------------------------
U.S. segments:
Professional/Trade $48,323 $44,403
Scientific, Technical, and Medical 48,048 48,017
Higher Education 29,022 28,720
European segment 52,278 43,892
Asia, Australia & Canada 9,456 9,921
------------- --------------
Total Direct Contribution to Profit 187,127 174,953
Shared Services and
Administrative Costs
--------------------
Distribution (25,479) (24,457)
Information technology (30,501) (30,130)
Finance (17,780) (16,303)
Other administrative (36,372) (28,436)
------------- --------------
Total Shared Services and
Administrative Costs (110,132) (99,326)
------------- --------------
Operating Income $76,995 $75,627
---------------- ============= ==============
9. Intangible Assets
Intangible assets consisted of the following (in thousands):
As of
As of October 31, April 30,
----------------------------------- ---------------
2006 2005 2006
---------------- -------------- ---------------
Intangible assets not subject to amortization
Branded trademarks $57,900 $57,900 $57,900
Acquired publication rights 118,281 118,441 117,911
---------------- -------------- ---------------
Total intangible assets not subject to amortization 176,181 176,341 175,811
Net intangible assets subject to amortization, principally
acquired publication rights 128,500 127,075 126,573
---------------- -------------- ---------------
Total $304,681 $303,416 $302,384
================ ============== ===============
10. Marketable Securities
---------------------
During the first quarter of fiscal year 2006, the Company sold its
remaining marketable securities for approximately $10.0 million. The
marketable securities consisted 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. These securities were accounted for as available-for-sale in
accordance with SFAS No. 115 "Accounting for Certain Investments in Debt
and Equity Securities."
11. Income Taxes
------------
The effective tax rate for the first six months of fiscal year 2007 was
28.3%. The tax provision for the first six months of fiscal year 2007
included $4.2 million, or $0.07 per diluted share, of tax benefits recorded
in the second quarter of fiscal year 2007 related to the finalization of
tax audits for fiscal years 2002 and 2003. Excluding the tax benefits
described above, the effective tax rate for the first six months of fiscal
year 2007 was 34.1%.
The effective tax rate for the first six months of fiscal year 2006 was
23.6%. The tax provision for the first six months of fiscal year 2006
included $7.5 million, or $0.12 per diluted share, of tax benefits
associated with the reversal of a tax accrual recorded on the repatriation
of dividends from European subsidiaries in the fourth quarter of fiscal
year 2005. On May 10, 2005, the U.S. Internal Revenue Service issued Notice
2005-38. The notice provided for a tax benefit that fully offset the tax
accrued by the Company on foreign dividends in the fourth quarter of fiscal
year 2005. Neither the tax benefit associated with the $7.5 million tax
accrual reversal, nor the corresponding fourth quarter fiscal year 2005 tax
accrual had a cash impact on the Company. Excluding the tax benefit
described above, the effective tax rate for the first six months of fiscal
year 2006 was 34.0%.
12. Retirement Plans
----------------
The components of net pension expense for the defined benefit plans were as
follows:
For the Three Months For the Six Months
Ending October 31, Ending October 31,
---------------------------------- --------------------------------
(Dollars in thousands) 2006 2005 2006 2005
---------------- -------------- --------------- -------------
Service Cost $2,983 $2,774 $5,948 $5,603
Interest Cost 3,499 2,876 6,975 5,818
Expected Return of Plan Assets (3,320) (2,753) (6,617) (5,521)
Net Amortization of Prior Service Cost 180 118 359 245
Recognized Net Actuarial Loss 489 788 970 1,646
---------------- -------------- --------------- -------------
Net Pension Expense $3,831 $3,803 $7,635 $7,791
================ ============== =============== =============
Pension plan contributions were $4.5 million and $3.3 million for the six
months ended October 31, 2006 and 2005, respectively.
13. Subsequent Event
----------------
On November 17, 2006, the Company announced that it had entered into a
definitive agreement to acquire the outstanding shares of Blackwell
Publishing (Holdings) Ltd., one of the world's foremost academic and
professional publishers. The purchase price of (pound)572 million,
currently approximately U.S. $1.1 billion, will be financed with a
combination of debt and cash. Wiley has received irrevocable commitments
from the principal shareholders of Blackwell Publishing to sell their
shares to Wiley. The companies anticipate that the transaction will close
early in calendar year 2007.
Based in the United Kingdom, Blackwell Publishing's revenue for the year
ended December 31, 2005 was approximately $380 million, which is about the
same as Wiley's aggregated global Scientific, Technical and Medical
business. Blackwell's publishing programs include journals, books and
online content in the sciences, technology, medicine, the social sciences
and humanities. Blackwell Ltd., the book library service and retailing
business, is a separate entity and is not part of the acquisition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - SECOND QUARTER ENDED OCTOBER 31, 2006
Revenue for the second quarter of fiscal year 2007 of $284.5 million
increased 8% from $262.7 million in the prior year's second quarter or 7%
excluding the impact of foreign exchange. All of the Company's businesses
contributed to the year-on-year growth. The U.S. P/T business contributed
to the growth with solid performances in business, consumer cooking and
architecture/culinary. Global STM's results reflect higher journal
subscriptions and increased book sales. U.S. Higher Education revenue
reflected growth in accounting and social sciences.
Gross profit margin for the second quarter of fiscal year 2007 was 67.2%
compared to 67.0% in the prior year's quarter. Operating and administrative
expenses for the second quarter increased 12% to $145.6 million, or 11%
excluding the effect of foreign currency, primarily driven by higher
selling, marketing and editorial/production costs to support business
growth and acquisitions and additional stock option costs of $3.0 million
associated with the adoption of Statement of Financial Accounting Standard
123R, "Share-Based Payments" (SFAS 123R). In addition, operating and
administration expenses were adversely affected by the timing of a
relocation incentive settlement with the State of New Jersey of
approximately $2.7 million, which has been delayed to the third quarter of
this fiscal year.
Total pre-tax stock option and other share-based compensation expense for
the current quarter were $4.7 million compared to $1.1 million in the
second quarter of the prior year. The increase over the prior year period
was principally due to the inclusion of $3.0 million of stock option
expense in the current year.
Operating income declined 3% to $42.0 million in the second quarter of
fiscal year 2007, or 4% excluding the effect of foreign currency. The
second quarter operating margin for fiscal year 2007 declined approximately
170 basis points to 14.8%. An improvement in product mix was more than
offset by increased costs due to the adoption of SFAS 123R and higher
operating and administration costs discussed above. Incremental expenses
associated with the adoption of SFAS 123R contributed approximately 104
basis points to the decline. Net interest expense and other increased $0.5
million primarily due to higher borrowing rates.
The effective tax rate for the second quarter of fiscal year 2007 was
23.8%. In the second quarter of fiscal year 2007, the Company recorded a
$4.2 million tax benefit associated with the finalization of tax audits for
fiscal years 2002 and 2003. The second quarter 2007 effective tax rate
excluding the tax benefit was 34.5% compared to 34.4% in the second quarter
of fiscal year 2006.
Reported earnings per diluted share and net income for the second quarter
of fiscal year 2007 were $0.52 and $29.9 million, respectively. Earnings
per diluted share and net income for the second quarter of fiscal year 2007
adjusted to exclude the $4.2 million tax benefit described above were $0.44
and $25.7 million, respectively. See Non-GAAP Financial Measures described
below. The second quarter 2007 results include an incremental $1.9 million
after-tax charge ($.03 per diluted share) related to the adoption of SFAS
123R. Reported earnings per diluted share and net income for the second
quarter of fiscal year 2006 were $0.45 and $27.0 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 measures
calculated in accordance with GAAP, they should not be considered as a
substitute for other GAAP measures, including net income and earnings per
share as indicators of operating performance. Adjusted net income and
adjusted earnings per diluted share excluding the tax benefits are as
follows:
Reconciliation of non-GAAP financial disclosure For the Three Months
----------------------------------------------- Ending October 31,
------------------------------------
Net Income (in millions): 2006 2005
---------------- ----------------
As reported $29.9 $27.0
Tax benefit on finalization of tax audits (4.2) -
---------------- ----------------
Adjusted $25.7 $27.0
================ ================
Earnings per Diluted Share:
As reported $0.52 $0.45
Tax benefit on finalization of tax audits (0.07) -
Adjusted $0.44 $0.45
================ ================
The Adjusted Net Income and Adjusted Earnings per Diluted Share for the
second quarter of fiscal year 2007 above exclude $4.2 million, or $0.07 per
diluted share, of tax benefits associated with the finalization of the tax
audits for fiscal years 2002 and 2003. The tax benefits had no cash impact
to the Company.
SEGMENT RESULTS
During the first quarter of fiscal year 2007, the Company finalized a
review of certain product prices used to settle inter-segment sales. As a
result of the study, certain intersegment product prices were modified.
While the modification had no effect on consolidated financial results, it
did impact individual segment operating results. Below is a supplemental
segment report adjusting prior year results to reflect the current modified
product prices:
Adjusted Segment Results For the Three Months Ending October 31,
(amounts in millions) 2006 2005
-------------- -----------------------------------------------
Inter-
As As Segment % Change
Reported Reported Impact Adjusted Adjusted As Reported
-------------- --------------- ------------ ------------ ------------- -------------
Revenue:
Professional/Trade $104.3 $94.9 $(2.1) $92.8 12% 10%
Scientific, Technical and Medical 52.9 49.4 (0.3) 49.1 8% 7%
Higher Education 42.0 41.8 (0.9) 40.9 3% -
European Segment 80.8 76.8 (1.0) 75.8 7% 5%
Asia, Australia & Canada 32.2 30.2 - 30.2 7% 7%
Intersegment Sales Eliminations (27.7) (30.4) 4.3 (26.1) 6% -9%
--------------------------------------------------------------------------------------------------
Total Revenue $284.5 $262.7 - $262.7 8% 8%
==================================================================================================
Direct Contribution to Profit:
Professional/Trade $29.2 $25.6 $(1.5) $24.1 21% 14%
Scientific, Technical and Medical 23.1 23.5 - 23.5 -2% -2%
Higher Education 12.0 11.7 (0.9) 10.8 11% 3%
European Segment 28.1 25.3 1.6 26.9 4% 11%
Asia, Australia & Canada 5.9 6.4 0.8 7.2 -18% -8%
--------------------------------------------------------------------------------------------------
Total Direct Contribution to Profit $98.3 $92.5 - $92.5 6% 6%
Shared Services and Admin. Costs (56.3) (49.0) - (49.0) 15% 15%
--------------------------------------------------------------------------------------------------
Operating Income $42.0 $43.5 - $43.5 -3% -3%
==================================================================================================
Professional/Trade (P/T)
------------------------
U.S. P/T revenue for the second quarter advanced 10% over the prior year to
$104.3 million. Building on the first quarter's momentum, P/T delivered
solid second quarter results driven by frontlist and backlist books in
business, consumer cooking and architecture/culinary, as well as online
advertising. Direct contribution to profit increased by 14% to $29.2
million for the quarter. Adjusting for the effect of the change in
inter-segment product prices noted above, revenue and direct contribution
to profit improved 12% and 21%, respectively. Also on an adjusted basis,
direct contribution margin for the quarter improved approximately 200 basis
points to 28% principally due to lower unit costs on higher sales volume.
Second quarter highlights include the publication of The Little Book of
Value Investing by Christopher Browne, a Managing Director of Tweedy,
Browne Company LLC, a follow-up to Joel Greenblatt's hugely successful The
Little Book that Beats the Market; Seven Years to Seven Figures by Michael
Masterson; Maui Millionaires by David Finkel and Diane Kennedy; and A
Leader's Legacy by James Kouzes and Barry Posner, authors of The Leadership
Challenge.
The August release of Barbara Fairchild's The Bon Appetit Cookbook launched
an unprecedented fall cookbook line-up that included the 8th edition of The
Culinary Institute of America's Professional Chef; the Betty Crocker
Cookbook Bonus Edition and Christmas Cookbook; Pillsbury Baking; and Marcus
Samuelson's Soul of a New Cuisine. During the quarter, the first two titles
(Italy and Ireland) of the MTV-branded series of travel guides were
published.
P/T's online business had an active quarter with the launch of new
products, such as Schein/Career Anchors, an online self-assessment product;
two new modules of Therascribe, the Child 4E Treatment Planner and the
Child 2E 2006 Treatment Planner; and the Certified Internal Auditor
Examination Test Prep 1.0. Wiley's branded web sites - CliffsNotes.com, For
Dummies.com and Frommers.com - generated new advertising and licensing
revenue through co-promotions with major corporations and the launch of
Podcasts to promote books.
Several P/T books received considerable media and customer attention during
the quarter. The Wall Street Journal included a major feature on Patrick
Lencioni and his Wiley books. The Five Dysfunctions of a Team, continues to
enjoy bestseller status on the BusinessWeek, The Wall Street Journal and
the New York Times lists. Five other Wiley titles made major bestseller
lists during the quarter, including The Little Book That Beats the Market,
The Little Book of Value Investing, Investing For Dummies, Hotel California
and The Leadership Challenge.
During the quarter, Wiley acquired Whatsonwhen Ltd., a U.K.-based provider
of travel-related online content, technology and related services. The
acquisition will enhance Wiley's extensive travel-related content business,
which includes the integrated online and print Frommer's, For Dummies and
Unofficial Guides brands.
The Company announced a multi-year publishing agreement with the Lincoln
Center for the Performing Arts, Inc. for a minimum of 15 books that will
draw on Lincoln Center's community of artists, extensive archives and
educational expertise. The first title, Lincoln Center: A Promise Realized,
1979-2006 by Stephen Stamas and Sharon Zane, published in October. Another
alliance was formed with Essential Learning Partnership, a provider of
web-based continuing education for clinical professionals in psychology,
counseling and social work. As a result of this agreement, clinicians will
be able to purchase training courses using Wiley titles to meet license
requirements.
Scientific, Technical, and Medical (STM)
----------------------------------------
U.S. STM revenue of $52.9 million increased 7% over the previous year's
second quarter driven by increased revenue from journals, books and
controlled-circulation advertising. New businesses and publications
acquired during the past year, such as InfoPOEMs, Dialysis &
Transplantation, The Hospitalist and the Journal of Orthopaedic Research,
contributed $0.8 million to the revenue growth for the quarter.
The second quarter direct contribution margin was 43.7% compared to 47.6%
in the prior year. Revenue improvement was more than offset by additional
costs associated with new business growth, lower gross margins on imported
books, royalty costs on society-owned journals and stock option costs
associated with the adoption of SFAS 123R.
Customers continue to take advantage of Wiley InterScience's content. The
number of visits through the first six months of this fiscal year increased
by approximately 32% over the first half of last year.
Early in the quarter, Wiley and the International Society for Stem Cell
Research (ISSCR) signed a multi-year agreement to jointly develop and
publish Current Protocols in Stem Cell Biology, the first comprehensive
source of high-quality methods for isolating, maintaining and
differentiating embryonic and adult stem cells for both novice researchers
and experienced investigators.
In addition, the Company announced the launch of Statistical Analysis and
Data Mining, a new international journal providing an interdisciplinary
focus on data analysis. The journal will publish six times per year
beginning in calendar year 2007. Designed to encourage collaboration across
the diverse disciplines of computer science, engineering and statistics,
Statistical Analysis and Data Mining will communicate novel data mining and
statistical techniques to both novices and experts involved in the analysis
of data.
Two of the 2003 recipients of the Wiley Prize in Biomedical Sciences, Dr.
Andrew Z. Fire and Dr. Craig C. Mello, were awarded the 2006 Nobel Prize in
Physiology or Medicine for their discovery of RNA interference. Elizabeth
H. Blackburn, PhD and Carol W. Greider, co-recipients of the Wiley Prize in
Biomedical Sciences earlier this year, received the 2006 Lasker Award for
Basic Medical Research.
Higher Education
----------------
U.S. Higher Education revenue for the second quarter of fiscal year 2007
was $42.0 million, essentially the same as in the prior year. Adjusting for
the effect of the change in inter-segment product prices, revenue grew 3%
for the quarter. Improvement in accounting and social sciences, licenses
and reprint revenue was partially offset by lower sales in the sciences and
mathematics.
Direct contribution to profit margin was 28.6% in the second quarter of
fiscal 2007 versus 28.0% in the prior year period. Adjusting for the effect
of the change in inter-segment product prices, direct contribution to
profit margin for the quarter improved approximately 220 basis points,
which was driven by cost reduction initiatives in composition, paper
purchasing and printing.
The accounting and social sciences programs continued their strong results,
particularly Kimmel/Financial Accounting 4e; Kieso/Intermediate Accounting
12e; deBlij/Regions 12e and Human Geography 8e; Huffman/Psychology 8e;
Callister/Materials 7e; Incropera/Heat Transfer 6e; and Meriam/Statistics
Dynamics 6e.
October was the first month in which Wiley distributed Microsoft Official
Academic Curriculum (MOAC) textbooks and e-learning tools. The alliance
with Microsoft was extended internationally during the quarter, and our
global sales force is already launching it around the world. This important
relationship enables Wiley to establish a significant global position in
the technology certification market.
Europe
------
Wiley Europe's second quarter revenue of $80.8 million improved 5% over
prior year, or 2% excluding the impact of foreign exchange. Adjusting for
the effect of the change in inter-segment product prices, as well as
foreign exchange, Wiley Europe's revenue for the second quarter of fiscal
year 2007 improved 4%. Growth in journal revenue and P/T sales was
partially offset by the anticipated reduction in Sudoku for Dummies sales
and lower advertising revenue.
Direct contribution to profit for the second quarter improved over prior
year by 11% to $28.1 million or 10% excluding the impact of foreign
exchange. Adjusting for the effect of the change in inter-segment product
prices, as well as foreign exchange, direct contribution to profit for the
second quarter improved over prior year by 3%. Higher journal revenue and
inventory cost reduction initiatives related to improved printing contracts
and higher electronic delivery contributed to the results.
STM journal subscriptions continued to improve in all disciplines,
particularly Chemistry, which includes the Angewante Chemie journals
published on behalf of the German Chemical Society. For the second quarter
of fiscal year 2007, The Cochrane Library, an evidence-based medicine
collection available through Wiley InterScience, increased 30%.
Wiley Europe forged a publishing agreement with the Royal Meteorological
Society (RMetS), a leading professional and learned society, to publish all
five of its journals. This agreement expands an existing relationship,
establishing Wiley as the exclusive publisher of all the RMetS journals.
Wiley and the RMetS have worked together since 1980, when they launched the
International Journal of Climatology.
The three SuDoku For Dummies titles continued to sell, although not at the
same pace as the prior year. Cedric Reid: CFO Insights published during the
quarter with strong bulk sales. The publication of Davison/The Shopaholic's
Guide to Buying Online received considerable promotion from a number of
bookstore chains. The Company continues to take advantage of opportunities
afforded by WileyPLUS, such as designing customized products to meet
pharmaceutical companies' training needs.
Early in the quarter, Wiley Europe announced the formation of a multi-year
publishing partnership with the Dana Centre, an extension of the Science
Museum in London. Written by leading technology journalists and experts in
the U.K., the books will examine technology-related news stories from
around the world, explore their implications on everyday life and
predictions for the future. The Dana Centre is well known for its
innovative and thought-provoking adults-only events and debates on
contemporary science, technology and culture.
Asia, Australia, and Canada
---------------------------
Wiley's revenue in Asia, Australia and Canada advanced 7% to $32.2 million,
or 5% excluding favorable foreign exchange. Growth was driven by P/T in
Asia and Canada and Higher Education and School sales in Australia. Lower
STM reference book sales in Asia, due to the timing of the frontlist, and
sluggish Higher Education sales in Canada, partially offset the revenue
improvements in other areas.
Direct contribution to profit decreased $0.5 million compared to the prior
year, or $1.0 million excluding the impact of foreign exchange. Excluding
the effect of foreign exchange and the change in inter-segment product
prices, direct contribution to profit decreased for the second quarter of
fiscal year 2007 $1.8 million to $5.9 million, principally due to product
mix and higher marketing, sales and composition costs associated with new
business development.
Wiley Asia published several key P/T titles during the quarter including
Iqbal and Mirakhor's An Introduction to Islamic Finance; The Rise of India:
Its Transformation from Poverty to Prosperity by Niranjan Rajadhyaksha, the
Deputy Editor of Business World, one of India's leading business magazines;
and Equities by Mark Mobius, as part of his Master Class series. Strong
retail performance in many Asian markets on such titles as China CEO:
Voices of Experience from 20 International Leaders by Juan Antonio
Fernandez boosted results. In addition, WileyPLUS continued to gain
momentum, particularly in Malaysia where the government is funding new
universities. MOAC titles are eliciting much interest, especially in India.
All of Wiley Australia's businesses showed strength during the quarter. The
second half of the year, which is the peak selling season for the Higher
Education and School businesses, began on a high note, with the rollout of
more than 20 WileyPLUS related titles. A new website went live in August,
offering more than 30,000 P/T titles with rich functionality.
This enhanced web presence has already helped to attract a new partnership
with the Association of Professional Engineers, Scientists and Managers.
Cricket For Dummies was released concurrently with the Australia vs.
England cricket competition.
Wiley Canada delivered mixed results for the second quarter, showing
strength in its P/T business, but falling short in Higher Education. Wiley
Canada's P/T growth was due to the continued demand for local real estate
books and frontlist releases.
Shared Services and Administrative Costs
----------------------------------------
Shared services and administrative costs for the second quarter increased
$7.3 million to $56.3 million. The increase is primarily attributable to
higher compensation costs associated with business growth, the timing of a
relocation incentive settlement with the State of New Jersey of
approximately $2.7 million, which is now expected in the third quarter of
this fiscal year and the shared service portion of additional share-based
compensation costs of $1.5 million associated with the adoption of SFAS
123R.
SIX MONTHS ENDED OCTOBER 31, 2006
Revenue for the first half of fiscal year 2007 of $547.9 million increased
10% from $499.4 million in the prior year, or 9% excluding the impact of
foreign exchange. Revenue growth over the prior year reflected continued
momentum in all of the Company's global businesses. Global STM results
reflect growth in journal subscriptions and increased sales of journal
backfiles and books. The U.S. P/T business contributed to the year-on-year
growth with solid performances in business, consumer cooking and
architecture/culinary. The U.S. Higher Education business also contributed
to the growth due to new editions in accounting and social sciences.
Gross profit margin for the six-month period was 67.4% compared to 67.3% in
the prior year. Operating and administrative expenses increased 12% over
the prior year. The increase primarily reflects increased selling,
marketing and editorial/production costs to support business growth and
acquisitions, additional stock option costs of $5.4 million associated with
the adoption of SFAS 123R and the timing of a relocation incentive
settlement with the State of New Jersey of approximately $2.7 million,
which has been delayed to the third quarter of this fiscal year.
Total pre-tax stock option and other share-based compensation expense for
the first half of fiscal year 2007 was $9.9 million compared to $3.2
million in the prior year. The increase over the prior year period was
principally due to the inclusion of $5.4 million of stock option expense in
the current year.
Operating income advanced 2% to $77.0 million in the first half of fiscal
year 2007. The operating margin for the first half of fiscal year 2007 was
14.1% as compared to 15.1% in the prior year period. Incremental expenses
associated with the adoption of SFAS 123R contributed approximately 100
basis points to the decline. An improvement in product mix was more than
offset by increased costs due to the adoption of SFAS 123R and the higher
operating costs discussed above including the delayed receipt of the
relocation incentive. Interest expense increased $1.0 million primarily due
to higher borrowing rates.
The effective tax rate for the first half of fiscal year 2007 was 28.3%
compared to 23.6% in the prior year period. The tax provision for the first
six months of fiscal year 2007 included tax benefits of $4.2 million
recorded in the second quarter of fiscal year 2007 related to the
finalization of tax audits for fiscal years 2002 and 2003.
The tax provision for the first six months of fiscal year 2006 included a
$7.5 million tax benefit associated with the reversal of a tax accrual
recorded on the repatriation of dividends from European subsidiaries in the
fourth quarter of fiscal year 2005. The effective tax rates for the first
six months of fiscal years 2007 and 2006 were 34.1% and 34.0%,
respectively, excluding the tax benefits described above.
Reported earnings per diluted share and net income for the first six months
of fiscal year 2007 were $0.89 and $51.8 million, respectively. Earnings
per diluted share and net income for the first six months of fiscal year
2007 adjusted to exclude the $4.2 million tax benefit recognized in the
second quarter of fiscal year 2007 were $0.82 and $47.6 million,
respectively. See Non-GAAP Financial Measures described below. The results
for the first half of fiscal year 2007 include a $3.3 million after-tax
charge ($0.06 per diluted share) related to the adoption of SFAS 123R.
Reported earnings per diluted share and net income for the first six months
of fiscal year 2006 were $0.91 and $54.9 million, respectively. Earnings
per diluted share and net income for the first six months of fiscal year
2006 adjusted to exclude the $7.5 million tax benefit recognized in the
first quarter of fiscal year 2006 on the repatriation of dividends were
$0.78 and $47.4 million, respectively. See Non-GAAP Financial Measures
described below.
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 measures calculated in accordance with GAAP, they should not
be considered as a substitute for other GAAP measures, including net income
and earnings per share as indicators of operating performance. Adjusted net
income and adjusted earnings per diluted share, for the six months ended
October 31, 2006 and 2005, excluding the tax benefits are as follows:
Reconciliation of non-GAAP financial disclosure For the Six Months
----------------------------------------------- Ending October 31,
Net Income (in millions) 2006 2005
--------------- -------------
As reported $51.8 $54.9
Tax benefit on finalization of tax audits (4.2) -
Tax benefit on dividends repatriated - (7.5)
--------------- -------------
Adjusted $47.6 $47.4
=============== =============
Earnings per Diluted Share 2006 2005
--------------- -------------
As reported $0.89 $0.91
Tax benefit on finalization of tax audits (0.07) -
Tax benefit on dividends repatriated - (0.12)
Adjusted $0.82 $0.78
=============== =============
The Adjusted Net Income and Adjusted Earnings per Diluted Share above for
the six months ending October 31, 2006 above exclude $4.2 million, or $0.07
per diluted share, of tax benefits associated with the finalization of the
tax audits for fiscal years 2002 and 2003. The tax benefits had no cash
impact to the Company.
The Adjusted Net Income and Adjusted Earnings per Diluted Share for the six
months ending October 31, 2005 above exclude $7.5 million, or $0.12 per
diluted share, of tax benefits associated with the reversal of a tax
accrual recorded on the repatriation of dividends from European
subsidiaries in the fourth quarter of fiscal year 2005.
On May 10, 2005, the US Internal Revenue Service issued Notice 2005-38. The
notice provided for a tax benefit, which was recorded by the Company in the
first quarter of fiscal year 2006, that fully offset the tax accrued by the
Company on foreign dividends in the fourth quarter of fiscal year 2005. The
current tax benefit and the corresponding fourth quarter tax accrual in
fiscal year 2005 had no cash impact on the Company.
SEGMENT RESULTS
During the first quarter of fiscal year 2007, the Company finalized a
review of certain product prices used to settle inter-segment sales. As a
result of the study, certain intersegment product prices were modified.
While the modification had no effect on consolidated financial results, it
did impact individual segment operating results. Below is a supplemental
segment report adjusting prior year results to reflect the current modified
product prices:
Adjusted Segment Results For the Six Months Ending October 31,
(amounts in millions) 2006 2005
-------------- -----------------------------------------------
Inter-
As As Segment % Change
Reported Reported Impact Adjusted Adjusted Reported
-------------- --------------- ------------ ------------ ------------- --------------
Revenue:
Professional/Trade $189.9 $173.5 $(3.4) $170.1 12% 9%
Scientific, Technical and Medical 106.5 98.1 (0.5) 97.6 9% 9%
Higher Education 89.7 87.3 (1.9) 85.4 5% 3%
European Segment 152.8 139.9 (1.7) 138.2 11% 9%
Asia, Australia & Canada 60.3 54.3 - 54.3 11% 11%
Intersegment Sales Eliminations (51.3) (53.7) 7.5 (46.2) 11% 4%
---------------------------------------------------------------------------------------------------
Total Revenue $547.9 $499.4 - $499.4 10% 10%
===================================================================================================
Direct Contribution to Profit:
Professional/Trade $48.3 $44.4 $(2.7) $41.7 16% 9%
Scientific, Technical and Medical 48.0 48.0 - 48.0 - -
Higher Education 29.0 28.7 (1.8) 26.9 8% 1%
European Segment 52.3 43.9 3.2 47.1 11% 19%
Asia, Australia & Canada 9.5 9.9 1.3 11.2 -15% -4%
---------------------------------------------------------------------------------------------------
Total Direct Contribution to Profit $187.1 $174.9 - $174.9 7% 7%
Shared Services and Admin. Costs (110.1) (99.3) - (99.3) 11% 11%
---------------------------------------------------------------------------------------------------
Operating Income $77.0 $75.6 - $75.6 2% 2%
===================================================================================================
Professional/Trade (P/T)
------------------------
U.S. P/T revenue for the first half of fiscal year 2007 advanced 9% over
the prior year. P/T's business and consumer cooking book programs, as well
as online advertising, contributed to the growth. Adjusting for the effect
of the change in inter-segment product prices noted above, revenue and
direct contribution to profit improved 12% and 16%, respectively. Direct
contribution margin improved by approximately 90 basis points to 25.4%,
principally due to lower unit costs on higher sales volume.
Scientific, Technical, and Medical (STM)
----------------------------------------
U.S. STM revenue for the first six months of fiscal year 2007 increased 9%
over the prior year. Subscription and non-subscription journal revenue,
such as journal backfiles, books and controlled circulation advertising
contributed to the year-on-year growth. New businesses and publications
acquired during the past year contributed approximately $2.0 million to
year-to-date revenue growth. Direct contribution margin for the first half
of fiscal year 2007 declined from 48.9% to 45.1%, reflecting the additional
costs associated with new business growth, lower gross margins on imported
books, royalty costs on society-owned journals and stock option costs
associated with the adoption of SFAS 123R.
Higher Education
----------------
Revenue of Wiley's U.S. Higher Education business increased 3% during the
first half of fiscal year 2007. Adjusting for the effect of the change in
inter-segment prices, revenue grew 5% for the first six months of fiscal
year 2007, driven primarily by growth in accounting and social sciences
titles. Direct contribution margin for the first half of fiscal year 2007
improved by approximately 80 basis points due to cost reduction initiatives
in composition, paper purchasing and printing partially offset by higher
costs associated with WileyPLUS.
Year-to-date WileyPLUS sales were up 83%. WileyPLUS sales are deferred with
the majority of the revenue recognized over the course of the second half
of the fiscal year. As of the end of the second quarter, approximately $3.0
million of current WileyPLUS sales were deferred until the second half of
this fiscal year.
Europe
------
Wiley Europe's first half revenue was up 9% over prior year, or 7%
excluding the impact of foreign exchange. Adjusting for the effect of the
change in inter-segment product prices, as well as foreign exchange, Wiley
Europe's revenue for the first half of fiscal year 2007 improved 8%. Growth
in journal subscription revenue and P/T sales were partially offset by
lower controlled circulation advertising revenue and lower sales of the
SuDoku for Dummies, as planned. Direct contribution to profit margin
increased 19% over the prior year. The impact of foreign exchange was not
significant. Excluding the effects of the change in inter-segment prices
and foreign currency, direct contribution margin for the six-month period
improved approximately 80 basis points principally due to product mix.
Asia, Australia, and Canada
---------------------------
Wiley's revenue in Asia, Australia, and Canada was up 11% during the first
half of fiscal year 2007, or 8% excluding foreign exchange. P/T and Higher
Education growth in Asia and Australia drove the improvement. Direct
contribution to profit decreased $0.5 million versus the prior year or $1.2
million excluding the impact of foreign exchange. Excluding the effects of
the change in inter-segment prices and foreign currency, direct
contribution margin for the six-month period declined $2.4 million to $9.5
million mainly due to unfavorable product mix in Asia and Australia and
higher planned marketing and sales costs in Asia and Canada.
Shared Services and Administrative Costs
----------------------------------------
Shared services and administrative costs for the first six months of fiscal
year 2007 increased 11% to $110.1 million. The increase is primarily
attributable to higher compensation costs associated with business growth,
the timing of a relocation incentive settlement with the State of New
Jersey of approximately $2.7 million, which has been delayed to the third
quarter of this fiscal year, the shared service portion of additional
share-based compensation costs of $2.9 million associated with the adoption
of SFAS 123R and higher facility costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents balance was $16.6 million at the
end of the second quarter of fiscal 2007, compared with $17.6 million a
year earlier. Cash used by operating activities in fiscal year 2007 was
$11.7 million compared to cash provided of $6.6 million in the prior year.
The timing of vendor and author payments increased incentive compensation
payments related to fiscal year 2006 were partially offset by higher
subscription journal receipts and improved trade collections. The increase
in the net change in operating assets and liabilities in the accompanying
Consolidated Statements of Cash Flow primarily reflects the timing of
vendor and author payments.
Cash used for investing activities for the first quarter 2007 was $61.3
million compared to $57.0 million in the prior year. The Company invested
$13.5 million in acquisitions of publishing assets and rights compared to
$24.6 million in the prior year. The current year acquisitions primarily
consisted of a provider of travel-related online content, technology and
services and two advertising-based cardiology journals. Projected product
development and property, equipment and technology capital spending for
fiscal year 2007 is forecast to be approximately $75 million and $35
million, respectively.
The Company increased spending for investments in product development and
property equipment and technology by approximately $5.5 million. The
Company sold $10 million of marketable securities during the first quarter
of 2006 consisting of shares of variable rate securities issued by
closed-end funds.
Cash provided by financing activities was $28.6 million in the second
quarter of fiscal 2007, as compared to a use of funds of $21.1 million in
the prior period. The increase in borrowings this fiscal year is primarily
due to the lower cash on hand at the beginning of fiscal year 2007 as
compared to the prior year. Current year financing activities also included
the continuation of the Company's stock repurchase program.
The Company increased its quarterly dividend to shareholders by 11% to
$0.10 per share versus $0.09 per share in the prior year.
The Company believes its cash balances together with existing credit
facilities are sufficient to meet its obligations. At October 31, 2006 the
Company had $207.8 million of variable rate loans outstanding and
approximately $202.7 million of unused borrowing capacity available under
its revolving credit facilities and other short-term lines of credit.
The Company announced on November 17, 2006 that it has entered into a
definitive agreement to acquire the outstanding shares of Blackwell
Publishing (Holdings) Ltd., one of the world's foremost academic and
professional publishers. The purchase price of (pound)572 million will be
financed with a combination of debt and cash. The companies anticipate that
the transaction will close early in calendar year 2007.
"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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 instruments 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 investments for trading or speculative purposes.
Interest Rates
The Company had $202.7 million of variable rate loans outstanding at
October 31, 2006, which approximated fair value. The Company did not use
any derivative financial investments to manage this exposure. The weighted
average interest rate as of October 31, 2006 was approximately 5.54%. A
hypothetical 1% change in interest rates for the variable rate debt would
affect annual net income and cash flow by approximately $1.3 million.
Sales Return Reserves
Sales return reserves, net of estimated inventory and royalty costs, are
reported as a reduction of accounts receivable in the Condensed
Consolidated Statement of Financial Position and amounted to $62.7 million
and $55.8 million at October 31, 2006 and April 30, 2006, respectively. The
Company provides for sales returns based upon historical experience. A
change in the pattern of trends in returns could affect the estimated
allowance. On an annual basis, a one percent change in the estimated sales
return rate could affect net income by approximately $3.6 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 enters into derivative financial
instruments in the form of forward contracts as a hedge against foreign
currency fluctuation of specific transactions, including inter-company
purchases. No derivative financial instruments were in effect during these
reporting periods.
Customer Credit Risk
The Company's business is not dependent upon a single customer; however,
the industry is concentrated in national, regional, and online bookstore
chains. Although no one book customer accounts for more than 7% of total
consolidated revenue, the top 10 book customers account for approximately
25% of total consolidated revenue and approximately 46% of total gross
trade accounts receivable at April 30, 2006.
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 17% of total consolidated revenue and no one agent
accounts for more than 7% of total consolidated revenue for the fiscal year
ended April 30, 2006. Insurance for these accounts is not commercially
feasible and/or available.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure
that information required to be disclosed in reports filed or submitted
under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified by the
Securities and Exchange Commission's rules and regulations. The Company's
Chief Executive Officer and Chief Financial Officer, together with the
Chief Accounting Officer and other members of the Company's management,
have conducted an evaluation of these disclosure controls and procedures as
of a date within 90 days prior to the date of filing this report. Based on
this evaluation, the Chief Executive Officer and Chief Financial Officer
have concluded that the Company's disclosure controls and procedures are
effective. There were no changes in the Company's internal controls or in
other factors that could materially affect such internal controls
subsequent to this evaluation.
PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the second quarter ending on October 31, 2006 the Company did not
repurchase shares of Common Stock under its stock repurchase program.
Remaining shares to be repurchased under the approved plan were 1,905,030
as of October 31, 2006. The program was approved by the Company's Board of
Directors and publicly announced in June 2005.
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were voted upon at the annual meeting of shareholders
of the Company on September 21, 2006. All significant contracts were filed
with the Securities and Exchange Commission as exhibits to the Company's
Shareholder Proxy Statement on August 7, 2006.
Election of Directors
---------------------
Eight directors as indicated in the Proxy Statement were elected to the
Board, three of whom were elected by the holders of Class A Common Stock,
and five by the holders of Class B Common Stock.
Proposal to Ratify the Appointment of KPMG LLP as
Independent Public Accountants for the Year Ending April 30, 2007.
-------------------------------------------------------------------
The holders of Class A and Class B shares voted together as a single class
on this matter, with each outstanding share of Class A stock entitled to
one-tenth (1/10) of one vote and each outstanding share of Class B stock
entitled to one vote.
The proposal was ratified as follows:
Votes For 14,131,397
Votes Against 23,133
Abstentions 20,924
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 - 18 U.S.C. Section 1350 Certificate by the President and Chief
Executive Officer
99.2 - 18 U.S.C. Section 1350 Certificate by the Chief Financial and
Operations Officer
(b) The following reports on Form 8-K were furnished to the Securities and
Exchange Commission since the filing of the Company's 10-Q on September 11,
2006.
i. Earnings release on the second quarter fiscal 2007 results issued on Form
8-K dated December 5, 2006 which include the condensed financial statements
of the Company.
The following reports on Form 8-K were filed with the Securities and
Exchange Commission since the filing of the Company's first quarter 10-Q on
September 11, 2006.
i. Announcement regarding the election of Director's issued on Form 8-K dated
November 6, 2006.
ii. Announcement of entering into a definitive agreement to acquire all
outstanding shares of Blackwell Publishing (Holdings) Ltd. on Form 8-K
dated November 22, 2006.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
JOHN WILEY & SONS, INC.
Registrant
By /s/ William J. Pesce
-----------------------
William J. Pesce
President and
Chief Executive Officer
By /s/ Ellis E. Cousens
-----------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial & Operations Officer
By /s/ Edward J. Melando
-----------------------
Edward J. Melando
Vice President, Controller and
Chief Accounting Officer
Dated: December 11, 2006
CERTIFICATIONS PERSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
------------------------------------------------------------------------
I, William J. Pesce, certify that:
I have reviewed this quarterly report on Form 10-Q of John Wiley & Sons, Inc.:
- - Based on my knowledge, this quarterly 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 quarterly report; and
- - Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 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: December 11, 2006
I, Ellis E. Cousens, certify that:
I have reviewed this quarterly report on Form 10-Q of John Wiley & Sons, Inc.;
- - Based on my knowledge, this quarterly 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 quarterly report; and
- - Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 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 & Operations Officer
Dated: December 11, 2006
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of John Wiley & Sons, Inc. (the
"Company") on Form 10-Q for the period ending October 31, 2006 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, William
J. Pesce, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that based on my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15
(d) of the Securities Exchange Act of 1934 (as amended), as
applicable; and
(2) 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: December 11, 2006
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 .S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of John Wiley & Sons, Inc. (the
"Company") on Form 10-Q for the period ending October 31, 2006 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Ellis
E. Cousens, Executive Vice President and Chief Financial & Operations Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15
(d) of the Securities Exchange Act of 1934 (as amended), as
applicable; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Ellis E. Cousens
- --------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial & Operations Officer
Dated: December 11, 2006