WILEY JOHN & SONS INC
FORM 10-K
(Annual Report)
Filed 7/1/1999 For Period Ending 4/30/1999
Address
111 RIVER STREET
HOBOKEN, New Jersey 07030
Telephone
CIK
Industry
Sector
Fiscal Year
201-748-6000
0000107140
Printing & Publishing
Services
04/30
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: April, 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the transition period from to
Commission file number 1-11507
JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5593032
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State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
605 Third Avenue, New York, NY 10158-0012
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Address of principal executive offices Zip Code
Registrant's telephone number (212) 850-6000
including area code
-------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
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Class A Common Stock, New York Stock Exchange
par value $1.00 per share
Class B Common Stock, New York Stock Exchange
par value $1.00 per share
Securities registered pursuant None
to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K
The number of shares outstanding of the Registrant's Class A and Class B Common Stock, par value $1.00 per share as of May 31, 1999, was
50,235,994 and 12,147,656 respectively, and the aggregate market value of such shares of Common Stock held by non-affiliates of the
Registrant as of such date was 887,946,646 based upon the closing market price of the Class A and Class B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Definitive proxy Statement to be filed with the Commission on or about August 6, 1999 for the Annual Meeting of
Shareholders to be held on September 16, 1999, (the "1999 Proxy Statement") is, to the extent noted below, incorporated by reference in Part
III.
Item 1. Business
PART I
The Company is a New York corporation incorporated on January 15, 1904. (As used herein the term "Company" means John Wiley & Sons,
Inc., and its subsidiaries and affiliated companies, unless the context indicates otherwise).
The Company is a global publisher of print and electronic products, specializing in scientific, technical, and medical books and journals;
professional and consumer books and subscription services; and textbooks and other educational materials for undergraduate and graduate
students as well as lifelong learners. The Company has publishing, marketing and distribution centers in the United States, Canada, Europe,
Asia, and Australia.
Journal publications are primarily in the sciences, medicine and engineering. Book publications are primarily in the areas of pure and applied
science, engineering, mathematics, architecture, the social sciences, biomedicine, accounting, computer science, business, economics, finance
and culinary arts and hospitality. Professional and reference books, encyclopedias, dictionaries, and periodicals are intended primarily for
practicing and research professionals and for libraries, while textbooks are produced primarily for use in formal instruction in the college and
university markets, as well as the lifelong learning, corporate and adult education and distance learning markets. The Company also publishes
for the secondary school market in Australia. Some of the above, as well as nonfiction consumer publications, are also marketed to the general
public. In addition, the Company markets and distributes books from other publishers. The Company develops and markets electronic versions
of certain of its print products, as well as computer software and online electronic data bases for educational use and professional research and
training.
Subsequent to the fiscal 1999 year-end, the Company acquired certain publishing assets from Pearson including college textbooks and
instructional packages in biology/anatomy and physiology, engineering, mathematics, economics/finance and teacher education, for
approximately $58 million in cash. In addition, the Company acquired the Jossey-Bass publishing company from Pearson for approximately
$82 million in cash. Jossey-Bass publishes books and journals for professionals and executives primarily in the areas of business, psychology
and education/health management.
The Company is on the Internet with a World Wide Web site located at http://www.wiley.com.
Publishing Operations
The Company publishes over 400 journals and other subscription-based products, which accounted for approximately 37% of the Company's
fiscal 1999 revenues. Most journals are owned by the Company, in which case they may or may not be sponsored by a professional society.
Some are owned by such societies and published by the Company under an agreement. Societies which sponsor or own such journals generally
receive a royalty and/or other consideration which varies with the nature of the relationship. The Company usually enters into agreements with
the outside independent editors of journals which state the duties of the editors, and the fees and expenses for their services. Contributors of
journal articles transfer publication rights to the Company or professional society, as applicable.
Journal subscriptions result primarily from direct mail and other advertising and promotional campaigns, renewals which are solicited annually
either directly or by companies commonly referred to as independent subscription agents, and memberships in the professional societies for
those journals that are sponsored by such societies. Printed journals are generally mailed to subscribers directly from independent printers.
Materials for book publications are obtained from authors throughout most of the world through the efforts of an editorial staff, outside
editorial advisors, and advisory boards. Most materials originate with their authors, but many are prepared as a result of suggestions or
solicitations by editors or advisors. The Company usually enters into agreements with authors which state the terms and conditions under which
the respective authors' materials will be published and under which other related rights may be exercised, the name in which the copyright will
be registered, the basis for any royalties, and other matters. Most of the authors are compensated by royalties which vary with the nature of the
product and its anticipated sales potential. In general, royalties for textbooks and consumer books are higher than royalties for research and
reference works. The Company makes advances against future royalties to authors of certain of its publications. The Company continues to add
new titles, revise existing titles, and discontinue the sale of others in the normal course of its business. The Company's general practice is to
revise its basic textbooks every three to five years, if warranted, and to revise other titles as appropriate. Subscription-based products, other
than journals, are updated more frequently on a regular schedule. Approximately 31% of the Company's fiscal 1999 domestic book publishing
revenues were from titles published or revised in that fiscal year.
Professional and consumer book sales consist of sales to trade bookstores and online booksellers serving the general public, to wholesalers who
supply such bookstores, to certain college bookstores for their non-textbook requirements, to individual professional practitioners, and to
research institutions, jobbers, libraries (including public, professional, academic, and other special libraries), industrial organizations, and
governmental agencies. The Company employs sales representatives who call upon independent bookstores, along with national and regional
chain bookstores, wholesalers and jobbers. Trade sales to bookstores, wholesalers and jobbers are generally made on a fully returnable basis.
Sales of professional and consumer books also result from direct mail campaigns, telemarketing, online access, and advertising and reviews in
periodicals.
Adopted textbooks (i.e., textbooks prescribed for course use) are sold primarily to bookstores, including online bookstores, serving educational
institutions in the United States (i.e., college bookstores). The Company employs sales representatives who call on faculty members
responsible for selecting books to be used in courses, and on the bookstores which serve such institutions and their students. Textbook sales are
generally made on a fully returnable basis. The textbook business is seasonal with the majority of textbook sales occurring during June through
August and November through January. There is an active used textbook market which negatively affects the sales of new textbooks.
The Company performs marketing and distribution services for other publishers under agency arrangements. It also engages in co-publishing of
titles with foreign publishers and in publication of adaptations of works from other publishers for particular markets. The Company also
receives licensing revenues from photocopies and electronic uses and reproductions of journal articles and other materials.
Like most other publishers, the Company generally contracts with independent printers and binderies for their services. The Company
purchases its paper from independent suppliers and printers. Paper prices continued to decline during fiscal 1999. The Company believes that
adequate printing and binding facilities, and sources of paper and other required materials are available to it, and that it is not dependent upon
any single supplier. Book products are distributed from Company operated warehouses.
The Company produces electronic versions of some of its products including software, video, CD-ROM, and through online services, including
distribution of the Company's journals as full-text electronic files over the Internet, through Wiley InterScience. The Company believes that the
demand for new electronic technology products will increase. Accordingly, to properly service its customers and to remain competitive, the
Company anticipates it will be necessary to increase its expenditures related to such new technologies over the next several years.
The Company's publishing business is not dependent upon a single customer, the loss of whom could have a material adverse effect. The
journal subscription business is primarily sourced through independent subscription agents who facilitate the journal ordering process by
consolidating the subscription orders/billings of each subscriber with various publishers. Monies are collected in advance from subscribers by
the subscription agents and are remitted to the journal publishers, 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 position and liquidity. Subscription agents account for approximately 28% of
total consolidated revenues and no one agent accounts for more than 6% of total consolidated revenues. The book publishing business has
witnessed a significant concentration in national and regional bookstore chains in recent years, however, no one customer accounts for more
than 5% of total consolidated revenues.
International Operations
The Company's publications are sold throughout most of the world through subsidiaries located in Europe, Canada, Australia, and Asia, or
through agents, or directly from the United States. These subsidiaries market their own indigenous publications, as well as publications
produced by the domestic operations and other subsidiaries and affiliates. The Export Sales Department in the United States markets the
Company's publications through agents as well as foreign sales representatives in countries not served by a foreign subsidiary. John Wiley &
Sons International Rights, Inc. sells foreign reprint and translations rights. The Company publishes, or licenses others to publish, its products
which are distributed throughout the world in 35 foreign languages. Approximately 45% of the Company's fiscal 1999 revenues were derived
from non-U.S. markets.
Copyrights, Patents, Trademarks, and Environment
Substantially all of the Company's publications are protected by copyright, either in its own name, in the name of the author of the work, or in
the name of the sponsoring professional society. Such copyrights protect the Company's exclusive right to publish the work in the United States
and in many countries abroad for specified periods: in most cases the author's life plus 70 years, but in any event a minimum of 28 years for
works published prior to 1978 and 35 years for works published thereafter.
The Company does not own any other material patents, franchises, or concessions, but does have registered trademarks and service marks in
connection with its publishing businesses. The Company's operations are generally not affected by environmental legislation.
Competition Within the Publishing Industry
The sectors of the publishing industry in which the Company is engaged are highly competitive. The principal competitive criteria for the
publishing industry are believed to be product quality, suitability of format and subject matter, author reputation, price, timely availability of
both new titles and revisions of existing texts, online availability of journal and other published information and, for textbooks and certain trade
books, timely delivery of products to retail outlets and consumers. Recent years have seen a consolidation trend within the publishing industry,
including several publishing companies having been acquired by larger publishers and other companies.
Based upon currently available industry statistics, the Company believes that of books published and sold in the United States, it accounts for
approximately 3% of the total sales of such university and college textbooks, and approximately 3% of the total sales of such professional
books.
The Company knows of no reliable industry statistics which would enable it to determine its share of the various foreign markets in which it
operates. The Company believes that the percentage of its total book publishing sales in markets outside the United States is higher than that of
most of the United States publishers. The Company also believes it is in the top rank of publishers of scientific and technical journals
worldwide, as well as the leading commercial chemistry publisher at the research level, and one of the four largest publishers of university and
college textbooks for the "hardside" disciplines, i.e. engineering, sciences and mathematics.
Employees
As of April 30, 1999, the Company employed approximately 2,100 persons on a full-time basis worldwide.
Financial Information About Industry Segments
The note entitled "Segment Information" of the Notes to Consolidated Financial Statements listed in the attached index is incorporated herein
by reference.
Financial Information about Foreign and
Domestic Operations and Export Sales
The note entitled "Segment Information" of the Notes to Consolidated Financial Statements listed in the attached index is incorporated herein
by reference.
Executive Officers
Set forth below as of April 30, 1999 are the names and ages of all executive officers of the Company, the period during which they have been
officers, and the offices presently held by each of them.
NAME AND AGE OFFICER SINCE PRESENT OFFICE
--------------------------------------------------------------------------------
Bradford Wiley II 1993 Chairman of the Board since January 1993
58 and a Director
William J. Pesce 1989 President and Chief Executive Officer
48 and a Director since May 1, 1998, (previously
Chief Operating Officer; Executive Vice
President, Educational and International
Group; Senior Vice President, Educational and
International Group; and Senior Vice
President, Educational Publishing)
Stephen A. Kippur 1986 Executive Vice President and President,
52 Professional and Trade Publishing Division
since July 1998 (previously Executive Vice
President and Group President, PRT; Senior
Vice President, Professional, Reference &
Trade Publishing Group)
Richard S. Rudick 1978 Senior Vice President, General Counsel since
60 June 1989
Robert D. Wilder 1986 Executive Vice President and Chief Financial
50 and Operations Officer since June 1996
(previously Senior Vice President, Chief
Financial Officer)
William Arlington 1990 Senior Vice President, Human Resources since
50 June 1996 (previously Vice President,
Human Resources)
Peter W. Clifford 1989 Senior Vice President, Finance, Corporate
53 Controller and Chief Accounting Officer
since June 1996 (previously Vice President,
Finance and Controller)
Deborah E. Wiley 1982 Senior Vice President, Corporate
53 Communications since June 1996 (previously
Vice President and Director of Corporate
Communications, and a Director of the Company
until September 1998.)
Timothy B. King 1996 Senior Vice President, Planning and
59 Development since June 1996 (previously Vice
President, Planning and Development)
Each of the officers listed above will serve until the next organizational meeting of the Board of Directors of the Company and until each of the
respective successors is duly elected and qualified. Deborah E. Wiley is the sister of Bradford Wiley II. There is no other family relationship
among any of the aforementioned individuals.
Item 2. Properties
The Company's publishing businesses occupy office, warehouse, and distribution centers in various parts of the world, as listed below
(excluding those locations with less than 10,000 square feet of floor area, none of which is considered material property).
APPROX. LEASE
LOCATION PURPOSE SQ. FT. EXPIRATION DATE
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LEASED-DOMESTIC
New York Executive and 230,000 2003
Editorial Offices
New Jersey Distribution 170,000 2003
Center and Office
New Jersey Warehouse 132,000 2002
OWNED-FOREIGN
Germany Office and Warehouse 66,000
LEASED-FOREIGN
Australia Office 16,000 2002
Warehouse 26,000 2000
Canada Office 14,000 2001
Warehouse 41,000 2001
England Office 48,000 2009
Warehouse 82,000 2012
Germany Office 9,000 2004
Singapore Office and Warehouse 45,000 2002
All of the buildings and the equipment owned or leased are believed to be in good condition and are generally fully utilized. The Company
considers its facilities overall to be adequate for its present and near-term anticipated needs.
Item 3. Legal Proceedings
The Company is involved in routine litigation in the ordinary course of its business. In the opinion of management, the ultimate resolution of
all pending litigation will not have a material effect upon the financial condition or results of operations of the Company.
Item 4. Submission of Matters to a
Vote of Security Holders
No matters were submitted to the Company's security holders during the last quarter of the fiscal year ended April 30, 1999.
Item 5. Market for the Company's Common
Equity and Related Stockholder Matters
PART II
The Quarterly Share Prices, Dividends and Related Stockholder Matters listed in the attached index are incorporated herein by reference.
Item 6. Selected Financial Data
The Selected Financial Data listed in the attached index is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations listed in the attached index is incorporated herein by
reference.
Item 7A. Quantitative And Qualitative Disclosures About Market Risk
The information appearing under the caption "Market Risk" in Management's Discussion and Analysis of Financial Condition and Results of
Operations listed in the attached index is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data listed in the attached index are incorporated herein by reference.
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
None.
Item 10. Directors and Executive Officers
PART III
The information regarding the Board of Directors on pages 4 to 11 of the 1999 Proxy Statement is incorporated herein by reference, and
information regarding Executive Officers appears in Part I of this report.
Item 11. Executive Compensation
The information on pages 10 to 16 of the 1999 Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain
Beneficial Owners and Management
The information on pages 2, 3, 8, and 9 of the 1999 Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules
PART IV
(1) List of Financial Statements filed. The financial statements listed in the attached index are filed as part of this Report.
(2) List of Financial Statement Schedules filed. The financial statement schedules listed in the attached index are filed as part of this Report.
(b) Reports on Form 8-K. No reports on form 8-K were filed during the quarter ended April 30, 1999.
(c) Exhibits
2.1 Amendment No. 1 to the Asset Purchase Agreement dated as of April 15, 1999 between the Company and Pearson Inc. (incorporated by
reference to the Company's Report on Form 8-K dated as of May 10, 1999).
2.2 Asset Purchase Agreement dated as of April 15, 1999 between the Company and Pearson Inc. (incorporated by reference to the Company's
Report on Form 8-K dated as of May 10, 1999).
2.3 Stock Purchase Agreement dated as of May 21, 1999 between the Company and Pearson Education, Inc. (incorporated by reference to the
Company's Report on Form 8-K dated as of May 21, 1999).
2.4 Purchase and Assignment Agreement dated May 7, 1996 among the Company and VCH Publishing Limited Partnership (incorporated by
reference to the Company's Report on Form 8-K dated as of June 13, 1996).
2.5 Purchase and Assignment Agreement dated May 7, 1996 among the Company and Gesellschaft Deutscher Chemiker e.V. and Deutsche
Pharmazeutische Gesellschaft e.V. (incorporated by reference to the Company's Report on Form 8-K dated as of June 13, 1996).
3.1 Restated Certificate of Incorporation (incorporated by reference to the Company's Report on Form 10-K for the year ended April 30, 1992).
3.2 Certificate of Amendment of the Certificate of Incorporation dated October 13, 1995 (incorporated by reference to the Company's Report
on Form 10-K for the year ended April 30, 1997).
3.3 Certificate of Amendment of the Certificate of Incorporation dated as of September 1998 (incorporated by reference to the Company's
Report on Form 10-Q for the quarterly period ended October 31, 1998).
3.4 By-Laws as Amended and Restated dated as of September 1998 (incorporated by reference to the Company's Report on Form 10-Q for the
quarterly period ended October 31, 1998).
4.1 Form of agreement between the Company and certain employees restricting transfer of Class B Common Stock (incorporated by reference
to the Company's Report on Form 10-Q for the quarterly period ended January 31, 1986).
10.1 Credit agreement dated as of November 15, 1996 among the Company, the
Banks from time to time parties hereto, and Morgan Guaranty Trust
Company of New York, as Agent (incorporated by reference to the
Company's report on Form 10-Q for the quarterly period ended October
31, 1996).
10.2 1991 Key Employee Stock Plan (incorporated by reference to the
Company's Definitive Proxy Statement dated August 8, 1991).
10.3 Amendment to 1991 Key Employee Stock plan dated as of September 19,
1996 (incorporated by reference to the Company's Definitive Proxy
Statement dated August 9, 1996).
10.4 1987 Incentive Stock Option and Performance Stock Plan (incorporated
by reference to the Company's Definitive Proxy Statements dated August
10, 1987).
10.5 Amendment to 1987 Incentive Stock Option and Performance Stock Plan
dated as of March 2, 1989 (incorporated by reference to the Company's
Report on Form 10-K for the year ended April 30, 1989).
10.6 1990 Director Stock Plan as Amended and Restated as of June 22, 1995
(incorporated by reference to the Company's Report on Form 10-K for
the year ended April 30, 1997).
10.7 1989 Supplemental Executive Retirement Plan (incorporated by reference
to the Company's Report on Form 10-K for the year ended April 30,
1989).
10.8 Agreement of Lease dated as of May 16, 1985 between Fisher 40th & 3rd
Company and Hawaiian Realty, Inc., Landlord, and the Company, Tenant
(incorporated by reference to the Company's Report on Form 10-K for
the year ended April 30, 1985).
10.9 Form of the Fiscal Year 1997 Executive Long-Term Incentive Plan
(incorporated by reference to the Company's Report on Form 10-K for
the year ended April 30, 1996).
10.10 Form of the Fiscal Year 1998 Executive Long-Term Incentive Plan
(incorporated by reference to the Company's Report on Form 10-K for
the year ended April 30, 1998).
10.11 Form of the Fiscal Year 1999 Executive Long-Term Incentive Plan.
10.12 Form of the Fiscal Year 1999 Executive Annual Incentive Plan.
10.13 Senior Executive Employment Agreement dated as of January 8, 1998
between William J. Pesce and the Company (incorporated by reference to
the Company's Report on Form 10-K for the year ended April 30, 1998).
10.14 Senior Executive Employment Agreement amended as of March 29, 1995
between Charles R. Ellis and the Company (incorporated by reference to
the Company's Report on Form 10-K for the year ended April 30, 1995).
10.15 Restricted Stock Award Agreement dated as of June 23, 1994 between
Charles R. Ellis and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.16 Senior Executive Employment Agreement dated as of July 1, 1994 between
Stephen A. Kippur and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.17 Amendment No. 1 to Stephen A. Kippur's Senior Executive Employment
Agreement dated as of July 1, 1994 (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.18 Restricted Stock Award Agreement dated as of June 23, 1994 between
Stephen A. Kippur and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.19 Restricted Stock Award Agreement dated as of June 23, 1994 between
William J. Pesce and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.20 Senior Executive Employment Agreement dated as of July 1, 1994 between
Robert D. Wilder and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.21 Amendment No. 1 to Robert D. Wilder's Senior Executive Employment
Agreement dated as of July 1, 1994 (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.22 Restricted Stock Award Agreement dated as of June 23, 1994 between
Robert D. Wilder and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.23 Employment agreement letter dated as of January 16, 1997 between
Richard S. Rudick and the Company (Incorporated by reference to the
Company's Report on Form 10-K for the year ended April 30, 1997).
22 List of Subsidiaries of the Company.
23 Consent of Independent Public Accountants (included in this report as
listed in the attached index).
27 Financial Data Schedule.
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and information appearing on the
pages indicated are filed as part of this Report:
Page(s)
Report of Independent Public Accountants and
Consent of Independent Public Accountants...............................16
Consolidated Statements of Financial Position
as of April 30, 1999 and 1998...........................................17
Consolidated Statements of Income and Retained Earnings
for the years ended April 30, 1999, 1998 and 1997.......................18
Consolidated Statements of Comprehensive Income
for the years ended April 30, 1999, 1998 and 1997.......................18
Consolidated Statements of Cash Flows for the
years ended April 30, 1999, 1998 and 1997...............................19
Notes to Consolidated Financial Statements.........................20 - 30
Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................31 - 34
Results by Quarter (Unaudited)..........................................35
Quarterly Share Prices, Dividends and Related Stockholder Matters.......35
Selected Financial Data.................................................36
Schedule II - Valuation and Qualifying Accounts.........................37
Other schedules are omitted because of absence of conditions under which they apply or because the information required is included in the
Notes to Consolidated Financial Statements.
To the Board of Directors and the Shareholders of John Wiley & Sons, Inc.:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited the accompanying consolidated statements of financial position of John Wiley & Sons, Inc. (a New York corporation), and
subsidiaries as of April 30, 1999 and 1998, and the related consolidated statements of income and retained earnings and cash flows for each of
the three years in the period ended April 30, 1999. These financial statements and the schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits.
We conducted our audits in accordance with 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 financial statements referred to above present fairly, in all material respects, the financial position of John Wiley & Sons,
Inc., and subsidiaries as of April 30, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the
period ended April 30, 1999 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the Index
to Consolidated Financial Statements and Schedules is presented for purposes of complying with the Securities and Exchange Commission's
rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
June 11, 1999
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by reference of our report included in the John Wiley & Sons, Inc.
Form 10-K for the year ended April 30, 1999, into the Company's previously filed Registration Statement File Nos. 33-60268, 2-65296, 2-
95104, 33-29372 and 33-62605.
ARTHUR ANDERSEN LLP
New York, New York
June 24, 1999
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
John Wiley & Sons, Inc. an April 30
Dollars in thousands 1999 1998
----------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $ 148,970 $ 127,405
Accounts receivable 53,785 56,147
Inventories 40,003 44,912
Deferred income tax benefits 3,865 456
Prepaid expenses 9,347 8,690
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Total Current Assets 255,970 237,610
-----------------------------------------------------------------------
Product Development Assets 38,099 36,039
Property and Equipment 34,726 34,310
Intangible Assets 174,911 172,798
Deferred Income Tax Benefits 13,001 15,593
Other Assets 11,845 10,564
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Total Assets $ 528,552 $ 506,914
-----------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts and royalties payable $ 34,708 $ 36,854
Deferred subscription revenues 110,143 99,225
Accrued income taxes 3,356 1,174
Other accrued liabilities 46,893 41,100
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Total Current Liabilities 195,100 178,353
-----------------------------------------------------------------------
Long-Term Debt 125,000 125,000
Other Long-Term Liabilities 30,271 26,663
Deferred Income Taxes 15,969 16,147
Shareholders' Equity
Common stock issued
Class A (67,548,260 and 67,106,196 shares) 67,548 67,106
Class B (15,641,752 and 15,868,728 shares) 15,642 15,869
Additional paid-in capital 13,045 5,624
Retained earnings 154,759 122,906
Accumulated other comprehensive income (526) (540)
Unearned deferred compensation (3,114) (2,715)
-------------------------------------------------------------------------
247,354 208,250
Less Treasury shares at cost
(Class A - 17,323,920 and 15,498,412;
Class B - 3,484,096 and 3,484,096) (85,142) (47,499)
-------------------------------------------------------------------------
Total Shareholders' Equity 162,212 160,751
-------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $528,552 $506,914
=========================================================================
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
John Wiley & Sons, Inc. and Subsidiaries For the years ended April 30
Dollars in thousands except per share data 1999 1998 1997
---------------------------------------------------------------------------
Revenues $ 508,435 $ 467,081 $ 431,974
Costs and Expenses
Cost of sales 173,983 164,169 155,245
Operating and administrative expenses 261,353 250,008 233,771
Amortization of intangibles 9,445 12,040 8,161
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Total Costs and Expenses 444,781 426,217 397,177
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Gain on Sale of Publishing Assets -- 21,292 --
---------------------------------------------------------------------------
Operating Income 63,654 62,156 34,797
Interest Income and Other 5,713 3,863 2,281
Interest Expense (7,322) (7,933) (6,225)
---------------------------------------------------------------------------
Interest Income (Expense)-Net (1,609) (4,070) (3,944)
---------------------------------------------------------------------------
Income Before Taxes 62,045 58,086 30,853
Provision for Income Taxes 22,336 21,498 10,513
---------------------------------------------------------------------------
Net Income 39,709 36,588 20,340
---------------------------------------------------------------------------
Retained Earnings at Beginning of Year 122,906 93,337 106,716
Retroactive Effect of 2-for-1 Stock Splits -- -- (27,486)
Cash Dividends
Class A Common
($.1275, $.1125 and $.1000 per share) (6,479) (5,766) (5,116)
Class B Common
($.1125, $.1000 and $ .0875 per share) (1,377) (1,253) (1,117)
---------------------------------------------------------------------------
Total Dividends (7,856) (7,019) (6,233)
---------------------------------------------------------------------------
Retained Earnings at End of Year $ 154,759 $ 122,906 $ 93,337
===========================================================================
Income Per Share
Diluted $ 0.60 $ 0.55 $ 0.31
Basic $ 0.63 $ 0.58 $ 0.32
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
John Wiley & Sons, Inc. and Subsidiaries For the years ended April 30
Dollars in thousands 1999 1998 1997
-------------------------------------------------------------------------------
Net Income $ 39,709 $ 36,588 $ 20,340
Other Comprehensive Income
Foreign currency translation adjustments 14 (646) 3,192
-------------------------------------------------------------------------------
Comprehensive Income $ 39,723 $ 35,942 $ 23,532
===============================================================================
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
John Wiley & Sons, Inc. and Subsidiaries For the years ended April 30
Dollars in thousands 1999 1998 1997
-------------------------------------------------------------------------------
Operating Activities
Net Income $ 39,709 $ 36,588 $ 20,340
Noncash Items
Amortization of intangibles 9,445 12,040 8,161
Amortization of composition costs 21,322 20,213 17,763
Depreciation of property and equipment 9,788 9,188 8,340
Reserves for returns, doubtful accounts,
and obsolescence 5,406 10,181 11,861
Deferred income taxes (1,056) 9,234 3,243
Gain on sale of publishing assets -- (21,292) --
Other 10,822 12,207 7,300
Changes in Operating Assets and Liabilities
Decrease (increase) in receivables 1,151 (2,872) (178)
Decrease in inventories 3,032 4,426 1,791
Increase (decrease) in
accounts and royalties payable (1,917) 6,000 (12,109)
Increase in deferred subscription
revenues 10,413 5,983 7,769
Net change in other operating
assets and liabilities 9,783 2,162 (10,372)
--------------------------------------------------------------------------------
Cash Provided by Operating Activities 117,898 104,058 63,909
--------------------------------------------------------------------------------
Investing Activities
Additions to product development assets (31,998) (30,220) (25,466)
Additions to property and equipment (10,631) (11,935) (8,868)
Proceeds from sale of publishing assets -- 26,500 --
Acquisition of publishing assets (10,429) (30,491) (103,980)
--------------------------------------------------------------------------------
Cash Used for Investing Activities (53,058) (46,146) (138,314)
--------------------------------------------------------------------------------
Financing Activities
Purchase of treasury shares (38,549) (4,281) (10,506)
Additions to long-term debt -- -- 125,000
Repayment of long-term debt -- -- (10,542)
Net repayments of short-term debt -- (156) (1,270)
Cash dividends (7,856) (7,019) (6,233)
Proceeds from issuance of
stock on option exercises and other 5,159 2,288 1,249
--------------------------------------------------------------------------------
Cash Provided by (Used for)
Financing Activities (41,246) (9,168) 97,698
--------------------------------------------------------------------------------
Effects of exchange rate changes
on cash (2,029) (455) 539
--------------------------------------------------------------------------------
Cash and Cash Equivalents
Increase for year 21,565 48,289 23,832
Balance at beginning of year 127,405 79,116 55,284
--------------------------------------------------------------------------------
Balance at end of year $ 148,970 $ 127,405 $ 79,116
================================================================================
Cash Paid During the Year for
Interest $ 7,886 $ 8,042 $ 5,143
Income taxes $ 17,201 $ 12,409 $ 7,995
The accompanying notes are an integral part of the consolidated financial statements.
Notes to Consolidated Financial Statements Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the accounts of John Wiley & Sons, Inc., and its majority-owned
subsidiaries (the "Company"). All significant intercompany items have been eliminated.
Common Stock Splits: During fiscal 1999, the Company declared two 2-for-1 stock splits for both its Class A and Class B common stock. The
first split was in October 1998, and the second split was distributed in May 1999. All shares and per share amounts in the accompanying
consolidated financial statements have been restated to reflect the effects of both stock splits.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
Subscription Revenues: Subscription revenues are generally collected in advance. These revenues are deferred and recognized as earned when
the related issue is shipped or made available on-line to the subscriber.
Sales Returns and Doubtful Accounts: The Company provides an estimated allowance for doubtful accounts and for future returns on sales
made during the year. The allowance for doubtful accounts and returns (estimated returns net of inventory and royalty costs) is shown as a
reduction of receivables in the accompanying consolidated balance sheets and amounted to $41.8 and $41.6 million at April 30, 1999 and 1998,
respectively.
Depreciation and Amortization: Buildings, leasehold improvements, and capital leases are amortized over the lesser of the estimated useful
lives of the assets up to 40 years, or the duration of the various leases, using the straight-line method. Furniture and equipment is depreciated
principally on the straight-line method over estimated useful lives ranging from 3 to 10 years. Composition costs representing the costs
incurred to bring an edited manuscript to publication including typesetting, proofreading, design and illustration, etc., are capitalized and
amortized over estimated useful lives representative of product revenue patterns, generally three years.
Intangible Assets: Intangible assets consist of acquired publication rights, which are principally amortized over periods ranging from 3 to 30
years based on the projected revenues of rights acquired; noncompete agreements; which are amortized over the term of such agreements, and
goodwill and other intangibles, which are amortized on a straight - line basis over periods ranging from 5 to 40 years. If facts and
circumstances indicate that long-lived assets and/or intangible assets may be permanently impaired, it is the Company's policy to assess the
carrying value and recoverability of such assets based on an analysis of undiscounted future cash flows of the related operations. Any resulting
reduction in carrying value based on the estimated fair value would be charged to operating results.
Derivative Financial Instruments - Foreign Exchange Contracts: The Company, from time to time, enters into forward exchange contracts as a
hedge against its overseas subsidiaries' foreign currency asset, liability, commitment and anticipated transaction exposures. To qualify as a
hedge, the financial instrument must be designated as a hedge against identified items which have a high correlation with the financial
instrument. The Company does not use financial instruments for trading or speculative purposes. Realized and unrealized gains and losses are
deferred and taken into income over the lives of the hedged items if permitted by generally accepted accounting principles; otherwise the
contracts are marked to market with any gains and losses reflected in operating expenses. There were no open foreign exchange contracts and
no gains or losses were deferred at April 30, 1999 or 1998. Included in operating and administrative expenses were net foreign exchange gains
(losses) of approximately $(.1), $(.1) and $.7 million in 1999, 1998, and 1997, respectively.
Stock-Based Compensation: Stock options and restricted stock grants are accounted for in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, the Company recognizes no compensation expense for fixed
stock option grants since the exercise price is equal to the fair value of the shares at date of grant. For restricted stock grants, compensation cost
is recognized generally ratably over the vesting period based on the fair value of shares.
Cash Equivalents: Cash equivalents consist primarily of highly liquid investments with a maturity of three months or less and are stated at cost
plus accrued interest, which approximates market value.
New Accounting Standards: In fiscal 1999, the Company adopted the following Statements of Financial Accounting Standards ("SFAS"):
SFAS No. 130, "Reporting Comprehensive Income," which requires disclosure of comprehensive income and its components, as defined;
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 requires additional disclosures relating to a company's pension and postretirement benefit plans. The adoption
of these new accounting standards require additional disclosures and did not have a material effect on the consolidated financial results or
financial position of the Company.
In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use," which requires that certain costs incurred in developing or obtaining internal use
software be capitalized and amortized over the useful life of the software. The Company will be required to adopt SOP 98-1 beginning in fiscal
year 2000 and is currently evaluating the effect this will have on its consolidated financial statements. Currently, the Company expenses most
of these costs as incurred. The Financial Accounting Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities," which specifies the accounting and disclosure requirements for such instruments, and is effective for the Company's fiscal
year beginning on May 1, 2001. It is anticipated that the adoption of this new accounting standard will not have a material effect on the
consolidated financial statements of the Company.
Income Per Share
A reconciliation of the shares used in the computation of income per-share follows:
In thousands 1999 1998 1997
--------------------------------------------------------------------------------
Weighted average shares outstanding 63,738 63,876 64,117
Less:Unearned deferred compensation shares (781) (782) (838)
--------------------------------------------------------------------------------
Shares used for basic income per share 62,957 63,094 63,279
Dilutive effect of stock options and other
stock awards 3,556 2,858 2,208
--------------------------------------------------------------------------------
Shares used for diluted income per share 66,513 65,952 65,487
--------------------------------------------------------------------------------
Acquisitions
In fiscal 1999, the Company acquired various publishing properties for approximately $10.4 million in cash including the Huthig Publishing
Group's scientific book and journals program; the German Materials Science Society book program; Chronimed's publishing program in such
areas as general health, cooking, nutrition, diabetes and other chronic illnesses; Hewin International, a publisher of technological-commercial
reports in the areas of agrochemicals, biochemistry, oleochemicals, and petrochemicals; and the remaining shares of Verlag Helvetica Chemica
Acta, a scientific publisher of chemistry books and journals. The excess of cost over the fair value of the tangible assets acquired amounted to
approximately $11.4 million, relating primarily to acquired publishing rights that are being amortized on a straight-line basis over periods
ranging from 5 to 30 years.
In fiscal 1998, the Company acquired the publishing assets of Van Nostrand Reinhold (VNR) for approximately $28 million in cash. VNR
publishes in such areas as architecture / design, environmental / industrial sciences, culinary arts / hospitality, and business technology. The
excess of cost over the fair value of the tangible assets acquired amounted to approximately $23 million, relating primarily to acquired
publication rights that are being amortized on a straight-line basis over an estimated average life of 15 years. In addition, during the year, the
Company acquired various newsletters, books, and journals for purchase prices aggregating approximately $2 million, which primarily relates
to acquired publication rights that are being amortized over periods ranging from 15 to 30 years.
In fiscal 1997, the Company acquired 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. VCH is a leading scientific, technical, and professional
publisher of journals and books in such disciplines as chemistry, architecture, and civil engineering. The excess of cost over the fair value of
the tangible assets acquired amounted to approximately $112 million relating to acquired publication rights, which are being amortized on a
straight-line basis over an average life of 30 years. In addition, during the year, the Company acquired various newsletters including the
publishing assets of Technical Insights, Inc., a publisher of print and electronic newsletters in various areas of science and technology, for
purchase prices aggregating $5 million, which primarily relates to goodwill and is being amortized on a straight-line basis over 10 years.
All acquisitions have been accounted for by the purchase method, and the accompanying financial statements include their results of operations
since their respective dates of acquisition.
Subsequent Events
Subsequent to the fiscal 1999 year-end, the Company acquired certain publishing assets from Pearson including college text books and
instructional packages in biology/anatomy and physiology, engineering, mathematics, economics / finance and teacher education, for
approximately $58 million in cash. In addition, the Company acquired the Jossey-Bass publishing company from Pearson for approximately
$82 million in cash. Jossey-Bass publishes books and journals for professionals and executives primarily in the areas of business, psychology,
and education/health management.
Divested Operations
In fiscal 1998, the Company sold its domestic law publishing program for $26.5 million, resulting in a gain of $21.3 million. Offsetting this
gain are special asset write-downs and other items amounting to approximately $4.4 million, including write-downs 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. The net effect of these unusual items amounted to a pretax gain of
$16.9 million, or $9.7 million after taxes, equal to $.14 per diluted share, or $.15 per basic share.
Inventories
Inventories at April 30 were as follows:
Dollars in thousands 1999 1998
-----------------------------------------------------------
Finished Goods $ 34,485 $ 38,039
Work-in-Process 5,325 6,864
Paper, Cloth, and Other 2,007 2,084
-----------------------------------------------------------
41,817 46,987
LIFO Reserve (1,814) (2,075)
-----------------------------------------------------------
Total $ 40,003 $ 44,912
-----------------------------------------------------------
Domestic book inventories aggregating $27.4 and $29.6 million at April 30, 1999 and 1998, respectively, are stated at cost or market,
whichever is lower, using the last-in, first-out method. All other inventories are stated at cost or market, whichever is lower, using the first-in,
first-out method.
Product Development Assets
Product development assets consisted of the following at April 30:
Dollars in thousands 1999 1998
-----------------------------------------------------------
Composition Costs $27,110 $25,468
Royalty Advances 10,989 10,571
-----------------------------------------------------------
Total $38,099 $ 36,039
-----------------------------------------------------------
Composition costs are net of accumulated amortization of $44,107 in 1999 and $40,108 in 1998.
Property and Equipment
Property and equipment consisted of the following at April 30:
Dollars in thousands 1999 1998
-------------------------------------------------------------
Land and Land Improvements $ 1,542 $ 1,542
Buildings and Leasehold Improvements 19,891 17,043
Furniture and Equipment 72,481 64,570
-------------------------------------------------------------
93,914 83,155
Accumulated Depreciation (59,188) (48,845)
-------------------------------------------------------------
Total $ 34,726 $ 34,310
-------------------------------------------------------------
Intangible Assets
Intangible assets consisted of the following at April 30:
Dollars in thousands 1999 1998
----------------------------------------------------------
Acquired Publication Rights $164,705 $149,977
Goodwill and Other Intangibles 51,870 52,061
Non-compete Agreements 1,516 1,316
----------------------------------------------------------
218,091 203,354
Accumulated Amortization (43,180) (30,556)
----------------------------------------------------------
Total $174,911 $172,798
----------------------------------------------------------
Other Accrued Liabilities
Included in other accrued liabilities was accrued compensation of approximately $21.3 million and $20.1 million for 1999 and 1998,
respectively.
Income Taxes
The provision for income taxes was as follows:
Dollars in thousands 1999 1998 1997
-------------------------------------------------------------
Currently Payable
Federal $ 16,419 $6,781 $ 945
Foreign 4,663 4,332 5,295
State and local 2,249 1,166 1,026
-------------------------------------------------------------
Total Current Provision 23,331 12,279 7,266
-------------------------------------------------------------
Deferred Provision
Federal (4,060) 6,211 2,496
Foreign 1,922 1,629 834
State and local 1,143 1,379 (83)
-------------------------------------------------------------
Total Deferred Provision (995) 9,219 3,247
-------------------------------------------------------------
Total Provision $ 22,336 $21,498 $10,513
-------------------------------------------------------------
The Company's effective income tax rate as a percent of pretax income differed from the U.S. federal statutory rate as shown below:
1999 1998 1997
----------------------------------------------------------------
U.S. Federal Statutory Rate 35.0% 35.0% 35.0%
State and Local Income Taxes
Net of Federal Income Tax Benefit 3.6 2.8 2.0
Tax Benefit Derived From FSC Income (2.5) (2.7) (4.8)
Foreign Source Earnings Taxed at
Other Than U.S. Statutory Rate .1 .6 .3
Nondeductible Amortization of
Intangibles .6 .7 .9
Other-Net (.8) .6 .7
----------------------------------------------------------------
Effective Income Tax Rate 36.0% 37.0% 34.1%
----------------------------------------------------------------
Deferred taxes result from timing differences in the recognition of revenue and expense for tax and financial reporting purposes. The
components of the provision for deferred taxes were as follows:
Dollars in thousands 1999 1998 1997
---------------------------------------------------------------
Depreciation and Amortization $(2,356) $(2,898) $(691)
Accrued Expenses 2,500 (275) 264
Provision for Sales Returns and
Doubtful Accounts (3,414) 5,699 (959)
Inventory 5 1,331 112
Retirement Benefits (1,454) (23) (87)
Long-Term Liabilities (1,175) 2,541 1,562
Alternative Minimum Tax Credit and
Other Carryforwards 288 236 653
Net Operating Loss Carryforwards 4,500 1,631 (1,150)
Valuation Allowance 245 826 2,432
Other-Net (134) 151 1,111
---------------------------------------------------------------
Total Deferred Provision $ (995) $ 9,219 $3,247
---------------------------------------------------------------
The significant components of deferred tax assets and liabilities were as follows:
1999 1998
--------------------------------------------------
Long- Long-
Dollars in thousands Current Term Current Term
------------------------------------------------------------------------------
Deferred Tax Assets
Net Operating Loss
Carryforwards $ -- $ 21,631 $ -- $ 26,131
Reserve for Sales Returns
and Doubtful Accounts 5,608 -- 2,194
Costs Capitalized for Taxes -- 2,900 -- 3,054
Retirement and Post-
Employment Benefits -- 4,924 -- 3,470
Amortization of Intangibles -- 4,018 -- 2,513
-------------------------------------------------------------------------------
Total Deferred Tax Assets 5,608 33,473 2,194 35,168
Less: Valuation Allowance -- (12,798) -- (12,553)
-------------------------------------------------------------------------------
Net Deferred Tax Assets 5,608 20,675 2,194 22,615
-------------------------------------------------------------------------------
Deferred Tax Liabilities
Inventory (1,743) -- (1,738) --
Depreciation and Amortization -- (3,454) -- (4,305)
Accrued Expenses -- (9,502) -- (7,002)
Long-Term Liabilities -- (10,687) -- (11,862)
-------------------------------------------------------------------------------
Total Deferred Tax Liabilities (1,743) (23,643) (1,738) (23,169)
-------------------------------------------------------------------------------
Net Deferred Tax Assets (Liability) $3,865 $(2,968) $456 $(554)
Approximately $9 million of the valuation allowance relates to net deferred tax assets recorded in connection with the VCH acquisition. Any
amounts realized in future years will reduce the intangible assets recorded at date of acquisition.
Current taxes payable for 1999 have been reduced by $4.6 million relating to the utilization of net operating loss carryforwards. At April 30,
1999, the Company had aggregate unused net operating loss carryforwards of approximately $50 million, which may be available to reduce
future taxable income primarily in foreign tax jurisdictions and generally have no expiration date.
In general, the Company plans to continue to invest the undistributed earnings of its foreign subsidiaries in those businesses, and therefore no
provision is made for taxes that would be payable if such earnings were distributed. At April 30, 1999, the undistributed earnings of foreign
subsidiaries approximated $28 million and, if remitted currently, would result in additional taxes approximating $6 million.
Notes Payable and Debt
Long-term debt consisted of the following at April 30:
Dollars in thousands 1999 1998
----------------------------------------------------------
Term Loan Notes Payable Due
October 2000 Through 2003 $ 125,000 $125,000
The weighted average interest rate on the term loan was 5.85% and 6.21% during 1999 and 1998, respectively; and 5.25% and 6.19% at April
30, 1999 and 1998, respectively.
The Company has a $175 million credit agreement expiring on October 31, 2003, with eight banks. The credit agreement consists of a term
loan of $125 million and a $50 million revolving credit facility. The Company has the option of borrowing at the following floating interest
rates: (i) Eurodollars at a rate based on the London Interbank Offered Rate (LIBOR) plus an applicable margin ranging from .15% to .30%
depending on certain coverage ratios, or (ii) dollars at a rate based on the current certificate of deposit rate, plus an applicable margin ranging
from .275% to .425% depending on certain coverage ratios, or
(iii) dollars at the higher of (a) the Federal Funds Rate plus .5% and (b) the banks' prime rate. In addition, the Company pays a facility fee
ranging from .10% to .20 % on the total facility depending on certain coverage ratios.
In the event of a change of control, as defined, the banks have the option to terminate the agreement and require repayment of any amounts
outstanding. Amounts outstanding under the term loan have mandatory repayments as follows:
Dollars in thousands 2000 2001 2002 2003 2004
$-- $30,000 $30,000 $30,000 $35,000
The credit agreement contains certain restrictive covenants related to minimum net worth, funded debt levels, an interest coverage ratio, and
restricted payments, including a cumulative limitation for dividends paid and share repurchases. Under the most restrictive covenant,
approximately $58 million was available for such restricted payments as of April 30, 1999.
The Company and its subsidiaries have other short-term lines of credit aggregating $50 million at various interest rates. Information relating to
all short-term lines of credit follows:
Dollars in thousands 1999 1998 1997
----------------------------------------------------------------
End of Year
Amount outstanding $-- $-- $172
Weighted average interest rate -- 10.4%
During the Year
Maximum amount outstanding $-- $28,794 $26,253
Average amount outstanding $-- $742 11,368
Weighted average interest rate -- 8.5% 6.0%
----------------------------------------------------------------
Based on estimates of interest rates currently available to the Company for loans with similar terms and maturities, the fair value of notes
payable and long-term debt approximates the carrying value.
Commitments and Contingencies
The following schedule shows the composition of rent expense for operating leases:
Dollars in thousands 1999 1998 1997
---------------------------------------------------------------
Minimum Rental $13,935 $13,137 $13,654
Lease Escalation 2,248 2,250 2,188
Less: Sublease Rentals (60) (50) (19)
---------------------------------------------------------------
Total $16,123 $15,337 $15,823
---------------------------------------------------------------
Future minimum payments under operating leases aggregated $78.3 million at April 30, 1999. Annual payments under these leases are $17.7,
$17.4, $17.0, $16.0 and $7.5 million for fiscal years 2000 through 2004, respectively.
The Company is involved in routine litigation in the ordinary course of its business. In the opinion of management, the ultimate resolution of
all pending litigation will not have a material effect upon the financial condition or results of operations of the Company.
Segment Information
The Company is a global publisher of print and electronic products, specializing in scientific, technical and medical books and journals;
professional and consumer books and subscription services; and text books and educational materials for colleges and universities. The
Company has publishing, marketing and distribution centers in the United States, Canada, Europe, Asia and Australia, which service
indigenous publications, as well as Company-wide publications. The Company's reportable segments are based on the management reporting
structure used to evaluate performance. Segment information was as follows:
Dollars In thousands 1999
-------------------------------------------------------------------------------------------------------------------------
Eliminations
European Other & Corporate
Domestic Segments Segment Segments Items Total
----------------------------------------------------------------------- -----------------------------------------------
Scientific,
Technical, Professional/
and Medical Trade College
-------------------------------------------------------------------------------------------------------------------------
Revenues
-External Customers $ 131,132 $ 104,338 $ 84,326 $ 135,008 $ 53,631 $ -- $ 508,435
-Intersegment Sales 7,375 13,587 14,141 11,396 466 (46,965) --
-------------------------------------------------------------------------------------------------------------------------
-Total Revenues $ 138,507 $ 117,925 $ 98,467 $ 146,404 $ 54,097 $ (46,965) $ 508,435
Direct Contribution To Profit $ 59,325 $ 28,048 $ 22,232 $ 42,232 $ 8,846 -- $ 160,683
-------------------------------------------------------------------------------------------------------------------------
Shared Services & Admin. Costs (97,029)
-------------------------------------------------------------------------------------------------------------------------
Operating Income 63,654
Interest Expense-Net (1,609)
-------------------------------------------------------------------------------------------------------------------------
Income Before Taxes $ 62,045
-------------------------------------------------------------------------------------------------------------------------
Assets $ 62,250 $ 87,130 $ 24,107 $ 162,379 $ 17,919 $ 174,767 $ 528,552
Expenditures For Long-Lived Assets $ 7,826 $ 14,047 $ 6,686 $ 18,906 $ 2,444 $ 3,149 $ 53,058
Depreciation & Amortization $ 6,664 $ 9,288 $ 7,138 $ 13,061 $ 945 $ 3,459 $ 40,555
Dollars In thousands 1998
-------------------------------------------------------------------------------------------------------------------------
Eliminations
European Other & Corporate
Domestic Segments Segment Segments Items Total
----------------------------------------------------------------------- -----------------------------------------------
Scientific,
Technical, Professional/
and Medical Trade College
-------------------------------------------------------------------------------------------------------------------------
Revenues
-External Customers $ 123,080 $ 90,564 $ 76,317 $ 122,385 $ 54,735 $ -- $ 467,081
-Intersegment Sales 6,741 11,701 14,558 11,164 344 (44,508) --
------------------------------------------------------------------------------------------------------------------------
-Total Revenues $ 129,821 $ 102,265 $ 90,875 $ 133,549 $ 55,079 ($ 44,508) $ 467,081
------------------------------------------------------------------------------------------------------------------------
Direct Contribution To Profit $ 55,405 $ 19,881 $ 17,833 $ 37,185 $ 7,679 -- $ 137,983
------------------------------------------------------------------------------------------------------------------------
Shared Services & Admin. Costs (92,720)
Unusual Items 16,893
------------------------------------------------------------------------------------------------------------------------
Operating Income 62,156
Interest Expense-Net (4,070)
------------------------------------------------------------------------------------------------------------------------
Income Before Taxes $ 58,086
------------------------------------------------------------------------------------------------------------------------
Assets $ 62,103 $ 83,166 $ 32,625 $ 158,933 $ 17,626 $ 152,461 $ 506,914
Expenditures For Long-Lived Assets $ 12,231 $ 37,128 $ 7,823 $ 8,641 $ 1,068 $ 5,755 $ 72,646
Depreciation & Amortization $ 5,619 $ 9,152 $ 7,698 $ 11,628 $ 1,034 $ 3,035 $ 38,166
Dollars In thousands 1997
-------------------------------------------------------------------------------------------------------------------------
Eliminations
European Other & Corporate
Domestic Segments Segment Segments Items Total
----------------------------------------------------------------------- -----------------------------------------------
Scientific,
Technical, Professional/
and Medical Trade College
-------------------------------------------------------------------------------------------------------------------------
Revenues
-External Customers $ 111,873 $ 83,896 $ 70,144 $ 110,879 $ 55,182 $ -- $ 431,974
-Intersegment Sales 6,466 11,863 13,140 5,995 320 (37,784) --
-------------------------------------------------------------------------------------------------------------------------
-Total Revenues $ 118,339 $ 95,759 $ 83,284 $ 116,874 $ 55,502 ($ 37,784) $ 431,974
-------------------------------------------------------------------------------------------------------------------------
Direct Contribution To Profit $ 51,208 $ 13,408 $ 13,580 $ 32,929 $ 11,204 -- $ 122,329
-------------------------------------------------------------------------------------------------------------------------
Shared Services & Admin. Costs (87,532)
-------------------------------------------------------------------------------------------------------------------------
Operating Income 34,797
Interest Expense-Net (3,944)
-------------------------------------------------------------------------------------------------------------------------
Income Before Taxes $ 30,853
-------------------------------------------------------------------------------------------------------------------------
Assets $ 53,794 $ 70,147 $ 37,079 $ 165,997 $ 21,118 $ 109,809 $ 457,944
Expenditures For Long-Lived Assets $ 9,197 $ 13,356 $ 7,159 $ 105,045 $ 1,583 $ 1,974 $ 138,314
Depreciation & Amortization $ 4,159 $ 8,244 $ 8,233 $ 8,858 $ 989 $ 3,781 $ 34,264
Intersegment sales are generally made at a fixed discount from list price. Shared services and administrative costs include costs for such
services as information technology, distribution, occupancy, human resources, finance and administration. These costs are not allocated as they
support the Company's worldwide operations. Corporate assets primarily consist of cash and cash equivalents, deferred tax benefits, and certain
property and equipment. Unusual items amounting to $16,893 in 1998 relate to the gain on the sale of the domestic law publishing program, net
of a write-down of certain intangible assets and other items. Export sales from the United States to unaffiliated international customers
amounted to approximately $60.5, $56.5 and $51.4 million in 1999, 1998, and 1997, respectively. The pretax income for consolidated
international operations was approximately $17.3, $14.1, $16.5 million in 1999, 1998, and 1997, respectively.
Worldwide revenues for the Company's core product lines were as follows:
Dollars in thousands Revenues
--------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------
Scientific, Technical, and Medical $232,594 $217,331 $199,206
Professional/Trade 156,713 137,270 126,899
Educational 119,128 112,480 105,869
--------------------------------------------------------------------------------
Total $508,435 $467,081 $431,974
--------------------------------------------------------------------------------
Revenues from external customers and long-lived assets by geographic area were as follows:
Dollars in thousands Revenues Long-Lived Assets
--------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
--------------------------------------------------------------------------------
Domestic $278,783 $253,429 $229,990 $121,643 $123,609 $104,498
International 229,652 213,652 201,984 137,938 130,102 136,307
--------------------------------------------------------------------------------
Total $508,435 $467,081 $431,974 $259,581 $253,711 $240,805
================================================================================
Retirement Plans
The Company and its principal subsidiaries have contributory and noncontributory retirement plans that cover substantially all employees. The
plans generally provide for employee retirement between the ages of 60 to 65 and benefits based on length of service and final average
compensation, as defined.
The Company has agreements with certain officers and senior management personnel that provide for the payment of supplemental retirement
benefits during each of the 10 years after the termination of employment. Under certain circumstances, including a change of control as
defined, the payment of such amounts could be accelerated on a present value basis.
The Company provides life insurance and health care benefits, subject to certain dollar limitations and retiree contributions, for substantially all
of its retired domestic employees. The cost of such benefits is expensed over the years that the employees render service and is funded on a
pay-as-you-go, cash basis. The accumulated postretirement benefit obligation amounted to $.3 million at April 30, 1999 and 1998, and the
amount expensed in fiscal 1999 and prior years was not material.
The components of net pension expense for the defined benefit plans were as follows:
Dollars in thousands 1999 1998 1997
------------------------------------------------------------------------------
Service Cost $ 4,960 $ 3,913 $ 3,372
Interest Cost 6,498 5,883 5,168
Expected Return on Plan Assets (6,684) (5,460) (5,039)
Net Amortization of Prior Service Cost 356 355 294
Net Amortization of Unrecognized Transition Asset (850) (852) (849)
Recognized Net Actuarial Gain (157) (59) (62)
------------------------------------------------------------------------------
Net Pension Expense $ 4,123 3,780 2,884
------------------------------------------------------------------------------
In fiscal 1999, the domestic plan was amended to provide that final average compensation be based on the highest three consecutive years
ended December 31, 1995. The Company may, but is not required to, update from time to time the ending date for the three-year period used to
determine final average compensation. The amendment had the effect of increasing pension expense for fiscal 1999 by $.2 million. The net
pension expense included above for the international plans amounted to approximately $2.6, $2.1 and $1.5 million for 1999, 1998, and 1997,
respectively.
The following table sets forth the changes in and the status of the plans' assets and benefit obligations. The unfunded plans primarily relate to a
non-U.S. subsidiary, which is governed by local statutory requirements, and the domestic supplemental retirement plans for certain officers and
senior management personnel.
1999 1998
-------------------------------------------------------------------------------------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Dollars in thousands Benefits Assets Benefits Assets
-------------------------------------------------------------------------------------------------------------
Plan Assets
Fair Value, beginning of year $ 84,262 $ -- $ 68,385 $ --
Actual Return on Plan Assets 9,780 -- 16,411 --
Employer Contributions 1,866 -- 1,610 --
Participants' Contributions 227 -- 2 --
Benefits Paid (2,621) -- (2,587) --
Foreign Currency Rate Changes (1,125) -- 441 --
------------------------------------------------------------------------------------------------------------
Fair Value, end of year $ 92,389 $ -- $ 84,262 $ --
------------------------------------------------------------------------------------------------------------
Benefit Obligation
Balance, beginning of year $(63,429) $(20,506) $(57,226) $(19,895)
Service Cost (4,122) (838) (3,172) (741)
Interest Cost (5,057) (1,441) (4,547) (1,336)
Amendments (1,748) -- (879) --
Actuarial Loss/(Gain) (4,133) (1,902) -- (241)
Benefits paid 2,621 963 2,587 1,100
Foreign Currency Rate Changes 915 382 (192) 607
------------------------------------------------------------------------------------------------------------
Balance, end of year $(74,953) $(23,342) $(63,429) $(20,506)
------------------------------------------------------------------------------------------------------------
Funded Status - Excess (Deficit) 17,436 (23,342) 20,833 (20,506)
Unrecognized Net Transition Asset (1,928) -- (2,907) --
Unrecognized Net Actuarial Loss (Gain) (16,800) 2,630 (18,738) 1,639
Unrecognized Prior Service Cost 3,830 1,085 2,401 593
------------------------------------------------------------------------------------------------------------
Net Prepaid (Accrued) Pension Cost $ 2,538 $(19,627) $ 1,589 $(18,274)
------------------------------------------------------------------------------------------------------------
The weighted average assumption used in determining these amounts were as follows:
------------------------------------------------------------------------------------------------------------
Discount Rate 7.2% 6.8% 7.9% 7.0%
------------------------------------------------------------------------------------------------------------
Expected Return On Plan Assets 8.0% -% 8.0% -%
------------------------------------------------------------------------------------------------------------
Rate of Compensation Increase 2.3% 4.8% 2.5% 4.8%
------------------------------------------------------------------------------------------------------------
Stock Compensation Plans
Under the Company's Key Employee Stock Plan, qualified employees are eligible to receive awards that may include stock options,
performance stock awards, and restricted stock awards up to a maximum per year of 3% of Class A stock outstanding and subject to an overall
maximum of 8,000,000 shares through the year 2000. As of April 30, 1999, approximately 1,274,432 shares were available for future grants.
Options granted under the plan may not be less than 100% of the fair market value of the stock at the date of grant. Options are exercisable, in
part or in full, over a maximum period of 10 years from the date of grant, and generally vest within five years from the date of the grant. Under
certain circumstances relating to a change of control, as defined, the right to exercise options outstanding could be accelerated.
The Company elected to apply the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation." Accordingly, no compensation cost is recognized for fixed stock option grants. Had compensation cost been recognized,
net income would have been reduced on a pro forma basis by $1.1 million, or $.02 per diluted share, in 1999; $.6 million, or $.01 per diluted
share, in 1998; and $.4 million, or $.01 per diluted share, in 1997. For the pro forma calculations, the fair value of each option grant was
estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions for 1999, 1998, and 1997:
risk-free interest rate of 5.6%, 6.5%, and 7.1%, respectively; dividend yield of 1.2%, 1.3%, and 1.5%, respectively; volatility of 23.2% 18.1%,
and 22.0%, respectively; and expected life of nine years for all years.
A summary of the activity and status of the Company's stock option plans follows:
1999 1998 1997
------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 4,207,636 5.18 4,167,756 4.47 4,114,652 3.84
Granted 958,636 13.88 598,712 8.63 573,396 7.59
Exercised (345,388) 3.26 (550,332) 3.53 (429,292) 2.71
Canceled - - (8,500) 6.47 (91,000) 4.31
------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 4,820,884 7.04 4,207,636 5.18 4,167,756 4.47
------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year 2,578,964 4.05 2,162,272 3.38 2,415,764 3.05
The weighted average fair value of options granted during the year was $5.25, $3.17 and $3.01 in 1999, 1998 and 1997, respectively.
A summary of information about stock options outstanding and options exercisable at April 30, 1999, follows:
Options Outstanding Options Exercisable
------------------------------------------------------------------------
Weighted Weighted
Number Average Average Number Average
Range of Of Remaining Exercise Of Exercise
Exercise Prices Options Term Price Options Price
------------------------------------------------------------------------
$ 1.97 to $ 3.06 1,456,748 2.5 years $ 2.54 1,456,748 $2.54
$ 5.17 642,168 5.1 years $ 5.17 622,836 $5.17
$ 6.56 to $ 14.59 2,721,968 7.8 years $ 9.90 499,380 $7.09
------------------------------------------------------------------------
Total 4,820,884 5.9 years $ 7.04 2,578,964 $4.05
------------------------------------------------------------------------
Under the terms of the Company's executive long-term incentive plans, upon the achievement of certain three-year financial performance-based
targets, awards will be payable in restricted shares of the Company's Class A Common stock. The restricted shares vest equally as to 50% on
the first and second anniversary date after the date the award is earned. Compensation expense is charged to earnings over the respective three-
year period. In addition, the Company granted restricted shares of the Company's Class A Common stock to key executive officers and others
in connection with their employment. The restricted shares generally vest one-third at the end of the third, fourth, and fifth years, respectively,
following the date of the grant. Under certain circumstances relating to a change of control or termination, as defined, the restrictions would
lapse and shares would vest earlier. Compensation expense is charged to earnings ratably over five years, or sooner if vesting is accelerated,
from the dates of grant. Restricted shares issued in connection with the above plans amounted to 114,400, 153,948 and 102,552 shares at
weighted-average grant-date fair values of $14.55, $8.40 and, $7.25 per share in 1999, 1998, and 1997, respectively. Compensation expense
charged to earnings for the above amounted to $3.0, $2.6 million, and $1.5 million in 1999, 1998, and 1997, respectively.
Under the terms of the Company's Director Stock Plan, each member of the Board of Directors who is not an employee of the Company is
awarded Class A Common stock equal to 50% of the board member's annual cash compensation, based on the market value of the stock on the
date of the shareholders' meeting. Directors may also elect to receive all or a portion of their cash compensation in stock. Under this plan
15,884, 28,196 and 41,096 shares were issued in 1999, 1998, and 1997, respectively. Compensation expense related to this plan amounted to
approximately $.5 million, $.3 million, and $.3 million in 1999, 1998, and 1997, respectively.
Capital Stock and Changes in Capital Accounts
Preferred stock consists of 2,000,000 authorized shares with $1 par value. To date, no preferred shares have been issued. Common stock
consists of 90,000,000 authorized shares of Class A Common, $1 par value, and 36,000,000 authorized shares of Class B Common, $1 par
value.
Each share of the Company's Class B Common stock is convertible into one share of Class A Common stock. The holders of Class A stock are
entitled to elect 30% of the entire Board of Directors and the holders of Class B stock are entitled to elect the remainder. On all other matters,
each share of Class A stock is entitled to one-tenth of one vote and each share of Class B stock is entitled to one vote.
In fiscal 1999, the Company completed its existing stock repurchase program for up to 4 million shares, and announced a new stock repurchase
program for up to an additional 4 million shares of its Class A common stock. The shares will be purchased from time to time in the open
market and through privately negotiated transactions. To date through April 30, 1999, the Company has repurchased 270,000 shares for a cost
of approximately $5.5 million under the new program.
Accumulated other comprehensive income balances consist solely of cumulative foreign currency translation adjustments.
Changes in selected capital accounts were as follows:
Additional
Common Stock Paid-in Treasury
---------------------------------------------------------------------------------------------
Dollars in thousands Class A Class B Capital Stock
---------------------------------------------------------------------------------------------
Balance at May 1, 1996 $ 16,412 $ 4,086 $ 31,615 $(33,493)
Director Stock Plan Issuance -- -- 217 85
Executive Long-Term Incentive Plan Issuance -- -- 132 47
Purchase of Treasury Shares -- -- -- (10,506)
Restricted Share Issuance -- -- 337 149
Issuance of Shares Under Employee Savings Plan -- -- 212 84
Exercise of Stock Options 108 -- 1,056 --
Other 49 (49) 763 4
Retroactive Effect of Two 2-For-1 Stock Splits 49,707 12,111 (34,332) --
---------------------------------------------------------------------------------------------
Balance at May 1, 1997 $ 66,276 $ 16,148 $ 0 $(43,630)
Director Stock Plan Issuance -- -- 217 67
Executive Long-Term Incentive Plan Issuance -- -- 192 73
Purchase of Treasury Shares -- -- -- (4,281)
Restricted Share Issuance -- -- 1,862 270
Issuance of Shares Under Employee Savings Plan -- -- 316 101
Exercise of Stock Options 551 -- 3,037 (99)
Other 279 (279) -- --
---------------------------------------------------------------------------------------------
Balance at May 1, 1998 $ 67,106 $ 15,869 $ 5,624 $(47,499)
Director Stock Plan Issuance -- -- 207 46
Executive Long-Term Incentive Plan Issuance -- -- 233 52
Purchase of Treasury Shares -- -- -- (38,549)
Restricted Share Issuance -- -- 2,754 349
Issuance of Shares Under Employee Savings Plan -- -- 461 86
Exercise of Stock Options 215 -- 3,766 373
Other 227 (227) -- --
---------------------------------------------------------------------------------------------
Balance at April 30, 1999 $ 67,548 $ 15,642 $ 13,045 $(85,142)
---------------------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations:
Fiscal 1999 Compared to Fiscal 1998
The Company registered another year of strong earnings growth and margin improvement through a combination of revenue gains and cost
containment measures.
Revenues for the year increased 9% to $508.4 million reflecting improvement in all the Company's core businesses. Professional / trade
publishing worldwide revenues advanced 14% over the prior year driven by volume growth attributable to a strong frontlist and backlist as well
as increased sales through online accounts. Scientific, technical and medical publishing worldwide revenues increased 7% primarily related to
the journal publishing programs. Worldwide educational revenues advanced 6%, led by an 8% increase in the domestic college division as a
result of market share gains attributable to a strong frontlist.
Cost of sales as a percentage of revenues was 34.2% in 1999 compared with 35.1% in the prior year, primarily reflecting lower paper, printing
and binding costs.
Operating and administrative expenses increased 4.5% over the prior year. Expenses as a percentage of revenues declined to 51.4%, compared
with 53.5% in the prior year, as the rate of growth in expenses was contained at less than the revenue growth rate.
Operating income increased 41% over the prior year, excluding the unusual items pre-tax gain in the prior year of $16.9 million. The operating
income margin reached 12.5% compared with 9.7% in the prior year.
Interest income increased by $1.9 million due to higher cash balances compared with the prior year.
The effective tax rate was 36% compared with 37% in the prior year.
Net income increased 48% to 39.7 million, excluding the unusual items net gain of $9.7 million after taxes in the prior year.
Results of Operations:
Fiscal 1998 Compared to Fiscal 1997
The Company continued to grow and strengthen its core businesses. In fiscal 1998, the Company sold its domestic law publishing program for
$26.5 million, and reinvested the proceeds by acquiring the publishing assets of Van Nostrand Reinhold (VNR) for $28.5 million in cash. The
domestic law program had limited potential for the Company. VNR reinforced the Company's strong position in four core subject areas:
architecture / design, environmental / industrial science, culinary arts / hospitality, and business technology.
Fiscal 1998 income includes unusual items amounting to a pre-tax gain of $16.9 million, or $9.7 million after taxes, equal to $0.14 per diluted
share, relating to the gain on the sale of the domestic law publishing program, net of a write-down of certain intangible assets and other items.
Revenues increased 8% over the prior year to $467.1 million reflecting improvement in all of the Company's core businesses. Worldwide
revenue increases over the prior year included 9% for scientific, technical, and medical publishing; 8% for professional/trade publishing; and
6% for educational publishing, led by the domestic college division, which increased 9%. The strong U.S. dollar depressed revenues in some of
the Company's overseas markets.
Cost of sales as a percentage of revenues was 35.1% in 1998 compared with 35.9% in the prior year primarily reflecting lower inventory
obsolescence provisions in the current year.
Operating and administrative expenses increased 6.9% over the prior year. Expenses as a percentage of revenues declined to 53.5%, compared
with 54.1% in the prior year, as the rate of growth in expenses was contained at less than the revenue growth rate.
Operating income excluding the unusual items mentioned above increased 30% over the prior year to $45.3 million. Operating income margins
increased to 9.7% of revenue from 8.1% in the prior year, primarily due to the effects of the higher revenue base and lower operating expenses
as a percentage of revenues. Operating income was adversely affected by weakness in the Company's Asian markets due to the economic
downturn in that region.
Interest expense increased by $1.7 million reflecting a full year of financing costs related to VCH, which was acquired during fiscal 1997.
Interest income increased by $1.6 million primarily as a result of higher cash balances compared with the prior year.
The effective tax rate was 37.0% compared with 34.1% in the prior year primarily reflecting the higher incremental tax rate on the unusual
items gain.
Net income, excluding the unusual items net gain of $9.7 million after taxes, increased 32% to $26.9 million.
Liquidity and Capital Resources
The Company's cash and cash equivalents balance was $149.0 million at the end of fiscal 1999, compared with $127.4 million at the end of the
prior year. Cash provided by operating activities was $117.9 million in fiscal 1999, an increase of $13.8 million compared with the prior year.
The Company's operating cash flow is strongly affected by the seasonality of its domestic college business and receipts from its journal
subscriptions. Receipts from journal subscriptions occur primarily during November and December from companies commonly referred to as
independent subscription agents. These companies facilitate the journal ordering process by consolidating the subscription orders/billings of
each subscriber with various publishers. Monies are collected in advance from subscribers by the subscription agents and are remitted to 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 position and
liquidity. Subscription agents account for approximately 28% of total consolidated revenues and no one agent accounts for more than 6% of
total consolidated revenues.
Sales to the domestic college market tend to be concentrated in June through August, and again in November through January. The Company
normally requires increased funds for working capital from the beginning of the fiscal year into September. Subject to variations that may be
caused by fluctuations in inventory accumulation or in patterns of customer payments, the Company's normal operating cash flow is not
expected to vary materially in the near term.
To finance its short-term seasonal working capital requirements and its growth opportunities, the Company has adequate cash and cash
equivalents available, as well as both domestic and foreign short-term lines of credit, as more fully described in the note to the consolidated
financial statements entitled "Notes Payable and Debt."
The capital expenditures of the Company consist primarily of investments in product development and property and equipment. Capital
expenditures for fiscal 2000 are expected to increase approximately 20% over 1999, primarily representing investments in product
development, including electronic media products, and computer equipment upgrades to support the higher volume of business to ensure
efficient, quality-driven customer service. These investments will be funded primarily from internal cash generation or from the liquidation of
cash equivalents.
Market Risk
The Company is exposed to market risk primarily related to interest rates and foreign exchange. It is the Company's policy to monitor these
exposures and to use derivative financial investments 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 a $125 million variable rate term loan outstanding at April 30, 1999 and 1998, which approximated fair value. The
Company did not use any derivative financial investments to manage this exposure. A hypothetical 10% adverse change in interest rates for this
variable rate debt would negatively affect net income and cash flow by approximately $.5 million.
Foreign Exchange Rates
The Company is exposed to foreign exchange movements primarily in European, Asian, Canadian and Australian currencies. Consequently, the
Company, from time to time, enters into forward exchange contracts as a hedge against its overseas subsidiaries' foreign currency asset,
liability, commitment, and anticipated transaction exposures, including intercompany purchases. There were no open foreign exchange
contracts at April 30, 1999 or 1998.
Effects of Inflation and Cost Increases
Although the impact of inflation is somewhat minimized as paper prices continued to decline during fiscal 1999 and the business does not
require a high level of investment in property and equipment, the Company, from time to time, does experience cost increases reflecting, in
part, general inflationary factors. To mitigate the effects of cost increases, the Company has taken a number of initiatives including various
steps to lower overall production and manufacturing costs including substitution of paper grades. In addition, selling prices have been
selectively increased as competitive conditions permit. The Company anticipates that it will be able to continue this approach in the future.
Year 2000 Issues
The Company has essentially completed the review of its systems and products to determine the extent and impact of the year 2000 issues.
Many of the systems are new and were designed to accommodate the year 2000 issue when originally installed. The Company is well along in
the process of implementing the needed changes, and systems testing has begun. The Company currently anticipates substantially completing
corrective measures and testing of its systems and products by September 30, 1999. The total cost to remedy the situation is currently estimated
to be approximately $2.5 million, of which $2.0 million has been expended to date. Subsequent to the fiscal year-end, the Company acquired
the Jossey-Bass publishing company and is currently in the process of evaluating the status of the year 2000 remediation efforts at that
company.
The Company has communicated with its customers and suppliers and is in the process of assessing how they intend to resolve their year 2000
issues. The Company at this time is not able to form an opinion as to whether its customers or suppliers will be able to resolve their year 2000
issues in a satisfactory and timely manner, or the magnitude of the adverse impact it would have on the Company's operations, if they fail to do
so.
Euro Conversion Issues
Effective January 1, 1999, eleven member countries of the European union established fixed conversion rates between their existing legal
currencies, the Euro, and adopted the Euro as their common legal currency beginning January 1, 2002.
The Company is in the process of assessing the impact that the conversion to the Euro will have on its operations and the modifications that
will be required to its systems. The Company believes that the Euro conversion should not have a material effect on its operations.
* * * * *
The anticipated costs and timing of resolving the year 2000 and Euro issues are based on numerous assumptions and estimates relating to future
events including the continued availability and cost of the personnel required to modify the systems, the timely resolution of the third party
customer and supplier interface issues, and other similar uncertainties. The Company is in the process of developing contingency plans in the
event remediation measures will not be completed on a timely basis.
New Accounting Standards
In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use", which requires that certain costs incurred in developing or obtaining internal use
software be capitalized and amortized over the useful life of the software. The Company will be required to adopt SOP 98-1 beginning next
fiscal year and is evaluating the effect this will have on its consolidated financial statements. Currently, the Company expenses most of these
costs as incurred. The Financial Accounting Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities", which specifies the accounting and disclosure requirements for such instruments, and is effective for the Company's fiscal year
beginning on May 1, 2001. It is anticipated that the adoption of this new accounting standard will not have a material effect on the consolidated
financial statements of the Company.
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995
This report contains certain forward-looking statements concerning the Company's operations, performance and financial condition. Reliance
should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any
such forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and
contingencies, many of which are beyond the control of the Company, and are subject to change based on many important factors. Such factors
include, but are not limited to: (i) the pace, acceptance, and level of investment in emerging new electronic technologies and products;
(ii) subscriber renewal rates for the Company's journals; (iii) the consolidation of the retail book trade market; (iv) the seasonal nature of the
Company's educational business and the impact of the used book market; (v) the ability of the Company and its customers and suppliers to
satisfactorily resolve the year 2000 and Euro issues in a timely manner; (vi) worldwide economic and political conditions; and (vii) other
factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no
obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.
Results by Quarter (Unaudited)
John Wiley & Sons, Inc. and Subsidiaries
Dollars in thousands except per share data
1999 1998
-----------------------------------------------------------
Revenues
First quarter $ 122,091 $ 112,086
Second quarter 123,640 115,886
Third quarter 137,976 124,350
Fourth quarter 124,728 114,759
-----------------------------------------------------------
Fiscal year $ 508,435 $ 467,081
-----------------------------------------------------------
Operating Income
First quarter $ 17,066 $ 13,711
Second quarter 15,306 10,326
Third quarter 21,282 31,806 (a)
Fourth quarter 10,000 6,313
-----------------------------------------------------------
Fiscal year $ 63,654 $ 62,156 (a)
-----------------------------------------------------------
Net Income
First quarter $ 10,564 $ 8,082
Second quarter 9,275 5,639
Third quarter 13,358 18,638 (a)
Fourth quarter 6,512 4,229
-----------------------------------------------------------
Fiscal year $ 39,709 $ 36,588 (a)
-----------------------------------------------------------
Income Per Share Diluted Basic Diluted Basic
---------------------------------------------------------------
First quarter $.17 $.16 $.12 $.13
Second quarter .14 .15 .09 .09
Third quarter .20 .21 .28 (a) .30 (a)
Fourth quarter .10 .11 .06 .07
Fiscal year .60 .63 .55 (a) .58 (a)
----------------------------------------------------------------
(a) Fiscal 1998 includes unusual items amounting to a pretax gain of $16,893 or $9,713 after tax, equal to $.14 per diluted share ($.15 per basic
share) relating to the gain on the sale of the domestic law publishing program, net of a write-down of certain intangible assets and other items.
Quarterly Share Prices, Dividends and Related Stockholder Matters
The Company's Class A and Class B shares are listed on the New York Stock Exchange under the symbols JWA and JWB, respectively.
Dividends per share and the market price range by fiscal quarter for the past two fiscal years were as follows:
Market Price Market Price Divi- --------------- Divi- --------------
Class A Common Stock Class B Common Stock
dends High Low dends High Low
-------------------------------------------------------------
1999
First quarter $.0319 $16.06 $13.31 $.0281 $16.05$13.33
Second quarter .0319 18.28 14.07 .0281 18.44 14.25
Third quarter .0319 24.16 16.63 .0281 24.88 17.66
Fourth quarter .0319 23.47 19.25 .0281 23.41 19.31
-------------------------------------------------------------
1998
First quarter $.0281 $8.63 $7.47 $.0250 $8.75 $7.50
Second quarter .0281 11.10 7.88 .0250 11.06 7.91
Third quarter .0281 14.25 11.02 .0250 14.10 11.13
Fourth quarter .0281 14.00 12.33 .0250 14.00 12.27
As of April 30, 1999, the approximate number of holders of the Company's Class A and Class B Common Stock were 1,262 and 184,
respectively, based on the holders of record and other information available to the Company.
The Company's credit agreement contains certain restrictive covenants related to the payment of dividends and share repurchases. Under the
most restrictive covenant, approximately $58 million was available for such restricted payments. Subject to the foregoing, the Board of
Directors considers quarterly the payment of cash dividends based upon its review of earnings, the financial position of the Company, and other
relevant factors.
Selected Financial Data
John Wiley & Sons, Inc. and Subsidiaries
Dollars in thousands except per share data
For the years ended April 30
--------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------
Revenues $508,435 $467,081 $431,974 $362,704 $331,091
Operating Income 63,654 62,156 (a) 34,797 32,955 26,879
Net Income 39,709 36,588 (a) 20,340 24,680 (b) 18,311
Working Capital 60,870 59,257 39,783 31,515 11,241
Total Assets 528,552 506,914 457,944 284,501 247,481
Long-Term Debt 125,000 125,000 125,000 -- --
Shareholders' Equity 162,212 160,751 128,983 117,982 98,832
-------------------------------------------------------------------------------------------
Per Share Data
Income Per Share
Diluted .60 .55 (a) .31 .37 (b) .28
Basic .63 .58 (a) .32 .39 (b) .29
Cash Dividends
Class A Common .1275 .11 .1000 .08 .0775
Class B Common .1125 .10 .0875 .07 .0688
Book Value-End of Year 2.60 2.51 2.03 1.83 1.55
----------------------------------------
(a) Fiscal 1998 includes unusual items amounting to a pretax gain of $16,893 or $9,713 after tax, equal to $.14 per diluted share ($.15 per basic
share) relating to the gain on the sale of the domestic law publishing program, net of a write-down of certain intangible assets and other items.
Excluding the unusual items, operating income would have been $45,263 and net income would have been $26,875, or $.41 per diluted share
and $.43 per basic share.
(b) Fiscal 1996 net income includes interest income after taxes of $2.6 million, or $.04 per diluted and basic share, received on the favorable
resolution of amended tax return claims.
Schedule II
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Dollars in Thousands)
Additions
--------------------------
Balance at Charged to Deductions Balance at
Beginning Cost & From From End of
Description of Period Expenses Acquisitions Reserves Period
------------------------------------------------------------------------------------------------------
Year Ended April 30, 1999
Allowance for sales returns(1) $33,411 $34,213 $ -- $33,411 $34,213
Allowance for doubtful accounts $ 8,165 $ 2,053 $ -- $ 2,607(2) $ 7,611
Year Ended April 30, 1998
Allowance for sales returns(1) $27,099 $32,945 $ -- $26,633 $33,411
Allowance for doubtful accounts $ 7,414 $ 3,445 $ -- $ 2,694(2) $ 8,165
Year Ended April 30, 1997
Allowance for sales returns(1) $20,786 $26,396 $ 357 $20,440 $27,099
Allowance for doubtful accounts $ 6,049 $ 2,591 $ 1,548 $ 2,774(2) $ 7,414
(1) Allowance for sales returns represents anticipated returns net of inventory and royalty costs.
(2) Accounts written off, less recoveries.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
JOHN WILEY & SONS, INC.
(Company)
By: /s/ William J. Pesce
-----------------------------------
William J. Pesce
President and Chief Executive
Officer
By: /s/ Robert D. Wilder
-----------------------------------
Robert D. Wilder
Executive Vice President and
Chief Financial & Support
Operations Officer
By: /s/ Peter W. Clifford
-----------------------------------
Peter W. Clifford
Senior Vice President, Finance
Corporate Controller
& Chief Accounting Officer
Dated: June 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons constituting
directors of the Company on June 24, 1999.
/s/ Warren J. Baker /s/ William J. Pesce
--------------------------- ---------------------------
Warren J. Baker William J. Pesce
s/ H. Allen Fernald /s/ William R. Sutherland
--------------------------- ---------------------------
H. Allen Fernald William R. Sutherland
--------------------------- ----------------------------
Gary J. Fernandes Thomas M. Taylor
/s/ Larry Franklin /s/ Bradford Wiley II
--------------------------- ----------------------------
Larry Franklin Bradford Wiley II
/s/ Henry A. McKinnell, Jr. /s/ Peter Booth Wiley
--------------------------- ----------------------------
Henry A. McKinnell, Jr. Peter Booth Wiley
Exhibit - 10.11
JOHN WILEY & SONS, INC.
FY 1999 EXECUTIVE LONG TERM INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
MAY 1, 1998
CONTENTS
Section Subject Page
I Definitions 2 II Plan Objectives 4 III Eligibility 4 IV Incentive 4
V Performance Measurement and Objectives 4 VI Performance Evaluation 5 VII Payouts 6 VIII Restricted Performance Shares 7 IX Stock
Option 9
X Administration and Other Matters 9
Following are definitions for words and phrases used in this document. Unless the context clearly indicates otherwise, these words and phrases
are considered to be defined terms and appear in this document in italicized print:
I. DEFINITIONS
company - John Wiley & Sons, Inc.
plan - The company's FY (Fiscal Year) 1999 Executive Long Term Incentive Plan as set forth in this document.
shareholder plan - The company's 1991 Key Employee Stock Plan.
plan cycle - The three year period from May 1, 1998 to April 30, 2001.
Governance and Compensation Committee (GCC) - The committee of the company's Board of Directors (Board) responsible for reviewing
executive compensation.
financial goals - The company's objectives to achieve specific financial results in terms of cash flow and earnings per share as defined below,
for the plan cycle, including interim revised financial goals, if any, as determined by the GCC and the Board, and confirmed in writing.
financial results - The company's actual achievement against the financial goals set for the plan cycle, as reflected in the company's audited
financial statements.
participant - Any person who is eligible and is selected to participate in the plan, as defined in Section III.
target incentive - The target incentive as determined and authorized by the GCC at the committee meeting held on June 24, 1998 is a restricted
performance shares award, which represents the number of restricted performance shares that a participant is eligible to receive if 100% of
his/her applicable financial goals are achieved and the participant remains an employee of the company through April 30, 2003, except as
otherwise provided in Section VIII. The target incentive is based on the participant's position and is described in Section IV.
stock - Class A Common Stock of the company.
restricted performance shares - Stock issued pursuant to this plan and the shareholder plan that is subject to forfeiture. In the shareholder plan,
such stock is referred to as "Restricted Stock." The value of each share of restricted performance shares under this plan will be determined by
reference to the stock closing sale price, as reported by New York Stock Exchange (NYSE), on the date the GCC acts at the beginning of the
plan cycle (June 24, 1998). In the event the stock is not traded on June 24, 1998 or the date the GCC acts, whichever is later, the closing sales
price shall be the price of the stock on the next day after June 24, 1998 or the date the GCC acts on which the stock trades.
restricted period - The period during which the shares of restricted performance shares shall be subject to forfeiture in whole or in part, as
defined in the shareholder plan, in accordance with the terms of the award.
plan end adjusted restricted performance shares award - The final amount of restricted performance shares awarded to a participant at the end
of the plan cycle after adjustments, if any, are made, as set forth in Section VIII.
stock option - A right granted to a participant, as more fully described under
Section IX, to purchase a specific number of shares of stock at a specified price. The stock option granted under this plan will be non-qualified
(i.e. is not intended to comply with the terms and conditions for a tax-qualified option, as set forth in Section 422A of the Internal Revenue
Code of 1986).
grant date - The date on which a participant is granted the stock option. This is also the date on which the exercise price of the stock option is
based.
payout amount - Cash, if any, plus plan end adjusted restricted performance shares award, as set forth in Section VIII, to a participant under
this plan, if any, for achievement of the financial goals, as further discussed in this plan.
performance levels
threshold - The minimum acceptable level of achievement for each financial goal. If threshold performance is achieved against all company
financial goals, a participant may earn 25% of the target incentive amount for which he/she is eligible. If threshold performance is achieved
against all divisional financial goals, a participant may earn 25% of the target incentive amount for which he/she is eligible.
target - Achievement in aggregate of the financial goals. Each individual financial goal is set at a level which is both challenging and
achievable.
outstanding - Superior achievement of the financial goals. If outstanding performance is achieved against all financial goals, the maximum
amount a participant may earn is 200% of the target incentive amount for which he/she is eligible.
payout factor - The percentage of financial goals deemed achieved applied to the target incentive amount, exclusive of the stock option portion,
if any, to determine the payout amount.
cash flow - Net income, excluding unusual items not related to the period being measured, plus/minus any non-cash items included in net
income and changes in operating assets and liabilities, minus normal investments in product development assets and property and equipment
for the final year of the plan cycle.
earnings per share - Earnings per share, as reported in the company's annual report for the final year of the plan cycle.
divisional operating income - Operating income before allocations for corporate support services and taxes, excluding the effects of any
unusual activity, for the final year of the plan cycle.
divisional cash flow - Operating income before allocations and taxes, excluding unusual items not related to the period being measured,
plus/minus any non-cash items included in divisional operating income (other than provisions for bad debts), and changes in controllable assets
and liabilities, less normal investments in product development assets and direct property and equipment additions, for the final year of the plan
cycle. Controllable assets and liabilities are inventory, composition, author advances, other deferred publication costs, and deferred
subscription revenues.
II. PLAN OBJECTIVES
The purpose of this plan is to enable the company to reinforce and sustain a culture devoted to excellent performance, emphasize long term
financial performance at the corporate and division levels, reward significant contributions to the success of the company, attract and retain
highly qualified executives, and provide an opportunity for each participant to acquire equity in the company.
III. ELIGIBILITY
The participant is selected by the GCC in its sole discretion, from among those employees in key management positions deemed able to make
the most significant contributions to the growth and profitability of the company. An employee must be a participant of the FY 1999 Executive
Annual Incentive Plan to be eligible to participate in this plan. The President and CEO of the company is a participant.
IV. INCENTIVE
A. The participant's target incentive is determined based on the participant's position in the company and the contributions the position is
deemed able to make in achieving the financial goals of the company.
B. The participant's target incentive is recommended by the President and CEO to the GCC for its and the Board's approval. In the case of the
President and CEO, the target incentive is recommended by the GCC for the Board's approval.
V. PERFORMANCE MEASUREMENT AND OBJECTIVES
A. The objectives for the financial goals are recommended by the GCC to the Board for its approval. The financial goals performance
objectives are set at a level which are challenging and achievable.
B. Financial goals established for each participant may include one or more organizational level's financial goals (e.g., company and division),
and one or more financial goals for a particular organizational unit (e.g., divisional cash flow, divisional operating income). The weighting of
and between the organizational levels' financial goals may vary, depending upon the participant's position. Weighting of the participant's
financial goals is recommended by the President and CEO to the GCC. In the case of the President and CEO, the financial goals are cash flow
and earnings per share.
C. Threshold, target and outstanding performance levels for the financial goals are recommended by the President and CEO for approval by the
GCC, and the Board.
VI. PERFORMANCE EVALUATION
A. Financial Results
1. Actual financial results achieved by the company and by each division will be calculated at the end of the plan cycle, subject to adjustment
for audited results, and will be compared with the previously set financial goals.
2. The financial results will be reviewed by the President and CEO to determine proposed payout factors for the company and for the divisions.
3. The President and CEO will provide to the GCC a view of the company's achievement of its financial goals, as well as divisional
achievement of like objectives, if any, and will recommend payout factors to be used for the company and divisional objectives.
B. Award Determination
1. At least threshold performance, in aggregate, of a participant's particular organizational level's objectives is necessary for the participant to
receive a payout for the particular organizational level. However, once the overall threshold is achieved for any single measure the non-
achievement of any one particular goal's target objective does not preclude a payout.
2. The determination of the performance level achievement (threshold, target and outstanding, or points in between) for each organizational
level's financial goals will be made independently of any other organizational level's financial goals a participant may have.
3. If the participant has more than one organizational level's financial goals, the non-achievement of a threshold performance level of one
organizational level's financial goals does not preclude a payout for the other organizational level's financial goals.
4. The following details the effect of the financial results performance levels on a participant's payout amount. The actual payout factors will be
in the sole judgment and discretion of the GCC, taking into account the following guidelines:
a. For below threshold performance in aggregate, the payout amount is zero.
b. For threshold performance in aggregate, 25% of the target incentive may be recommended.
c. For between threshold and target performance in aggregate, at minimum 25% of the target incentive and up to 100% of the target incentive
may be recommended.
d. For target performance in aggregate, 100% of the target incentive may be recommended.
e. For between target and outstanding performance in aggregate, at minimum 100% of the target incentive and up to 200% of the target
incentive may be recommended.
f. For outstanding performance in aggregate, 200% of the target incentive may be recommended.
5. Notwithstanding anything to the contrary, the maximum payout amount, if any, a participant may receive is 200% of the target incentive.
VII PAYOUTS
A. The restricted performance shares payout amount, if any, will be made as set forth in Section VIII below. The determination by the GCC of
plan end adjusted restricted performance shares shall constitute payout of this portion of the award.
B. The GCC, in its sole discretion, may direct that the payout be made wholly or partly in cash.
C. The GCC, in its sole discretion, may direct that the number of restricted performance shares for a participant be increased or decreased,
based on changed responsibilities for the participant during the plan cycle.
D. In the event of a participant's death, permanent disability, retirement or leave of absence prior to the end of the plan cycle, restricted
performance shares awarded at the beginning of the plan cycle, if any, are forfeited, and the payout amount, if any, will be determined by the
GCC in its sole discretion.
E. A participant who resigns, or whose employment is terminated by the company, with or without cause, prior to the end of the plan cycle, is
not eligible for a payout amount and shall forfeit any restricted performance shares awarded at the beginning of the plan cycle.
VIII. RESTRICTED PERFORMANCE SHARES AWARD PROVISIONS
A. Since one of the objectives of this plan is to provide the participant with an equity stake in the company and align management and
shareholder interests, the target incentive will be awarded as restricted performance shares.
B. Restricted performance shares, if any, shall be awarded at the beginning of the plan cycle, after the June 24, 1998 GCC meeting. The amount
of restricted performance shares awarded shall be based on the proportion of the target incentive allocated to restricted performance shares, as
determined by the GCC. The value of each share will be determined based on the stock closing sale price, as reported by the NYSE, on the date
the GCC acts at the beginning of the plan cycle (June 24, 1998). In the event the stock is not traded on June 24, 1998 or the date the GCC acts,
whichever is later, the closing sales price shall be the price of the stock on the next day after June 24, 1998 or the date the GCC acts on which
the stock trades, whichever is later. The restricted performance shares awarded at the beginning of the plan cycle are subject to adjustment at
the end of the plan cycle as set forth in Sections VIII (C) and (D) below. Restricted performance shares, if any, shall be awarded pursuant to the
shareholder plan, as approved by the GCC. In addition to the terms and conditions set forth in the shareholder plan and Section VII (D) and (E)
below, the following conditions shall apply:
1. During the plan cycle, the participant shall not have the right to receive dividends or other distributions with respect to restricted
performance shares received at the beginning of the plan cycle and shall not have the right to vote such shares. After the end of the plan cycle,
and after all adjustments to the amount of restricted performance shares are made by the GCC as set forth in Section VII(D) and (E) below, the
participant shall have the right to receive dividends or other distributions with respect to the final amount of restricted performance shares
issued and shall have the right to vote such shares. The date on which the dividend and voting rights shall commence is the date on which the
GCC makes its determination of the final number of restricted performance shares awarded after the plan cycle ends pursuant to Section VII(D)
and (E) below.
2. During the restricted period, the restricted performance shares may not be sold or transferred. Restricted performance shares shall be
legended and held by the Company.
3. Withholding taxes relating to restricted performance shares awarded may be satisfied by surrendering shares to the company, in lieu of cash,
upon lapse of the restrictions.
4. The restricted period for restricted performance shares awarded shall be as follows: subject to continued employment except as otherwise set
forth in the shareholder plan or Sections VII and VIII of this plan, the lapse of restrictions on one-half of the restricted performance shares
awarded will occur on the first anniversary (April 30, 2002) of the plan end date at which time the participant will receive a new stock
certificate in a number of shares equal to one-half of the restricted performance shares awarded with the restrictive legend deleted, and the
lapse of restrictions on the remaining half will occur on the second anniversary (April 30, 2003) of the plan end date at which time the
participant will receive a new stock certificate in a number of shares equal to the remaining half with the restrictive legend deleted.
5. If the participant dies or becomes permanently disabled during the restricted period, the restrictions on the restricted performance shares will
lapse on the date of such event.
6. If the participant retires during the restricted period at or after his/her normal retirement date, the restrictions on the restricted performance
shares will lapse on the date of such event.
7. If the participant takes early retirement during the restricted period, the restrictions on the restricted performance shares will not lapse until
the restricted period expires. If the participant dies between the time the participant takes early retirement and the end of the restricted period
(April 30, 2003), the lapse of restrictions on the restricted performance shares will occur on the date of such event.
8. The restricted performance shares may be adjusted by the GCC for any change in the capital stock of the company, as provided in Section II
of the shareholder plan and are in all respects subject to the provisions of that plan.
9. In the event of a change of control, whether before or after the end of the plan cycle, as defined in the shareholder plan, all shares of
restricted performance shares which would otherwise remain subject to restrictions under the plan shall be free of such restrictions.
C. The number of shares of restricted performance shares awarded at the beginning of the plan cycle, may be adjusted at the end of the plan
cycle based on actual achievement of target objectives.
D. The final amount of restricted performance shares will be determined as follows: The restricted performance shares established by the GCC
at the beginning of the plan cycle multiplied times the payout factor equals the number of shares for the plan end adjusted restricted
performance shares award. The result of this calculation will be compared to the restricted performance shares awarded at the beginning of the
plan cycle, and the appropriate amount of restricted performance shares will be awarded or forfeited, as required, to bring the restricted
performance shares award to the number of shares designated as the plan end adjusted restricted performance shares award.
IX. STOCK OPTION
The participant may be granted a stock option pursuant to the shareholder plan at the beginning of the plan cycle, representing another
incentive vehicle by which the participant is able to share in the equity growth of the company. The number of shares in the stock option
granted to a participant under this plan is based on a set of variables and assumptions, applied consistently to all participants, regarding the
monetary value a participant might receive upon exercise of the stock option. The terms and conditions of the award of the stock option are
contained in the shareholder plan and in the stock option award. Withholding taxes relating to the gain realized on the exercise of an option
may be satisfied by surrendering to the company the equivalent value of the taxes, or a portion thereof, in option shares in lieu of cash.
X. ADMINISTRATION AND OTHER MATTERS
A. This plan will be administered by the GCC, which will have authority in its sole discretion to interpret and administer this plan, including,
without limitation, all questions regarding eligibility and status of any participant, and no participant shall have any right to receive any
restricted performance shares or payment of any kind whatsoever, except as determined by the GCC hereunder.
B. The company will have no obligation to reserve or otherwise fund in advance any amount which may become payable under the plan.
C. Restricted performance shares, stock options awarded and any cash paid out under this plan shall not be considered as compensation for
purposes of defining compensation for retirement, savings or supplemental executive retirement plans, or similar type plans.
D. This plan may not be modified or amended except with the approval of the GCC. Notwithstanding the foregoing, Section VIII B (9) shall
not be amended.
E. In the event of a conflict between the provisions of this plan and the provisions of the shareholder plan, the provisions of the shareholder
plan
shall apply.
Exhibit - 10.12
JOHN WILEY & SONS, INC.
FY 1999 EXECUTIVE ANNUAL INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
MAY 1, 1998
CONTENTS
Section Subject Page
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Objectives and Measurement 3
V. Performance Evaluation 4
VI. Payouts 5
VII. Status Changes 6
VIII. Administration and Other Matters 6
I. DEFINITIONS
Following are definitions for words and phrases used in this document. Unless the context clearly indicates otherwise, these words and phrases
are considered to be defined terms and appear in this document in italicized print:
company - John Wiley & Sons, Inc.
plan - The company's FY (Fiscal Year) 1999 Executive Annual Incentive Plan described in this document and any written amendments to this
document.
plan year - The twelve month period from May 1, 1998 to April 30, 1999.
Governance and Compensation Committee (GCC) - The committee of the company's Board of Directors (Board) responsible for reviewing
executive compensation.
financial goals - A participant's objective to achieve specific financial results for FY 1999, including interim revised financial goals, if any, as
approved and communicated in writing, as described in Sections IV and V below.
financial results - Total company or division achievement against financial goals set for FY 1999.
strategic milestone - A participant's objective to achieve specific results for FY 1999, including interim revised strategic milestones, if any, as
approved and communicated in writing, as described in Sections IV and V below. Strategic milestones are leading indicators of performance.
participant - Any person who is eligible to and is selected to participate in the plan, as defined in Section III.
base salary - The participant's base salary as of July 1,1998, or the date of hire, or promotion into the plan, if later, adjusted for any increases or
decreases during FY 1999, on a prorated basis and adjusted for any amount of time the participant may not be in the plan for reasons of hire,
promotion, death, disability, retirement and/or termination.
payout - Actual gross dollar amount paid to a participant under the plan, if any, for achievement of financial goals and strategic milestones, as
further discussed in this plan.
target incentive percent - The percent applied to the participant's base salary to determine the target incentive amount.
target incentive amount - The amount, if any, that a participant is eligible to receive if a participant achieves 100% of his/her financial goals
and strategic milestones. The incentive for financial goals should constitute at least 70% of the target incentive amount for the participant.
performance levels
threshold - The minimum acceptable level of achievement of each financial goal and strategic milestone. If threshold performance is achieved
against all financial goals and strategic milestones, a participant may earn 25% of the target incentive amount for which he/she is eligible.
target - Achievement in aggregate of target financial goals and strategic milestones. Each individual financial goal and strategic milestone is set
at a level which is both challenging and achievable.
outstanding - Superior achievement of financial goals and strategic milestones, both in quality and scope, with limited time and resources. If
outstanding performance is achieved against all financial goals and strategic milestones, the maximum amount a participant may earn is 175%
of the target incentive amount.
payout factor - Percentage of financial goals and strategic milestones deemed achieved, applied to the target incentive amount, used to
determine the payout for which a participant is eligible.
II. PLAN OBJECTIVES
The purpose of the FY 1999 Executive Annual Incentive Plan is to enable the company to reinforce and sustain a culture devoted to excellent
performance, emphasize performance at the corporate and division levels, reward significant contributions to the success of Wiley, and attract
and retain highly qualified executives.
III. ELIGIBILITY
The participant is selected by the President and CEO of the company, from among those employees in key management positions deemed able
to make the most significant contributions to the growth and profitability of the company, with the approval of the GCC. The President and
CEO of the company is a participant.
IV. PERFORMANCE OBJECTIVES AND MEASUREMENT
The plan employs two categories of objectives for performance measurement:
financial goals and strategic milestones. The weighting of and between the two measures may vary, depending upon the participant's position.
Weighting is recommended by the participant's manager and approved by the President and CEO, if the President and CEO is not the
participant's manager.
A. Financial Goals
1. Financial goals for the company are determined near the beginning of the plan year by the President and CEO. The President and CEO's
goals are reviewed and approved by the Finance Committee of the Board and GCC, and approved by the Board.
2. Financial goals are set for the company as a whole and for each division and may be revised in the interim, as appropriate. The participant
will be given specific financial goals, based on an appropriate mix of company and/or division objectives.
3. Financial goals include defining levels of performance (threshold, target and outstanding) and the measures of each.
B. Strategic Milestones
1. Strategic milestones are non-financial individual objectives over which the participant has a large measure of control, which lead to, or are
expected to lead to improved performance for the company in the future. Strategic milestones are determined near the beginning of the plan
year by the participant, and approved by the participant's manager, if the President and CEO is not the participant's manager.
2. The strategic milestones for the President and CEO are reviewed and approved by the Executive and Policy Committee of the Board and by
the Board.
3. The strategic milestones for the President and CEO should be appropriately reflected in those of all other employees at all levels. Each
participant collaborates with his/her manager in setting strategic milestones. The strategic milestones may be revised in the interim, as
appropriate.
4. The determination of strategic milestones includes defining a target level of performance and the measure of such, and may include defining
threshold and outstanding levels of performance and the measures of such.
A. Financial Results
V. PERFORMANCE EVALUATION
1. Actual financial results achieved by the company and by each group and division will be calculated at the end of the plan year, subject to
adjustment for audited results, and will be compared with previously set financial goals.
2. Actual financial results will be reviewed by the participant's manager and the President and CEO and a payout factor determined. The payout
factor is based on a judgment of the relative importance of financial results and the achievement compared to the financial goals. This payout
factor is subject to the review and approval of the President and CEO. The GCC will evaluate the President and CEO's financial results and will
recommend to the Board his/her financial results payout factor.
B. Strategic Milestones
1. Achievement of a participant's strategic milestones will be determined at the end of the plan year by comparing results achieved to
previously set objectives.
2. Each participant's manager will recommend a payout factor for achievement of all strategic milestones compared with the previously set
objectives. In determining the payout factor, the overall performance on all strategic milestones will be considered. This payout factor is
subject to the review and approval of the President and CEO, the GCC and the Board. The GCC will recommend to the Board for approval the
payout factor for the President and CEO's achievement of his/her strategic milestones based on the GCC's evaluation of his/her achievement
compared with the previously set objectives.
C. Award Determination
1. Financial goals, established for each participant, may include one or more organizational level's financial goals (e.g. company and division),
and one or more financial goal for a particular organizational unit. At least threshold performance, in aggregate, of a participant's particular
organizational level is necessary for the participant to receive a payout for the particular organizational level. However, once the overall
threshold is achieved, the non-achievement of any one particular financial goal's target objective does not preclude a payout for all the
participant's financial goals.
2. At least threshold performance of a financial goal for any of the operating units for which he/she is responsible is required for a payout of
strategic milestones to be made to the participant. The CEO has the right to override this provision if he feels such action is warranted.
3. Payout eligibility will be determined by calculating the amount for achievement of financial goals and strategic milestones and adding the
two together, as follows:
EAIP PAYOUT ELIGIBILITY CALCULATION
FINANCIAL RESULTS PAYOUT AMOUNT
Base Salary X Target Incentive Percent
X Weighting of Financial Goals X Payout Factor
= Financial Goals Payout Eligibility
STRATEGIC MILESTONES PAYOUT AMOUNT
Base Salary X Target Incentive Percent
X Weighting of Strategic Milestones X Payout Factor
= Strategic Milestones Payout Eligibility
EAIP PAYOUT ELIGIBILITY
Financial Goals Payout Amount
+ Strategic Milestones Payout Amount
= EAIP Payout Eligibility
4. Notwithstanding anything to the contrary, the maximum payout, if any, a participant may receive is 175% of the target incentive amount.
5. The foregoing EAIP payout eligibility calculation is intended to set forth general guidelines on how awards are to be determined. The
purpose of this plan is to motivate the participant to perform in an outstanding manner. The President and CEO has discretion under this plan to
take into consideration the contribution of the participant, the participant's management of his/her organizational unit and other relevant factors,
positive or negative, which impact the company's, the participant's organizational unit(s), and the participant's performance overall in
determining whether to recommend granting or denying an award, and the amount of the award, if any. If the participant is the President and
CEO, such discretion is to be exercised by the GCC and the Board.
VI. PAYOUTS
Payouts will be made within 90 days after the end of the plan year and will be based on audited financial results.
VII. STATUS CHANGES
A. In the event of a participant's death, disability, retirement or leave of absence prior to payout from the plan, the payout, if any, will be
determined by the President and CEO in his/her sole discretion, subject to any approval of the GCC in its sole discretion, subject to any
required Board approvals. If the participant is the President and CEO, such approval is required by the Board, in its sole discretion.
B. A participant who resigns, or whose employment is terminated by the company, with or without cause, before payout from the plan is
distributed, will not receive a payout. Exception to this provision shall be made only with the approval of the GCC, in its sole discretion,
subject to any required Board approvals. If the participant is the President and CEO, such approval is required by the Board in its sole
discretion.
C. A participant who transfers between divisions of the company, will have his/her payout prorated to the nearest fiscal quarter for the time
spent in each division, based on the achievement of financial goals and strategic milestones established for the position in each division, and
based upon a judgment of the participant's contribution to the achievement of goals in each position, including interim revisions, if appropriate.
D. A participant who is appointed to a position with a different target incentive percent will have his/her payout prorated to the nearest fiscal
quarter for the time spent in each position, based on the achievement of financial goals and strategic milestones established for each position.
E. A participant who is hired or promoted into an eligible position during the plan year may receive a prorated payout as determined by the
President and CEO, in his/her sole discretion, subject to the approval of the GCC.
VIII. ADMINISTRATION AND OTHER MATTERS
A. The plan is effective for the plan year. It will terminate, subject to payout, if any, in accordance with and subject to the provisions of this
plan unless renewed by the company in writing in its sole discretion.
B. This plan will be administered by the President and CEO, who will have authority to interpret and administer this plan, including, without
limitation, all questions regarding eligibility and status of the participant, subject to the approval of the GCC required under this plan or the by-
laws of the company.
C. This plan may be withdrawn, amended or modified at any time, for any reason, in writing, by the company.
D. The determination of an award and payout under this plan, if any, is subject to the approval of the President and CEO, the GCC, and the
Board in their sole discretion. This plan does not confer upon any participant the right to receive any payout, or payment of any kind
whatsoever.
E. No participant shall have any vested rights under this plan. This plan does not constitute a contract.
F. All deductions and other withholdings required by law shall be made to
the participant's payout, if any.
Exhibit 22
SUBSIDIARIES OF JOHN WILEY & SONS, INC.(1)
Jurisdiction
In Which
Incorporated
-------------------------------------------------------------------------
Wiley Europe Limited England
Wiley Heyden Limited England (2)
John Wiley & Sons Limited England (2)
Academy Group Limited England (2)
Chancery Law Publishing Limited England (2)
John Wiley & Sons Australia, LTD. Australia
John Wiley & Sons (HK) Limited Hong Kong
Wiley Interscience, Inc. New York
John Wiley & Sons International Rights, Inc. Delaware
Wiley-Liss, Inc. Delaware
Wiley Publishing Services, Inc. Delaware
Wiley Subscription Services, Inc. Delaware
Clinical Psychology Publishing Company, Inc. Delaware
John Wiley & Sons Canada Limited Canada
Wiley Foreign Sales Corporation Barbados
John Wiley & Sons (Asia) Pte Ltd. Singapore
Scripta Technica, Inc. District of Columbia
John Wiley & Sons GmbH Germany
VCH Verlagsgesellschaft mbH Germany (3)
Wilhelm Ernst & Sohn, Verlag fur
Architektur und technische
Wissenschaften, GmbH Germany (4)
Akademie Verlag GmbH Germany (4)
Chemical Concepts Gesellschaft fur
Chemie-Informationssysteme mbH Germany (4)
VCH Publishers (U.K.) Limited England (4)
VCH Verlags AG Switzerland (4)
Verlag Chemie GmbH Germany (4)
Physik-Verlag GmbH Germany (4)
--------------------------------------
(1) The names of other subsidiaries which would not constitute a significant subsidiary in the aggregate have been omitted.
(2) Subsidiary of Wiley Europe Limited.
(3) Subsidiary of John Wiley & Sons GmbH.
(4) Subsidiary of VCH Verlagsgesellschaft mbH.
ARTICLE 5
John Wiley & Sons, Inc., and Subsidiaries Financial Data Schedule (Dollars in Thousands Except Per Share Data) This schedule contains
summary financial information extracted from the consolidated statement of financial position and the consolidated statement of income and
is qualified in its entirety by reference to such financial statements.
CIK: 0000107140
NAME: John Wiley & Sons, Inc.
MULTIPLIER: 1000
PERIOD TYPE
FISCAL YEAR END
PERIOD START
PERIOD END
CASH
SECURITIES
RECEIVABLES
ALLOWANCES
INVENTORY
CURRENT ASSETS
PP&E
DEPRECIATION
TOTAL ASSETS
CURRENT LIABILITIES
BONDS
PREFERRED MANDATORY
PREFERRED
COMMON
OTHER SE
TOTAL LIABILITY AND EQUITY
SALES
TOTAL REVENUES
CGS
TOTAL COSTS
OTHER EXPENSES
LOSS PROVISION
INTEREST EXPENSE
INCOME PRETAX
INCOME TAX
INCOME CONTINUING
DISCONTINUED
EXTRAORDINARY
CHANGES
NET INCOME
EPS BASIC
EPS DILUTED
End of Filing
12 MOS
APR 30 1999
MAY 01 1998
APR 30 1999
148,970
0
95,608
41,824
40,003
225,970
93,914
59,188
528,552
195,100
125,000
0
0
83,190
79,022
528,552
0
508,435
173,983
444,781
0
0
7,322
62,045
22,336
39,709
0
0
0
39,709
.63
.60
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