SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
(Amendment No. 1)
June 13, 1996
(Date of Report)
(Date of earliest event reported)
JOHN WILEY & SONS, INC.
(Exact name of registrant as specified in its charter)
New York
(State or jurisdiction of incorporation)
0-11507 13-5593032
- ---------------------------------------- -------------------------------------
Commission File Number IRS Employer Identification Number
605 Third Avenue, New York, NY 10158-0012
- ---------------------------------------- -------------------------------------
Address of principal executive offices Zip Code
Registrant's telephone number, including
area code: (212) 850-6000
-------------------------------------
This is the first page of a twenty five page document.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
------------------------------------------------------------------
The following information is herewith filed as an amendment to the Form 8-K
dated June 13, 1996 filed by the Company in connection with its acquisition of a
90% interest in the German based VCH Publishing Group (VCH) through the purchase
of 90% of the shares of VCH Verlagsgesellschaft mbH.
ITEM 7(A). FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED PAGE NO.
------------------------------------------- --------
Report of Independent Public Accountants 3
Consolidated Balance Sheets as of December 31, 1995, 1994
and 1993 4
Consolidated Income Statements for the years ended
December 31, 1995, 1994 and 1993 5
Consolidated Statements of Shareholders' Equity (Deficit)
for the years ended December 31, 1995, 1994 and 1993 6
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 7-8
Notes to Consolidated Financial Statements 9-19
ITEM 7(B). PRO FORMA FINANCIAL INFORMATION
-------------------------------
Introduction 20-21
Unaudited Pro Forma Condensed Combined Statement of Financial
position of John Wiley & Sons, Inc. and VCH Publishing Group 22
Unaudited Pro Forma condensed Combined Statement of Income of
John Wiley & Sons, Inc. and VCH Publishing Group. 23
Notes to Unaudited Pro Forma Condensed Combined Financial
Information of John Wiley & Sons, Inc. and VCH Publishing
Group. 24
SIGNATURE 25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------
TO THE MANAGEMENT OF
VCH VERLAGSGESELLSCHAFT MBH, WEINHEIM
- -------------------------------------
We have audited the accompanying consolidated balance sheets of VCH
Verlagsgesellschaft mbH, Weinheim and subsidiaries as of December 31, 1993, 1994
and 1995 and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three years ended December 31, 1993, 1994
and 1995. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of VCH
Verlagsgesellschaft mbH, Weinheim, and subsidiaries as of the three years ended
December 31, 1993, 1994 and 1995, in conformity with accounting principles
generally accepted in the United States.
Eschborn/Frankfurt am Main
July 31, 1996
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
Fluck Herzing
Wirtschaftsprufer Wirtschaftsprufer
3
VCH VERLAGSGESELLSCHAFT MBH, WEINHEIM, GERMANY
----------------------------------------------
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1993, 1994 AND 1995
------------------------------------------------------------------
ASSETS 1993 1994 1995
------ DM DM DM
------------- ------------- -------------
I CURRENT ASSETS
--------------
Cash and equivalents 7,898,970.30 1,036,313.04 1,277,835.60
------------- ------------- -------------
Accounts receivable
Trade receivables,
net of allowances for doubtful accounts 18,070,515.72 16,358,918.23 13,487,392.21
Accounts due from other group companies 64,682.77 415,578.01 415,236.66
Current loans 32,000.00 12,000.00 62,000.00
------------- ------------- -------------
18,167,198.49 16,786,496.24 13,964,628.87
------------- ------------- -------------
Inventories
Raw materials and supplies 692,003.09 667,044.33 796,384.25
Work-in-process 6,738,367.84 7,565,094.84 6,903,905.21
Finished goods and trading stock 30,108,956.18 30,423,710.69 30,374,351.74
Advance payments 60,674.00 50,681.00 30,000.00
------------- ------------- -------------
37,600,001.11 38,706,530.86 38,104,641.20
------------- ------------- -------------
Other current assets 6,618,609.99 2,650,316.35 2,439,118.42
------------- ------------- -------------
Prepaid expenses 154,427.86 125,847.92 99,400.24
------------- ------------- -------------
70,439,207.75 59,305,504.41 55,885,624.33
------------- ------------- -------------
II INVESTMENTS
-----------
Shares in affiliated companies 325,091.09 325,091.09 325,091.09
Investments 105,589.89 248,698.39 248,698.39
Other loans 332,407.18 314,179.69 260,361.38
------------- ------------- -------------
763,088.16 887,969.17 834,150.86
------------- ------------- -------------
III PROPERTY, LAND AND EQUIPMENT
----------------------------
Land and buildings 10,456,925.34 7,025,270.98 6,724,138.95
Furniture and equipment 1,007,563.38 905,841.33 942,895.70
------------- ------------- -------------
11,464,488.72 7,931,112.31 7,667,034.65
------------- ------------- -------------
IV INTANGIBLE ASSETS
-----------------
Licenses and similar rights and
licenses to such rights 2,450,200.52 2,567,178.88 2,394,768.00
Goodwill 5,372,126.83 4,875,629.29 4,379,132.09
Advances paid on intangible assets 1,083,136.73 1,099,869.72 1,297,294.50
------------- ------------- -------------
8,905,464.08 8,542,677.89 8,071,194.59
------------- ------------- -------------
V OTHER ASSETS
------------
Non-current receivables 0.00 0.00 12,999.24
TOTAL ASSETS 91,572,248.71 76,667,263.78 72,471,003.67
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY 1993 1994 1995
------------------------------------ DM DM DM
------------- ------------- -------------
I LIABILITIES
-----------
Current Liabilities:
Bank loans and overdrafts 2,525,087.20 4,693,618.31 3,576,594.58
Notes payable 863,150.00 0.00 100,000.00
Accounts payable 10,907,223.66 11,011,819.92 13,777,341.81
Accounts due to affiliated companies 331,856.89 249,010.33 278,644.69
Accounts due to other group companies 0.00 257,729.47 1,051,514.16
Deferred subscription revenues 26,337,004.10 20,654,379.63 22,231,449.79
Liabilities due to shareholders 3,951,866.55 630,169.40 4,382,584.39
Other accruals 6,344,361.65 5,649,297.31 5,110,767.21
Other liabilities 2,816,885.36 2,855,584.10 3,332,131.30
-------------- ------------- -------------
54,077,435.41 46,001,608.47 53,841,027.93
-------------- ------------- -------------
Deferred items 19,224.94 69,462.17 46,753.89
-------------- ------------- -------------
Long-term debt
Subordinated loan 27,738,965.33 0.00 0.00
Bank loans 5,385,000.00 1,740,000.00 1,200,000.00
Liabilities due to shareholders 4,000,000.00 4,000,000.00 0.00
Accrued pensions 16,681,476.00 17,564,127.00 17,525,362.00
-------------- ------------- -------------
53,805,441.33 23,304,127.00 18,725,362.00
-------------- ------------- -------------
107,902,101.68 69,375,197.64 72,613,143.82
-------------- ------------- -------------
II SHAREHOLDERS' EQUITY
--------------------
Capital stock 2,650,000.00 4,687,500.00 4,687,500.00
Additional paid-in capital 1,350,000.00 26,798,028.78 26,798,028.78
Accumulated deficit (21,607,881.16) (25,427,414.70) (33,286,870.03)
Cumulative translation adjustment 1,278,028.19 1,233,952.06 1,659,201.10
-------------- ------------- -------------
(16,329,852.97) 7,292,066.14 (142,140.15)
-------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY 91,572,248.71 76,667,263.78 72,471,003.67
============== ============= =============
The accompanying notes are an integral part of these statements.
4
VCH VERLAGSGESELLSCHAFT MBH, WEINHEIM, GERMANY
----------------------------------------------
CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
-----------------------------------------------------------------------------------
1993 1994 1995
DM DM DM
---------------- ---------------- ---------------
Net sales 100,745,115.42 94,154,574.59 97,264,431.00
Cost of sales (43,756,422.35) (38,702,659.45) (39,249,115.00)
-------------- ------------- -------------
Gross margin 56,988,693.07 55,451,915.14 58,015,316.00
Selling, general and administrative expenses (60,752,629.94) (64,526,960.34) (63,513,054.62)
Amortization of intangibles (2,325,553.50) (1,413,382.70) (1,535,846.24)
-------------- ------------- -------------
Total expense (63,078,183.44) (65,940,343.04) (65,048,900.86)
Unusual items 5,722,898.21 5,292,544.05 (731,000.00)
Other income 4,791,415.64 3,938,438.35 1,675,971.53
-------------- ------------- -------------
Operating income (loss) 4,424,823.48 (1,257,445.50) (6,088,613.33)
Interest income and other 101,311.38 112,177.96 162,407.00
Interest and similar expenses (5,245,563.68) (2,647,142.28) (1,528,876.00)
-------------- ------------- -------------
Loss before taxes (719,428.82) (3,792,409.82) (7,455,082.33)
Provision for taxes (19,837.54) (27,123.72) (404,373.00)
-------------- ------------- -------------
Net loss (739,266.36) (3,819,533.54) (7,859,455.33)
============== ============= =============
The accompanying notes are an integral part of these statements.
5
VCH VERLAGSGESELLSCHAFT MBH, WEINHEIM, GERMANY
----------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993, 1994, 1995
1993 1994 1995
DM DM DM
--------------------------------------------------------
CAPITAL STOCK
Beginning balance 2,650,000.00 2,650,000.00 4,687,500.00
Additions 0.00 2,037,500.00 0.00
--------------------------------------------------------
Ending balance 2,650,000.00 4,687,500.00 4,687,500.00
--------------------------------------------------------
ADDITIONAL PAID IN
CAPITAL
Beginning balance 1,350,000.00 1,350,000.00 26,798,028.78
Additions 0.00 25,448,028.78 0.00
--------------------------------------------------------
Ending balance 1,350,000.00 26,798,028.78 26,798,028.78
--------------------------------------------------------
ACCUMULATED DEFICIT
Beginning balance (20,868,614.80) (21,607,881.16) (25,427,414.70)
Net loss (739,266.36) (3,819,533.54) (7,859,455.33)
--------------------------------------------------------
Ending balance (21,607,881.16) (25,427,414.70) (33,286,870.03)
--------------------------------------------------------
CUMULATIVE
TRANSLATION
ADJUSTMENT
Beginning balance 1,760,729.96 1,278,028.19 1,233,952.06
Current year adjustm. (482,701.77) (44,076.13) 425,249.04
--------------------------------------------------------
Ending balance 1,278,028.19 1,233,952.06 1,659,201.10
--------------------------------------------------------
TOTAL SHAREHOLDERS'
EQUITY (DEFICIT) (16,329,852.97) 7,292,066.14 (142,140.15)
========================================================
The accompanying notes are an integral part of these statements.
6
VCH VERLAGSGESELLSCHAFT MBH, WEINHEIM, GERMANY
----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH-FLOWS AS OF DECEMBER 31, 1993, 1994 AND 1995
----------------------------------------------------------------------------
1993 1994 1995
DM DM DM
---------------------------------------------------------
Operating activities
- --------------------
Net loss (739,266.36) (3,819,533.54) (7,859,455.33)
Adjustments to reconcile net income to net cash
provided by operating activities
Gain on sale of medical list (5,722,898.21) 0.00 0.00
Gain on sale of property 0.00 (5,462,544.00) 0.00
Depreciation and amortization 3,348,839.94 2,531,480.88 2,324,620.61
Changes in certain assets and liabilities:
Accounts receivable (143,020.72) 1,731,597.49 2,821,526.02
Inventories (1,856,207.90) (1,106,529.75) 601,889.66
Accounts payable (3,896,237.35) (6,266,295.30) 5,266,011.10
Accrued pensions 16,929.00 882,651.00 (38,765.00)
Other accruals 800,203.65 (695,064.34) (538,530.10)
Prepaid expenses 99,449.14 28,579.94 26,447.68
Deferred items 997.94 50,237.23 (22,708.28)
Other current assets 1,629,816.01 3,968,293.64 211,197.93
Other non-current assets 0.00 0.00 (12,999.24)
Other current liabilities (782,145.60) 38,698.74 476,547.20
------------- ------------- ------------
Net cash flow from (used for) operating activities (7,243,540.46) (8,118,428.01) 3,255,782.25
------------- ------------- ------------
Investing Activities
- --------------------
Proceeds on sale of medical list 10,117,600.00 0.00 0.00
Proceeds on sale of property 0.00 8,500,000.00 0.00
Purchase of property, plant and equipment (423,397.00) (844,240.00) (655,991.00)
Disposals of property, plant and equipment 447,745.00 52,382.00 5,003.00
Other (737,743.00) (1,159,978.00) (1,060,563.00)
------------- ------------- ------------
Net cash flow from (used for) investing activities 9,404,205.00 6,548,164.00 (1,711,551.00)
------------- ------------- ------------
Financing Activities
- --------------------
Cash financing activities
Accounts due from other group companies (5,556.77) (350,895.24) (341.35)
Accounts due from shareholders 119,088.00 0.00 0.00
Liabilities due to shareholders 139,303.55 (3,321,697.15) (247,585.01)
Increase (decrease) in short-term debt 799,087.20 2,168,531.11 (1,117,023.73)
Increase (decrease) in subordinated loan 2,972,032.33 (253,436.55) 0.00
Increase (decrease) in bank loans (2,584,840.00) (3,645,000.00) (540,000.00)
Other long-term liabilties (25,000.00) 0.00 0.00
------------- ------------- ------------
Net cash flow from (used for) financing activities 1,414,114.31 (5,402,497.83) (1,904,950.09)
------------- ------------- ------------
subtotal 3,574,778.85 (6,972,761.84) (360,718.84)
------------- ------------- ------------
7
sub total 3,574,778.85 (6,972,761.84) (360,718.84)
------------- ------------- ------------
Non-cash financing activities
Decrease in subordinated loan 0.00 (27,485,528.78) 0.00
Increase in capital stock 0.00 2,037,500.00 0.00
Increase in additional paid-in capital 0.00 25,448,028.78 0.00
------------- ------------- ------------
0.00 0.00 0.00
------------- ------------- ------------
Effect of exchange rate changes on cash (106,959.55) 110,104.58 602,241.40
- ---------------------------------------
Cash and Equivalents
- --------------------
Net increase (decrease) in cash and equivalents 3,467,819.30 (6,862,657.26) 241,522.56
Cash and equivalents, beginning 4,431,151.00 7,898,970.30 1,036,313.04
------------- ------------- ------------
Cash and equivalents, ending 7,898,970.30 1,036,313.04 1,277,835.60
------------- ------------- ------------
Supplemental disclosures
- ------------------------
Interest paid 4,856,260.00 2,468,840.00 1,776,461.00
Income taxes paid 428,411.00 458,089.50 1,101,748.00
The accompanying notes are an integral part of these statements.
8
VCH VERLAGSGESELLSCHAFT MBH
WEINHEIM/GERMANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND NATURE OF BUSINESS
VCH Verlagsgesellschaft mbH is an information provider in all fields
of science publishing, journals, books and electronic media,
particularly in the field of chemistry. The design and distribution
of scientific software and of teaching and communication aids, as
well as in the carrying out of all other business which is related to
its actions in said fields or of such nature as to promote same. The
company is the parent company of the group and assumes the function
of a financial holding company for its subsidiaries. The company is
based in Weinheim, Germany.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Certain accounting policies applied by the company and its
subsidiaries conform with generally accepted accounting principles in
the countries where they are located, mainly in the Federal Republic
of Germany and other European countries, but do not conform with
generally accepted accounting principles in the United States. The
financial statements as of and for the years ended December 31, 1993,
1994 and 1995 have been adjusted to comply with the United States
generally accepted accounting principles for the use by the new
majority shareholder in meeting certain reporting requirements in the
United States and, accordingly, they state the assets, liabilities,
shareholders' equity and revenues and expenses as adjusted for
that purpose. All amounts are in Deutsche Marks (DM), the functional
currency of the parent company.
a) Foreign currencies
The books and records of the companies in the group are maintained in
several local currencies. Assets and liabilities of non-German
operations were converted on the basis of the exchange rate on the
balance sheet date, while revenues and expenses were translated at
average rate of the year. The resulting net translation adjustments
are recorded as a separate component of shareholders' equity.
b) Principles of consolidation
The Consolidated Financial Statements have been drawn up as of the
end of each fiscal year by the Parent Company and they include the
accounts of the Parent Company and its majority owned subsidiaries.
All significant intercompany balances and transactions have been
eliminated.
9
Due to their minor importance for the Group's asset, financial and
profit situation Physik Verlag GmbH, Weinheim, Germany; Verlag Chemie
GmbH, Weinheim, Germany; VCH Shuppan K.K., Tokyo, Japan and the 24 %
share of Verlag Helvetica Chimica Acta AG, Basel, Switzerland were
not included in the consolidated balance sheet. The 50% owned joint
venture, Verlagsservice Sudwest GmbH, Waghausel, Germany was also not
included.
c) Accounts receivable
Accounts receivable are net of allowance for doubtful accounts. In
addition to specific allowances, a general allowance has been
provided to cover the bad debt risk of accounts outstanding.
d) Inventories
Inventories are carried at historical cost and, if necessary,
adjusted according to the lower of cost or market principle. A
manufacturing overhead of 12% is allocated on the work-in-process and
finished goods for the publications in 1991 and earlier years. For
the publications in 1992 and following an average manufacturing
overhead of 25% is used. Administration and marketing costs are not
allocated to the inventories. An allowance is provided for slow
moving and obsolete items.
e) Property, plant and equipment
Property, plant and equipment are carried at cost. Major additions
and improvements are capitalized, while maintenance and repairs which
do not improve or extend the useful lives of the respective assets
are expensed in the year of incurrence. Retirements and disposals are
removed from cost and accumulated depreciation accounts, with the
resulting gain or loss reflected in the income statement.
Depreciation on assets are calculated using the declining balance
method over the useful lives of the assets. The maximum depreciation
rate amounts to three times of the amount according to the
straight-line method but must not exceed 30 % of acquisition cost in
the year of acquisition of the asset. In the second and following
years the remaining book value is the basis to calculate the
depreciation according to the declining-balance method. A change to
the straight-line method is made when the amount depreciated
according to the straight-line method is higher than according to the
declining-balance-method. In case of buildings the depreciation is
computed using the straight-line method. The following estimated
useful lives have been used in the calculations:
Useful life in years
--------------------
Buildings 50
Machinery and equipment 4 to 10
Office equipment and other assets 4 to 10
f) Intangible assets and goodwill
Intangible assets mainly consisting of publication rights are
amortized over the estimated useful lives ranging from 4 to 15
(goodwill) years.
10
g) Investments
Investments in unconsolidated subsidiary companies are stated at cost
which approximates equity.
h) Research and development
Research and development costs are expensed as incurred. The costs
relate mainly to the activities of the subsidiary Chemical Concepts
GmbH, Weinheim, Germany.
i) Pensions
Provisions for pensions are based upon an actuarial computation of
future employee benefits derived from the company's pension plans.
Pension benefits are based on years of service and for certain plans
on average compensation immediately preceding retirement. Pension
expense/(income) is determined in accordance with Statements of
Financial Accounting Standards No. 87 "Employers' Accounting for
Pensions". The pension plans are not funded.
j) Other accrued expenses
Other accrued expenses consider all estimated expenses incurred until
the balance sheet date, but not yet billed or paid, including
vacation, overtime accruals and anniversary payments.
k) Income taxes
Deferred income taxes arise from timing differences between financial
and tax accounting and principally relate to provisions for pensions.
The company and some of its subsidiaries created significant tax loss
carryforwards during the periods under report. No deferred tax assets
have been created because of uncertainties on how and when benefits
from such loss carryforwards will be utilized.
l) Recognition of revenues and income
Revenues and related expenses are recognized when earned and
incurred, respectively.
m) Subsidies
Subsidies obtained in connection with development of electronic media
are taken into income according to the related expenses incurred.
11
(3) INVESTMENTS (all amounts in KDM)
The investments in affiliated companies consisted of the following:
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
---------------- ---------------- ---------------
Shares in affiliated companies 325 325 325
Investments in affiliated companies 106 249 249
---------------- ---------------- ---------------
Total investments in affiliated companies
431 574 574
---------------- ---------------- ---------------
Other loans 332 314 260
---------------- ---------------- ---------------
Total investments 763 888 834
================ ================ ===============
The shares in affiliated companies are 100 % owned subsidiaries which
were, due to their minor importance, not included in the consolidated
financial statements.
Investments in affiliated companies represent the 50 % interest in
the joint venture (Verlagsservice Sudwest GmbH, Waghausel, Germany)
as well as the 24 % interest acquired in fiscal year 1994 in the
Verlag Helvetica Chimica Acta AG, Basel, Switzerland.
Other loans reflect the loans granted to several employees. The
interest rate amounted from 4.0 to 6.0 % p.a.
(4) PROPERTY, PLANT AND EQUIPMENT (all amounts in KDM)
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
--------------------- -------------------- ---------------------
Cost:
Land and buildings 14,728 10,909 10,798
Furniture and equipment 5,802 5,964 6,452
--------------------- -------------------- ---------------------
20,530 16,873 17,250
Less: accumulated depreciation (9,065) (8,942) (9,583)
-----
--------------------- -------------------- ---------------------
Property, Plant and Equipment, net:
--- 11,465 7,931 7,667
===================== ==================== =====================
(5) INTANGIBLE ASSETS (all amounts in KDM)
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
------------------------ ----------------------- ---------------------
Cost:
Licenses and similar rights and licenses to
such rights 7,130 8,159 8,934
Goodwill 14,977 14,834 14,614
Advances paid on intangible assets
1,083 1,100 1,297
Less: accumulated depreciation (14,285) (15,550) (16,774)
-----
------------------------ ----------------------- ---------------------
Intangible assets - net: 8,905 8,543 8,071
----
======================== ======================= =====================
12
(6) SUBORDINATED LOAN (all amounts in KDM)
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
------------------------ ----------------------- ---------------------
subordinated loan 27,739 0 0
Less: current maturity 0 0 0
-----
------------------------ ----------------------- ---------------------
27,739 0 0
======================== ======================= =====================
The subordinated loan granted by OROPEL S.A., Panama, of KDM 20,000
includes the accumulated interest of KDM 7,739. Until maturity date,
December 31, 1997, the interest rate amounted to 12 % p.a. In 1993,
the interest expenses amounts to KDM 2,972.
In fiscal year 1994 a change in debtor from OROPEL to VCH Publishers
Limited, Dover, Delaware, USA took place. In a next step, this loan
was transferred by the amount of KDM 2,038 into capital stock and KDM
25.448 into additional paid-in capital.
The remaining amount of KDM 1,454 was paid back to the shareholder,
VCH Publishers Limited, Dover, Delaware, USA, in 1994.
(7) LIABILITIES DUE TO SHAREHOLDERS (all amounts in KDM)
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
----------------------------- ---------------------------- -----------------------------
Loans 4,000 4,000 4,000
Less: current maturities 0 0 (4,000)
-----
----------------------------- ---------------------------- -----------------------------
4,000 4,000 0
============================= ============================ =============================
A loan of KDM 4,000 was granted by a shareholder, bearing interest at
9% p.a. until maturity day on April 30, 1996.
Interest expenses amounted to KDM 360 for the years 1993 to 1995.
13
(8) LIABILITIES DUE TO BANKS (all amounts in KDM)
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
---------------------- ---------------------- ----------------------
Loans 6,960 2,280 1,740
Less: current maturities (1,575) (540) (540)
-----
---------------------- ---------------------- ----------------------
Total long-term bank loans 5,385 1,740 1,200
---------------------- ---------------------- ----------------------
Current maturities of long-term debt
1,575 540 540
Overdrafts 950 4,154 3,037
---------------------- ---------------------- ----------------------
Total current liabilities due to banks
2,525 4,694 3,577
---------------------- ---------------------- ----------------------
Total liabilities due to banks 7,910 6,434 4,777
====================== ====================== ======================
As of December 31, 1993, the long-term liabilities consist of four
loans, bearing interest at fixed rates ranging from 5.75 % p.a. to
9.45 % p.a. The loans are secured by mortgages.
In fiscal year 1994 two loans were prematurily paid back. The
interest expenses on the loans amounted to KDM 659 in 1993, KDM 583
in 1994 and KDM 202 in 1995.
(9) MATURITIES AND SHORT TERM CREDITS (all amounts in KDM)
a) Maturity
The long term liabilities, resulting from liabilities due to
shareholders and due to banks, mature in the following years
subsequent to balance sheet:
December 31, 1995
------------------------
first year - current maturities 4,540
------------------------
second year 240
third year 240
fourth year 240
fifth year 240
thereafter 240
------------------------
1,200
------------------------
5,740
========================
14
b) Short-term credits
The company has credit lines with several banks for short-term loans
and overdrafts.
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
------------------------------- ------------------------------- -------------------------------
Available credit lines 9,000 10,000 12,000
Usage of credit lines 950 4,154 3,037
Average interest rate 10.20 9.80 8.88
Unused credit lines 8,050 5,846 8,963
------------------------------- ------------------------------- -------------------------------
After the balance sheet date the available credit lines were reduced
from KDM 12,000 to KDM 6,000 until March 30, 1996.
From April 1 to August 31, 1996 the available credit lines amount to
KDM 8,000.
In addition, the company started in 1995 to make use of factoring
without recourse. This financing source was used until the end of
June 1996.
(10) PENSION BENEFITS
The company and one of its subsidiaries have established
non-contributory pension plans which are unfunded and result in the
following accruals recognized in the balance sheet:
(all amounts in KDM)
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
------------------------ ------------------------ -------------------------
VCH Verlagsgesellschaft mbH 16,389 17,250 17,197
Subsidiary 128 142 156
Provision for pension insurance (PSV)
164 172 172
------------------------ ------------------------ -------------------------
Total accrued pensions 16,681 17,564 17,525
======================== ======================== =========================
The company maintains a general pension plan granting fixed amounts
which are adjusted annually according to the years of services
rendered. Some executives have individual pension agreements with
individual conditions. The benefits include old-age pensions,
disability pensions and pensions to widows, widowers and infants.
Each company in Germany which has a pension plan has to pay annual
contributions to the union for pension insurance (PSV). The PSV pays
for companies which are unable to fulfil their pension obligations,
e.g. in case of bankruptcy, and allocates the related cost to the
German companies.
The allocations are made for the obligations related to retired
employees in the year when such obligations are transferred to PSV.
The obligations related to vested rights of still active employees or
former employees are allocated at the time when such employees are
retiring.
15
The vested benefit obligations of all plans as of the respective
balance sheet dates are as follows:
(all amounts in KDM)
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
------------------------ ------------------------ -------------------------
Vested benefit obligation 15,570 16,520 16,530
======================== ======================== =========================
The discount rate, assumed rate of increase in future compensation
levels and the assumed rate of increase in future annuities used in
determining the actuarial present value of benefit obligations were
6.5 %, 3.25 % and 2.75 % respectively, for all periods.
Service costs and interest costs for the defined benefit plans were
as follows:
1993 1994 1995
------------------------ ----------------------- ---------------------
service costs 410 451 386
interest costs 985 1,072 1,128
------------------------ ----------------------- ---------------------
Total expense for pension plans and profit sharing and savings plan
amounted to KDM 1,720 in 1993, KDM 1,740 in 1994, and KDM 1,690 in
1995.
(11) INCOME TAXES
The company and its subsidiaries are subject to income taxes under
the rules of the countries in which they are located. The income tax
rates principally vary from 34 % to 57 %. The parent company
represents the most significant component of the group and is subject
to two types of income-based taxes in Germany.
German trade tax on income is levied on a company's taxable income
adjusted for certain revenues which are not taxable for trade tax
purposes and for certain expenses which are not deductible for trade
tax purposes. The trade tax rate is dependent on the municipalities
in which the company operates. The average statutory trade tax rate
was approximately 15% for all years under report. Trade tax is
deductible for corporate income tax purposes.
Corporate income tax in Germany is levied at 36 % (1993) /30 % (1994
and following) on the portion of taxable income which will be
distributed as dividends and at 50 % (1993) /45 % (1994 and
following) on that portion of taxable income which will be retained
in the company.
Beginning January 1, 1995 a surcharge of 7.5 % on corporate income
tax has been implemented for an indefinite period of time related to
reunification costs.
The result of the latest regular tax audit in Germany for the years
1989 to 1992 was reflected (total effect of additional taxes: KDM
813) in the financial statements of 1995. Tax assessment for the
Company and several subsidiaries for the period ending December 31,
1992 are not final due to the fact that tax authorities did not issue
the final version of the tax field audit report yet.
16
The income taxes shown in the reported years are not significant. The
company and some of its subsidiaries created significant tax loss
carryforwards during those periods. No deferred tax assets have been
created for theses losses because of uncertainties on how and when
benefits from such loss carryforwards will be utilized. The net
operating loss carryforwards of the company for income tax purposes
in Germany amounted to approximately DM 21.1 million for corporate
income tax and DM 41.4 million for trade tax on income as of December
31, 1995.
The net operating loss carryforward of the United Kingdom
subsidiaries for income purposes amounted to approximately British
pound 2.3 million as of December 31, 1995. The net operating loss
carryforwards of the subsidiary in the United States of America for
income tax amounted to approximately US $ 1.5 million as of December
31, 1995.
(12) NET SALES (all amounts in KDM)
The geographic breakdown of net sales during the reporting periods is
as follows:
1993 1994 1995
------------------- ------------------- --------------------
Domestic (Germany) 85,982 85,731 89,558
Foreign 51,270 45,143 45,206
Less: intercompany sales (36,507) (36,719) (37,500)
-----
------------------- ------------------- --------------------
Total sales 100,745 94,155 97,264
=================== =================== ====================
(13) UNUSUAL ITEMS (all amounts in KDM)
1993 1994 1995
------------------- ------------------- -------------------
Sale of the medical list 5,723 0 0
Sale of Property 0 5,463 0
Loss from foreign currency transactions 0 (170) (731)
------------------- ------------------- -------------------
5,723 5,293 (731)
=================== =================== ===================
VCH medical list
----------------
In December 1993 VCH disposed of its entire medical list. After
allowing for inventory and goodwill write-offs of KDM 4,659, the
profit on disposal amounted to KDM 5,549.
Property
--------
In July 1994, the company sold its premises in Berlin. The gain on
disposal amounted to KDM 5,463.
Swap arrangements
-----------------
The currency losses in 1994 and 1995 result from a series of US
Dollar swap arrangements undertaken by the company during a period of
high rate volatility - a 10% swing.
17
(14) OTHER INCOME
Other income includes subsidies from the German Government (1993: KDM
1,862; 1994: KDM 1,411; 1995: KDM 723) to reimburse for expenditures,
mainly payroll costs, related to the development of electronic media.
In 1995 the decrease in other income mainly was due to lower
subsidies and adjustments regarding to US-GAAP reconciliation.
(15) COMMITMENTS AND CONTINGENT LIABILITIES
a) Lease commitments and long-term rental agreements
The company leases certain offices, machines and office equipment
under noncancelable operating lease agreements with aggregate annual
future minimum lease payments. Lease expenses under these contracts
approximate:
fiscal years KDM
---------------------------------------- ---------------------
1996 3,488
1997 2,519
1998 2,150
1999 1,226
2000 and thereafter 3,558
---------------------
12,941
=====================
b) Contingent liabilities (all amounts in KDM)
The VCH together with its 50 % Partner, has provided a general
guarantee in respect of Verlagsservice Sudwest GmbH, their jointly
owned book and journal distribution center. Its obligations were as
follows:
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
----------------------- ----------------------- ---------------------
296 151 0
======================= ======================= =====================
(16) SHAREHOLDERS' EQUITY
The fully paid capital stock amounts to DM 2,650,000 (Dec. 31, 1993),
DM 4,687,500 (Dec. 31, 1994 and Dec. 31, 1995) and is held as
follows:
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995
DM DM DM
------------------- ------------------- ------------------
Gesellschaft Deutscher Chemiker e.V.,
Frankfurt am Main, Germany 1,687,500 1,687,500 1,687,500
VCH Publishing Limited Partnership, Dover,
USA 775,000 2,812,500 2,812,500
Deutsche Pharmazeutische Gesellschaft e.V.,
Berlin, Germany 187,500 187,500 187,500
------------------- ------------------- ------------------
2,650,000 4,687,500 4,687,500
=================== =================== ==================
18
The shareholders' equity reflects the share capital of the parent
company and paid-in surplus and retained earnings of the group. In
1994, the share capital has been increased by DM 2,037,500. The
increase was made by VCH Publishing Limited Partnership by a
respective debt forgiveness. The debt forgiveness in excess of the
share capital was reported as additional paid-in surplus (DM
25,448,029).
(17) SUBSEQUENT EVENTS
On May 7, 1996 John Wiley & Sons Inc., a New York listed publishing
company acquired 90 % of the shares of the VCH Verlagsgesellschaft
mbH, Weinheim. The purchase was officially sanctioned by the German
'Kartellamt' (antitrust division) on June 12, 1996.
Since the acquisition, John Wiley and Sons Inc. has provided VCH
Publishing group with DM 18 million which has allowed VCH to clear
all its long-term debts due to banks and shareholders. Additionally,
John Wiley & Sons Inc. has indicated its intention to strenghten the
financial position of VCH by providing sufficient financing.
19
ITEM 7(B). PRO FORMA FINANCIAL INFORMATION
INTRODUCTION
The following unaudited pro forma financial information gives
effect to the acquisition on June 13, 1996 by John Wiley &
Sons, Inc. ("Wiley") of a 90% interest in the German based VCH
Publishing Group (VCH) through the purchase of 90% of the
shares of VCH Verlagsgesellschaft mbH for approximately $99
million in cash, including estimated expenses.
The unaudited pro forma statements have been prepared by Wiley
based on purchase accounting and upon assumptions deemed
proper by Wiley. The pro forma calculations presented are
shown for comparative purposes only, and it should be noted
that Wiley's financial statements will reflect the effects of
the acquisition of VCH only since date of acquisition in June,
1996.
For purposes of calculating the pro forma financial
information, a portion of the cost in excess of historical
book values has been allocated to the various assets acquired
and liabilities assumed on the basis of preliminary estimated
fair values. In addition, Wiley intends to dispose of certain
VCH operations which have not been segregated as the effect
would not be material to the information presented. The pro
forma adjustments are based on preliminary estimates and
assumptions, and actual adjustments may differ as a result of
changes due to appraisals and evaluations of VCH's assets and
liabilities and tax regulations. At this time, it is
anticipated that any changes will not have a material effect
in the aggregate on the information presented.
For the unaudited pro forma condensed combined financial
information, certain VCH amounts have been reclassified to
conform to the Wiley presentation. It is possible that a more
detailed evaluation may result in different reclassifications
of VCH accounts or in other changes in its accounting
principles to conform with Wiley.
The unaudited pro forma condensed combined statement of
financial position which follows, combines the audited
consolidated statement of financial position of Wiley and the
unaudited statement of financial position of VCH as of April
30, 1996, as if the acquisition had been consummated on April
30, 1996. The information presented does not purport to
reflect the financial position of Wiley as of April 30, 1996
had Wiley acquired VCH on that date, or the financial position
of Wiley at any future date.
20
The unaudited pro forma condensed combined statement of income
which follows, presents the combined results of operations of
Wiley and VCH for the year ended April 30, 1996, based on the
audited results of operations for Wiley and the unaudited
results of operations for VCH for such year, as if the
acquisition had been consummated as of May 1, 1995. The
results shown are not necessarily indicative of the actual
results that would have been obtained had the acquisition been
consummated as of May 1, 1995, or of future results of
operations of the combined companies.
The statements that follow should be read in conjunction with
the above and the Notes to the Unaudited Pro Forma Condensed
Combined Financial Information, and the historical financial
statements and notes thereto of Wiley and VCH.
21
JOHN WILEY & SONS, INC. AND VCH PUBLISHING GROUP
PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
APRIL 30, 1996
UNAUDITED
(Dollars in Thousands)
Pro Forma Pro Forma
Wiley VCH Adjustments Combined
----- --- ----------- --------
Assets
Current Assets
Cash and cash equivalents $ 55,284 276 - 55,560
Accounts receivable 60,276 10,418 (702) (A) 69,992
Inventories 43,981 23,569 (11,652) (A) 55,898
Deferred income tax benefits 7,677 - 13,308 (A) 20,985
Prepaid expenses & Other Assets 3,413 1,560 - 4,973
--------------------------------------------------------------------
Total Current Assets 170,631 35,823 954 207,408
--------------------------------------------------------------------
Product Development Assets 30,282 - - 30,282
Property and Equipment 22,989 5,041 - 28,030
Intangible Assets 52,394 4,254 110,775 (A) 167,423
Other Assets 8,205 632 - 8,837
--------------------------------------------------------------------
Total Assets $ 284,501 45,750 111,729 441,980
====================================================================
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable and current portion of long-term debt $ - 9,861 (9,861) (B) -
Accounts and royalties payable 36,952 5,525 - 42,477
Deferred subscription revenues 71,999 17,452 - 89,451
Accrued income taxes 5,068 549 - 5,617
Other accrued liabilities 25,097 3,842 9,355 (A) 38,294
--------------------------------------------------------------------
Total Current Liabilities 139,116 37,229 (506) 175,839
--------------------------------------------------------------------
Long-Term Debt - - 108,861 (B) 108,861
Other Long-Term Liabilities 14,994 9,650 2,232 (A) 26,876
Deferred Income Taxes 12,409 13 - 12,422
Shareholders' Equity
Common stock 20,498 3,062 (3,062) (C) 20,498
Additional paid-in capital 31,615 17,504 (17,504) (C) 31,615
Retained earnings (deficit) 106,716 (21,708) 21,708 (C) 106,716
Cumulative translation adjustment (3,086) - - (3,086)
Unearned deferred compensation (4,268) - - (4,268)
--------------------------------------------------------------------
151,475 (1,142) 1,142 (C) 151,475
Less Treasury shares (33,493) - - (33,493)
--------------------------------------------------------------------
Total Shareholders' Equity 117,982 (1,142) 1,142 (C) 117,982
--------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 284,501 45,750 111,729 441,980
====================================================================
The accompanying introduction and notes are an integral part of this statement.
22
JOHN WILEY & SONS, INC. AND VCH PUBLISHING GROUP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED APRIL 30, 1996
UNAUDITED
(Dollars in Thousands Except Per Share Data)
Pro Forma Pro Forma
Wiley VCH Adjustments Combined
----- --- ----------- --------
Revenues $ 362,704 67,280 429,984
Costs and Expenses
Cost of sales 126,718 28,973 - 155,691
Operating and administrative expenses 198,494 40,140 - 238,634
Amortization of intangibles 4,537 333 3,501 (E) 8,371
--------------------------------------------------------------------
Total Costs and Expenses 329,749 69,446 3,501 - 402,696
--------------------------------------------------------------------
Operating Income (Loss) 32,955 (2,166) (3,501) 27,288
Interest Income and Other 6,211 6,211
Interest Expense (368) (1,258) (6,634) (D) (8,260)
--------------------------------------------------------------------
Interest Income (Expense) - Net 5,843 (1,258) (6,634) (2,049)
--------------------------------------------------------------------
Income (Loss) Before Taxes 38,798 (3,424) (10,135) 25,239
Provision (Benefit) for Income Taxes 14,118 626 (4,802) (F) 9,942
--------------------------------------------------------------------
Net Income (Loss) $ 24,680 (4,050) (5,333) 15,297
--------------------------------------------------------------------
Income per Share
Primary and Fully Diluted $ 1.49 .92
Average Shares Used in Computation
Primary 16,560,114 16,560,114
Fully Diluted 16,583,389 16,583,389
The accompanying introduction and notes are an integral part of this statement.
23
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
----------------------------------------
1. Pro Forma Adjustments
---------------------
The following notes describe the pro forma adjustments to the unaudited pro
forma condensed combined balance sheet reflecting the acquisition of VCH as
though it was consummated as of April 30, 1996:
(A) To allocate the purchase price paid, including estimated expenses, of
approximately $99 million and to adjust VCH's assets and liabilities
based on preliminary estimates of fair values including:
- reduction in inventory values to conform with Wiley's accounting
policies and preliminary estimates of net realizable values.
- recognition of costs to be paid in connection with the acquisition.
- recognition of appropriate deferred tax benefits.
(B) To reflect borrowings of $108.9 million to finance the acquisition and
to refinance the existing debt of VCH. The transaction was initially
financed through available cash balances, existing lines of credit, and
a $75 million bridge line of credit. Wiley is currently in the process
of refinancing the transaction.
(C) To eliminate the equity accounts of VCH.
The following notes describe the pro forma adjustments to the unaudited pro
forma condensed combined statements of income reflecting the acquisition of VCH
as though it was consummated as of May 1, 1995.
(D) To reflect additional interest expense assumed to have been incurred on
the borrowings to finance the acquisition and to refinance VCH debt.
For purposes of the pro forma results of operations, an average
effective interest rate of 7.25% was used. If the financing is floating
rate, interest expense could change by approximately $136,000 per year
for each one-eighth percent change in interest rates.
(E) To reflect the amortization of intangible assets arising from the
allocation of the purchase price and adjustments to VCH's assets and
liabilities based on preliminary estimates of fair values. The values
assigned to acquired publication rights, goodwill and other intangible
assets are being amortized over an estimated average life of 30 years.
(F) To record the estimated income tax effects of the pro forma
adjustments.
24
SIGNATURE
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 hereunto duly authorized.
John Wiley & Sons, Inc.
/S/ Robert D. Wilder
----------------
Robert D. Wilder
Executive Vice President and
Chief Financial Officer
Date: August 27, 1996
25