SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended January 31, 1998 Commission File No. 1-11507
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from to
JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5593032
- --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
605 THIRD AVENUE, NEW YORK, NY 10158-0012
- --------------------------------------- ------------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, (212) 850-6000
including area code ------------------------------------
NOT APPLICABLE
Former name, former address, and former fiscal year,
if changed since last report
Indicate by check mark, whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
The number of shares outstanding of each of the Registrant's classes of common
stock as of January 31, 1998 were:
Class A, par value $1.00 - 12,895,427
Class B, par value $1.00 - 3,110,358
This is the first of an eleven page document
JOHN WILEY & SONS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements.
Condensed Consolidated Statements of Financial Position - Unaudited
as of January 31, 1998 and 1997 and April 30, 1997................. 3
Condensed Consolidated Statements of Income - Unaudited
for the Nine Months ended January 31, 1998 and 1997................ 4
Condensed Consolidated Statements of Cash Flow - Unaudited
for the Nine Months ended January 31, 1998 and 1997................ 5
Notes to Unaudited Condensed Consolidated Financial Statements..6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................8 - 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................10
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995...................10
SIGNATURES...................................................................11
EXHIBITS
27 Financial Data Schedule
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
(UNAUDITED)
January 31, April 30,
--------------------------------------
1998 1997 1997
--------------------------------------
Assets
Current Assets
Cash and cash equivalents $ 141,227 92,060 79,116
Accounts receivable 79,563 78,925 61,841
Inventories 46,755 56,397 49,100
Deferred income tax benefits 7,130 7,680 7,143
Prepaid expenses 6,297 4,202 6,935
Total Current Assets 280,972 239,264 204,135
Product Development Assets 37,108 31,258 31,683
Property and Equipment 32,759 31,347 32,699
Intangible Assets 177,516 164,479 165,147
Deferred income tax benefits 16,077 13,533 13,004
Other Assets 10,733 15,296 11,276
--------------------------------------
Total Assets $ 555,165 495,177 457,944
--------------------------------------
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable and current portion of $ 751 998 172
Accounts and royalties payable 58,891 51,395 30,988
Deferred subscription revenues 124,454 111,045 94,419
Accrued income taxes 10,501 6,611 3,825
Other accrued liabilities 36,938 37,242 34,948
--------------------------------------
Total Current Liabilities 231,535 207,291 164,352
Long-Term Debt 125,000 125,000 125,000
Other Long-Term Liabilities 26,337 25,231 24,907
Deferred Income Taxes 15,391 13,772 14,702
Shareholders' Equity 156,902 123,883 128,983
--------------------------------------
Total Liabilities & Shareholders'
Equity $ 555,165 495,177 457,944
--------------------------------------
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
JOHN WILEY & SONS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands except per share information)
Three Months Nine Months
Ended January 31, Ended January 31,
----------------------------------------------
1998 1997 1998 1997
----------------------------------------------
Revenues $ 124,350 118,105 $ 352,322 324,392
Costs and Expenses
Cost of sales 45,304 42,762 123,230 113,934
Operating and administrative expenses 63,055 61,215 184,786 173,715
Amortization of intangibles 5,477 2,215 9,755 5,925
----------------------------------------------
Total Costs and Expenses 113,836 106,192 317,771 293,574
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Gain on Sale of Publishing Assets 21,292 -- 21,292 --
----------------------------------------------
Operating Income 31,806 11,913 55,843 30,818
Interest Income and Other 895 491 2,246 835
Interest Expense (1,887) (1,878) (5,836) (4,372)
----------------------------------------------
Interest Income (Expense) - Net (992) (1,387) (3,590) (3,537)
----------------------------------------------
Income Before Taxes 30,814 10,526 52,253 27,281
Provision For Income Taxes 12,176 3,795 19,894 9,827
----------------------------------------------
Net Income $ 18,638 6,731 $ 32,359 17,454
----------------------------------------------
Net Income Per Share
Diluted $ 1.12 0.41 $ 1.97 1.06
Basic $ 1.18 0.43 $ 2.05 1.10
Cash Dividends Per Share
Class A Common $ 0.1125 0.1000 $ 0.3375 0.3000
Class B Common $ 0.1000 0.0875 $ 0.3000 0.2625
Average Shares
Diluted 16,603 16,288 16,432 16,416
Basic 15,789 15,749 15,763 15,863
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)
Nine Months
Ended January 31,
-------------------------
1998 1997
-------------------------
Operating Activities
Net income $ 32,359 17,454
Non-cash items 25,440 36,019
Net change in operating assets and liabilities 44,197 9,624
-------------------------
Cash Provided by Operating Activities 101,996 63,097
-------------------------
Investing Activities
Additions to product development assets (22,473) (18,490)
Additions to property and equipment (8,122) (6,248)
Acquisition of publishing assets (30,438) (103,331)
Sale of publishing assets 26,500 0
-------------------------
Cash Used for Investing Activities (34,533) (128,069)
-------------------------
Financing Activities
Purchase of treasury shares (1,942) (10,393)
Additions to long-term debt 0 125,000
Repayment of acquired debt 0 (10,542)
Net borrowings of short-term debt 632 1,035
Cash dividends (5,259) (4,685)
Proceeds from exercise of stock options 1,742 903
-------------------------
Cash Provided by (Used for) Financing Activities (4,827) 101,318
-------------------------
Effects of Exchange Rate Changes on Cash (525) 430
-------------------------
Cash and Cash Equivalents
Decrease for Period 62,111 36,776
Balance at Beginning of Period 79,116 55,284
-------------------------
Balance at End of Period $ 141,227 92,060
-------------------------
Cash Paid During the Period for
Interest $ 6,008 3,193
Income taxes $ 6,286 4,472
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
JANUARY 31, 1998
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the Company's
consolidated financial position as of January 31, 1998 and 1997, and April
30, 1997, and results of operations and cash flows for the periods ended
January 31, 1998 and 1997. 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, 1997.
2. The results for the nine months ended January 31, 1998 are not necessarily
indicative of the results to be expected for the full year.
3. In the third quarter of fiscal 1998, the Company adopted the Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" which
requires the presentation of "basic" earnings per share which excludes the
dilutive effects of unexercised stock options and non-vested stock awards,
and "diluted" earnings per share which includes the effects of such items.
A reconciliation of the shares used in the computation follows:
Three Months Nine Months
Ended January 31, Ended January 31
-------------------------------------
1998 1997 1998 1997
-------------------------------------
(thousands)
Weighted average shares outstanding 15,986 15,959 15,957 16,072
Less: Unearned deferred compensation shares (197) (210) (194) (209)
------- ------- ------- -------
Shares used for Basic Earnings Per Share 15,789 15,749 15,763 15,863
Dilutive effect of stock options
and other stock awards 814 539 669 553
------- ------- ------- -------
Shares used for Diluted Earnings Per Share 16,603 16,288 16,432 16,416
------- ------- ------- -------
4. Inventories were as follows:
January 31,
------------------ April 30,
1998 1997 1997
-------- -------- --------
(thousands)
Finished goods $ 37,070 $ 47,562 $ 40,859
Work-in-process 7,019 8,483 7,475
Paper, cloth and other 5,056 4,372 2,559
-------- -------- --------
49,145 60,417 50,893
LIFO reserve (2,390) (4,020) (1,793)
-------- -------- --------
Total inventories $ 46,755 $ 56,397 $ 49,100
-------- -------- --------
5. Income for the third quarter and first nine months of fiscal 1998 includes
unusual items amounting to a pretax gain of $16.9 million, or $9.7 million
after taxes, equal to $0.59 per diluted share ($0.62 per basic earnings per
share). Included in this is a gain of $21.3 million relating to the sale of
the Company's law publishing program for $26.5 million in proceeds.
Offsetting this gain are special asset writedowns and other items amounting
to approximately $4.4 million, including writedowns of intangible assets of
approximately $3.3 million in accordance with the Company's policy of
evaluating such assets, and if deemed to be permanently impaired, writing
them down to net realizable value based on discounted cash flows.
6. In the third quarter of fiscal 1998, the Company acquired the publishing
assets of Van Nostrand Reinhold (VNR) for approximately $28.5 million in
cash. VNR publishes in such areas as architecture/design,
environmental/industrial sciences, culinary arts/hospitality and business
technology. The acquisition has been accounted for by the purchase method,
and the accompanying financial statements include the net assets acquired
and results of operations since date of acquisition. The cost of the
acquisition has been allocated on the basis of preliminary estimates of the
fair values of the assets acquired and the liabilities assumed. Final asset
and liability fair values may differ based on appraisals and tax bases,
however, it is anticipated that any changes will not have a material effect
in the aggregate on the consolidated financial position of the Company. The
excess of cost over the preliminary estimate of the fair value of the
tangible assets acquired amounted to approximately $26 million, relating
primarily to acquired publication rights and noncompete agreements, and is
being amortized on a straight line basis over an estimated average life of
15 years. The pro forma effects of the acquisition were not material.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JANUARY 31, 1998
FINANCIAL CONDITION
Operating activities for the first nine months of fiscal 1998 provided $102
million of cash compared with $63 million in the prior year. The generation
of cash during this period is consistent with the seasonality of the
journal receipts cycle which occurs, for the most part, in the third
quarter of the fiscal year. The increase over the prior year was primarily
due to higher journal receipts and higher levels of payables.
Investing activities used $35 million during the current period, or $94
million less than the comparable prior year's period, primarily as a result
of the VCH acquisition in the prior year.
Financing activities in the current year primarily reflect dividend
payments and purchases of treasury shares during the period.
RESULTS OF OPERATIONS
THIRD QUARTER ENDED JANUARY 31, 1998
Income for the third quarter and first nine months of fiscal 1998 includes
unusual items amounting to a pretax gain of $16.9 million, or $9.7 million
after taxes, equal to $0.59 per diluted share, relating to the gain on the
sale of Wiley's law publishing program, net of a writedown of certain
intangible assets and other items as more fully described in note 5 to the
financial statements. Excluding the unusual items, operating income and net
income increased 25% and 32%, respectively.
Revenues for the third quarter advanced 5% to $124 million from $118
million in the prior year.
Revenue and operating income gains reflected improvement in all of the
Company's core businesses-college publishing, professional/trade publishing
and the worldwide scientific, technical and medical program. Revenues and
operating income were adversely affected by the strong U.S. dollar in some
of our overseas markets and by softness in our Asian markets due to the
economic downturn in that region.
Cost of sales as a percentage of revenues increased from 36.2% in the prior
year to 36.4% due to product mix. Operating expenses as a percentage of
revenues were 50.7% in the current quarter compared with 51.8% in the prior
year's third quarter. The improvement is a result of cost containment
measures. The effective tax rate was 39.5% in the current quarter compared
with 36% in the prior year. The increase was attributable to higher state
and local income taxes on the unusual items.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JANUARY 31, 1998
Excluding the unusual items, operating income increased 26% and net income
increased 30% over the prior year. Revenues for the first nine months of
fiscal 1998 were $352 million, or 9% ahead of the $324 million in the
comparable prior year period.
The improvement in revenues and operating income for the period are
attributable to the same factors noted in the results of operations for the
third quarter. Wiley-VCH, which was acquired in fiscal 1997, was a positive
contributor to operating income in the current year, but was dilutive to
earnings for the year-to-date by approximately $1.8 million, or $0.11 per
diluted share, due to interest costs related to the acquisition.
For the year-to-date, costs of sales as a percentage of revenues decreased
from 35.1% to 35.0%, and operating expenses declined from 53.6% to 52.4%.
Interest expense increased by $1.5 million due to a full nine months of
financing costs in the current year related to the VCH acquisition.
Interest income increased $1.4 million due to higher cash balances. The
effective tax rate was 38% in the current year, or 2% higher than the prior
year due to higher state and local income taxes on the unusual gain.
YEAR 2000 ISSUES
The Company is currently in the process of conducting a comprehensive
review of its systems and products to determine the extent and impact of
the year 2000 issues. Based on a preliminary assessment, in the opinion of
the Company's management, the year 2000 issues will be addressed in a
timely fashion and should not have a material adverse impact on the
Company's operations.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued the following Statements of
Financial Accounting Standards ("SFAS") which become effective for the
Company's fiscal 1999 financial statements: SFAS No. 130, "Reporting
Comprehensive Income", which requires disclosure of comprehensive income
defined as the change in equity from sources other than reported net
income; SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information", which requires certain financial and descriptive
information about a company's reportable operating statements; and SFAS No.
132, "Employers' Disclosures about Pensions and other Postretirement
Benefits", which require additional disclosures relating to a company's
pension and postretirement benefit plans. In the opinion of the Company's
management, the adoption of these new accounting standards will not have a
material effect on the consolidated financial statements of the Company.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
January 31, 1998
"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 which are inherently subject to
uncertainties and contingencies, many of which are beyond the control of the
Company, and are subject to change based on many important factors. Such factors
include but are not limited to: (i) the pace, acceptance, and level of
investment in emerging new electronic technologies and products; (ii) subscriber
renewal rates for the Company's journals; (iii) the consolidation of the retail
book trade market; (iv) the seasonal nature of the Company's educational
business and the impact of the used book market; (v) worldwide economic and
political conditions; and (vi) other factors detailed from time to time in the
Company's filings with the Securities and Exchange Commission.
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/Charles R. Ellis
--------------
Charles R. Ellis
President and
Chief Executive Officer
By /s/Robert D. Wilder
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Robert D. Wilder
Executive Vice President and
Chief Financial Officer
Dated: March 13, 1998