UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: April 30, 2019
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 001-11507
JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK
State or other jurisdiction of incorporation or organization
13-5593032
I.R.S. Employer Identification No.
111 River Street, Hoboken, NJ
Address of principal executive offices
07030
Zip Code
(201) 748-6000
Registrant’s telephone number including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock, par value $1.00 per share
Class B Common Stock, par value $1.00 per share
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
Trading Symbol
JW.A
JW.B
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Non-accelerated filer ☐
Accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing price as of
the last business day of the registrant’s most recently completed second fiscal quarter, October 31, 2018, was approximately $2,465
million. The registrant has no non-voting common stock.
The number of shares outstanding of the registrant’s Class A and Class B Common Stock as of May 31, 2019 was 47,499,550 and
9,132,133 respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for use in connection with its annual meeting of stockholders scheduled to be
held on September 26, 2019, are incorporated by reference into Part III of this Form 10-K.
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
FORM 10-K
FOR THE FISCAL YEAR ENDED APRIL 30, 2019
INDEX
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Information About Our Executive Officers
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
ITEM 15.
ITEM 16.
SIGNATURES
Exhibits, Financial Statement Schedules
Form 10-K Summary
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Cautionary Notice Regarding Forward-Looking Statements “Safe Harbor” Statement under the Private Securities Litigation
Reform Act of 1995:
This report contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 concerning our business, consolidated financial condition and results of operations. The Securities and Exchange
Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a
company’s prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties,
many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you
should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as
“anticipates,” “believes,” “plan,” “assumes,” “could,” “should,” “estimates,” “expects,” “intends,” “potential,” “seek,” “predict,”
“may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report
regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements.
Examples of forward-looking statements include, among others, statements we make regarding our fiscal year 2020 outlook,
anticipated restructuring charges and savings, 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 many assumptions and estimates that are inherently subject to uncertainties and contingencies,
many of which are beyond our control, and are subject to change based on many important factors. Such factors include, but are not
limited to (i) the level of investment in new technologies and products; (ii) subscriber renewal rates for our journals; (iii) the financial
stability and liquidity of journal subscription agents; (iv) the consolidation of book wholesalers and retail accounts; (v) the market
position and financial stability of key retailers; (vi) the seasonal nature of our educational business and the impact of the used book
market; (vii) worldwide economic and political conditions; (viii) our ability to protect our copyrights and other intellectual property
worldwide; (ix) our ability to successfully integrate acquired operations and realize expected opportunities; (x) achievement of
targeted run rate savings through restructuring activities; and (xi) other factors detailed from time to time in our filings with the SEC.
We undertake no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.
Please refer to Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for important factors that we believe could cause
actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this
report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no
obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as
a result of new information, future developments or otherwise.
Non-GAAP Financial Measures:
We present financial information that conforms to Generally Accepted Accounting Principles in the United States of America (“U.S.
GAAP”). We also present financial information that does not conform to U.S. GAAP, which we refer to as non-GAAP.
In this report, we may present the following non-GAAP performance measures:
Adjusted Earnings Per Share “(Adjusted EPS)”;
Free Cash Flow less Product Development Spending;
Adjusted Revenue;
Adjusted Operating Income and margin;
Adjusted Contribution to Profit and margin;
EBITDA and Adjusted EBITDA; and
Results on a constant currency basis.
Management uses these non-GAAP performance measures as supplemental indicators of our operating performance and financial
position as well for internal reporting and forecasting purposes, when publicly providing its outlook, to evaluate our performance and
calculate incentive compensation. We present these non-GAAP performance measures in addition to U.S. GAAP financial results
because we believe that these non-GAAP performance measures provide useful information to certain investors and financial analysts
for operational trends and comparisons over time. The use of these non-GAAP performance measures may also provide a consistent
basis to evaluate operating profitability and performance trends by excluding items that we do not consider to be controllable activities
for this purpose.
For example:
Adjusted EPS, Adjusted Revenue, Adjusted Operating Profit, Adjusted Contribution to Profit, and Adjusted EBITDA provide
a more comparable basis to analyze our operating results and earnings over time and are measures commonly used by
shareholders to measure our performance.
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Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our
shareholders as it represents cash available to repay debt, pay common stock dividends and fund share repurchases and
acquisitions.
Results on a constant currency basis removes distortion from the effects of foreign currency movements to provide better
comparability of our business trends from period to period. We measure our performance before the impact of foreign
currency (or at “constant currency”), which means that we apply the same foreign currency exchange rates for the current and
equivalent prior period.
In addition, we have historically provided these or similar non-GAAP performance measures and understand that some investors and
financial analysts find this information helpful in analyzing our operating margins, and net income and comparing our financial
performance to that of our peer companies and competitors. Based on interactions with investors, we also believe that our non-GAAP
performance measures are regarded as useful to our investors as supplemental to our U.S. GAAP financial results, and that there is no
confusion regarding the adjustments or our operating performance to our investors due to the comprehensive nature of our disclosures.
We have not provided our 2020 outlook for the most directly comparable U.S. GAAP financial measures, as they are not available
without unreasonable effort due to the high variability, complexity, and low visibility with respect to certain items, including
restructuring charges and credits, gains and losses on foreign currency, and other gains and losses. These items are uncertain, depend
on various factors, and could be material to our consolidated results computed in accordance with U.S. GAAP.
Non-GAAP performance measures do not have standardized meanings prescribed by U.S. GAAP and therefore may not be
comparable to the calculation of similar measures used by other companies and should not be viewed as alternatives to measures of
financial results under U.S. GAAP. The adjusted metrics have limitations as analytical tools and should not be considered in isolation
from or as a substitute for U.S. GAAP information. It does not purport to represent any similarly titled U.S. GAAP information and is
not an indicator of our performance under U.S. GAAP. Non-U.S. GAAP financial metrics that we present may not be comparable with
similarly titled measures used by others. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures.
PART I
Item 1. Business
The Company, founded in 1807, was incorporated in the state of New York on January 15, 1904. Throughout this report, when we
refer to “Wiley,” the “Company,” “we,” “our,” or “us,” we are referring to John Wiley & Sons, Inc. and all of our subsidiaries, except
where the context indicates otherwise.
Please refer to Part II, Item 8, “Financial Statements and Supplementary Data,” for financial information about the Company and its
subsidiaries, which is incorporated herein by reference. Also, when we cross reference to a “Note,” we are referring to our “Notes to
Consolidated Financial Statements,” unless the context indicates otherwise.
We are a global research and learning company. Through the Research segment, we provide scientific, technical, medical, and
scholarly journals, as well as related content and services, to academic, corporate, and government libraries, learned societies, and
individual researchers and other professionals. The Publishing segment provides scientific, professional, and education books and
related content in print and digital formats, as well as test preparation services and course workflow tools, to libraries, corporations,
students, professionals, and researchers. The Solutions segment provides online program management services for higher education
institutions and learning, development, and assessment services for businesses and professionals. Our operations are primarily located
in the United States (“U.S.”), United Kingdom (“U.K.”), Germany, Russia, Singapore, and France.
Business growth strategies include driving pricing and volume growth from existing journal and book brands and titles, as well as
learning services related to education and professional development, the development of new journal titles or through publishing
partnerships, technology and content acquisitions which complement our existing businesses, designing and implementing new
methods of delivering products to our customers, and the development of new products and services.
Business Segments
We report our segment information in accordance with the provisions of Financial Accounting Standards Board Accounting Standards
Codification Topic 280, “Segment Reporting” (“FASB ASC Topic 280”). Our segment reporting structure consists of three reportable
segments, which are listed below, and a Corporate category:
Research;
Publishing; and
Solutions
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Research:
Research’s mission is to support researchers, professionals and learners in the discovery and use of research knowledge to help them
achieve their goals in research, learning and practice. Research provides scientific, technical, medical, and scholarly journals, as well
as related content and services, to academic, corporate, and government libraries, learned societies, and individual researchers and
other professionals. Journal publishing areas include the physical sciences and engineering, health sciences, social sciences and
humanities and life sciences. Research also includes Atypon Systems, Inc. (“Atypon”), a publishing software and service provider that
enables scholarly and professional societies and publishers to deliver, host, enhance, market, and manage their content on the web
through the Literatum platform.
Research’s customers include academic, corporate, government, and public libraries, funders of research, researchers, scientists,
clinicians, engineers and technologists, scholarly and professional societies, and students and professors. Research’s products are sold
and distributed globally in digital and print formats through multiple channels, including research libraries and library consortia,
independent subscription agents, direct sales to professional society members, and other customers. Publishing centers include
Australia, China, Germany, India, the United Kingdom, and the United States. Research’s revenue accounted for approximately 52%
of our consolidated revenue in the year ended April 30, 2019.
Research’s major products are: Journal Subscriptions, Licensing, Reprints, Backfiles, and Other, Open Access and Publishing
Technology Services (Atypon). The graphs below present Research revenue by product type for the years ended April 30, 2019 and
2018:
Key growth strategies for the Research business include evolving and developing new licensing models for our institutional
customers, developing new open access products and revenue streams, focusing resources on high-growth and emerging markets, and
developing new digital products, services, and workflow solutions to meet the needs of researchers, authors, societies, and corporate
customers.
Journal Subscriptions
We publish approximately 1,700 academic research journals. We sell journal subscriptions directly through our sales representatives,
indirectly through independent subscription agents, through promotional campaigns, and through memberships in professional
societies for those journals that are sponsored by societies. Journal subscriptions, making up approximately 37% of our consolidated
2019 total company revenue, are primarily licensed through contracts for digital content available online through Wiley Online
Library, which we migrated to our Literatum platform in March 2018, acquired as part of our purchase of Atypon. Contracts are
negotiated by us directly with customers or their subscription agents. Subscription periods typically cover calendar years. Print
journals are generally mailed to subscribers directly from independent printers. We do not own or manage printing
facilities. Subscription revenue is generally collected in advance.
Approximately 50% of Journal Subscription revenue is derived from publishing rights owned by us. Publishing alliances also play a
major role in Research’s success. Approximately 50% of Journal Subscription revenue is derived from publication rights that are
owned by professional societies and published by us pursuant to a long-term contract (generally 5–10 years) or owned jointly with a
professional society. These society alliances bring mutual benefit, with the societies gaining Wiley’s publishing, marketing, sales, and
distribution expertise, while Wiley benefits from being affiliated with prestigious societies and their members. Societies that sponsor
or own such journals generally receive a royalty and/or other financial consideration. We may procure editorial services from such
societies on a pre-negotiated fee basis. We also enter into agreements with outside independent editors of journals that define the
duties of the editors and the fees and expenses for their services. Contributors of articles to our journal portfolio transfer publication
rights to us or a professional society, as applicable. We publish the journals of many prestigious societies, including the American
Cancer Society, the American Heart Association, the British Journal of Surgery Society, the European Molecular Biology
Organization, the American Anthropological Association, the American Geophysical Union, and the German Chemical Society.
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Literatum, our online publishing platform for our Research segment, delivers integrated access to over 7 million articles from 1,700
journals, as well as 19,000 online books and hundreds of multi-volume reference works, laboratory protocols and databases. Wiley
Online Library, which is delivered through our Literatum platform, provides the user with intuitive navigation, enhanced
discoverability, expanded functionality, and a range of personalization options. Access to abstracts is free and full content is accessible
through licensing agreements or as individual article purchases. Large portions of the content are provided free or at nominal cost to
nations in the developing world through partnerships with certain non-profit organizations. Our online publishing platforms provide
revenue growth opportunities through new applications and business models, online advertising, deeper market penetration, and
individual sales and pay-per-view options. The Literatum platform hosts over 40% of the world’s English language journals.
In 2018, Wiley saw an increase in impact factors across more than half of its indexed titles. An Impact Factor is an industry measure
of the importance of a journal within its field and is determined based on the number of citations received by the journal, from other
journals. According to the 2017 Journal Citation Reports (“JCR”), re-released in October 2018 by Clarivate Analytics, 58% of Wiley
journals increased their impact factor between 2016 and 2017. Wiley had 1,221 journals indexed (72% of the Wiley portfolio), with
13 Wiley titles receiving their first impact factor in this year’s JCR release. In addition, 25 Wiley journals achieved a top-category
rank, including CA:A Cancer Journal for Clinicians (Impact Factor of 244.585, ranked #1 in Oncology), World Psychiatry (Impact
Factor of 30.000, ranked #1 in Psychiatry – the first Social Sciences title to reach an Impact Factor of 30) and Journal of Cachexia,
Sarcopenia and Muscle (Impact Factor of 12.511, ranked #1 in Geriatrics & Gerontology). The Clarivate Analytics index is a
barometer of journal influence across the research community.
Licensing, Reprints, Backfiles, and Other
Licensing, Reprints, Backfiles, and Other includes advertising, backfile sales, the licensing of publishing rights, journal and article
reprints, and individual article sales. We generate advertising revenue from print and online journal subscription products, our online
publishing platform, Literatum, online events such as webinars and virtual conferences, community interest Web sites such as
spectroscopyNOW.com, and other Web sites. A backfile license provides access to a historical collection of Wiley journals, generally
for a one-time fee. We also engage with international publishers and receive licensing revenue from photocopies, reproductions,
translations, and other digital uses of our content. Journal and article reprints are primarily used by pharmaceutical companies and
other industries for marketing and promotional purposes. Through the Article Select and PayPerView programs, we provide fee-based
access to non-subscribed journal articles, content, book chapters, and major reference work articles. The Research business is also a
provider of content and services in evidence-based medicine (“EBM”). Through our alliance with The Cochrane Collaboration, we
publish The Cochrane Library, a premier source of high-quality independent evidence to inform healthcare decision-making. EBM
facilitates the effective management of patients through clinical expertise informed by best practice evidence that is derived from
medical literature.
Open Access
Under the Author-Funded Access business model, accepted research articles are published subject to payment of Article Publication
Charges ("APCs"). All Author-Funded articles are immediately free to access online. Contributors of Author-Funded Access articles
retain many rights and typically license their work under terms that permit re-use.
Author-Funded Access offers authors choices in how to share and disseminate their work, and it serves the needs of researchers who
may be required by their research funder to make articles freely accessible without embargo. APCs are typically paid by the individual
author or by the author’s funder, and payments are often mediated by the author’s institution. We provide specific workflows and
infrastructure to authors, funders, and institutions to support the requirements of the Author-Funded Access model.
We offer two Open Access publishing models. The first of these is Hybrid Open Access where, upon payment of an APC, authors
publishing in the majority of our paid subscription journals are offered, after article acceptance, the opportunity to make their
individual research article openly available through the OnlineOpen service.
The second offering of the Open Access model is a growing portfolio of fully open access journals, also known as Gold Open Access
Journals, in which all accepted articles are published subject to receipt of an APC. All Open Access articles are subject to the same
rigorous peer-review process applied to our subscription-based journals. As with our subscription portfolio, a number of the Gold
Open Access Journals are published under contract for, or in partnership with, prestigious societies, including the American
Geophysical Union, the American Heart Association, the European Molecular Biology Organization and the British Ecological
Society. The Open Access portfolio spans life, physical, medical and social sciences and includes a choice of high impact journals and
broad-scope titles that offer a responsive, author-centered service.
In January 2019, Wiley announced a new contractual arrangement in support of Open Access, a countrywide partnership agreement
with Projekt DEAL, a representative of nearly 700 academic institutions in Germany. This transformative three-year agreement
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provides all Projekt DEAL institutions with access to read Wiley’s academic journals back to the year 1997, and researchers at Projekt
DEAL institutions can publish articles open access in Wiley’s journals. The partnership will better support institutions and researchers
in advancing open science, driving discovery, and developing and disseminating knowledge. We are compensated primarily through a
fee per article published.
Publishing Technology Services (Atypon)
Atypon is a publishing software and service provider that enables scholarly and professional societies and publishers to deliver, host,
enhance, market, and manage their content on the web through the Literatum platform.
Publishing:
Our Publishing segment acquires, develops, and publishes scientific, professional and education books and related content, as well as
test preparation services and course workflow tools, to libraries, corporations, students, professionals, and researchers. Communities
served include business, finance, accounting, workplace learning, management, leadership, technology, behavioral health,
engineering/ architecture, science and medicine, and education. Products are developed in print and digitally for worldwide
distribution through multiple channels, including chain and online booksellers, libraries, colleges and universities, corporations, direct
to consumer, Web sites, distributor networks and other online applications. Publishing centers include Australia, Germany, India, the
United Kingdom, and the United States. Publishing accounted for approximately 32% of our consolidated revenue in the year ended
April 30, 2019.
Publishing revenue by product type are: STM (Scientific, Technical and Medical) and Professional Publishing, Education Publishing,
Test Preparation and Certification, Courseware (WileyPLUS), and Licensing, Distribution, Advertising and Other. The graphs below
present Publishing revenue by product type for the years ended April 30, 2019 and 2018:
Key growth strategies for the Publishing business include developing and acquiring products and services to drive corporate
development and professional career development, developing leading brands and franchises, executing strategic acquisitions and
partnerships, and innovating digital book formats while expanding their global discoverability and distribution. We continue to
implement strategies to manage declines in print revenue through cost improvement initiatives and focusing our efforts on growing its
digital lines of business. We are continuing to perform portfolio reviews and workforce realignment, restructuring, and operational
excellence initiatives. In certain areas, we will explore new formats or promote digital-only, and in other areas, we may rationalize our
portfolio. Our approach is to continue to realign our cost structure to help mitigate the market changes that are contributing to revenue
decline, and to sharpen our focus on high performing areas and digital opportunities, while improving operating efficiency.
Publishing
Book products accounted for approximately 24% of our consolidated fiscal year 2019 revenue. Categories include STM, Professional,
and Education Publishing.
STM books are sold and distributed globally in digital and print formats through multiple channels, including research libraries and
library consortia, independent subscription agents, direct sales to professional society members, bookstores, online booksellers, and
other customers.
Professional books, which include business and finance, technology, and other professional categories, as well as the For Dummies
brand, are sold to bookstores and online booksellers serving the general public, wholesalers who supply such bookstores, warehouse
clubs, college bookstores, individual practitioners, industrial organizations and government agencies. We employ sales representatives
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who call upon independent bookstores, national and regional chain bookstores, and wholesalers. Sales of professional books also
result from direct mail campaigns, telemarketing, online access, advertising, and reviews in periodicals.
Education textbooks and related supplementary material and digital products are sold primarily to bookstores and online booksellers
serving both for-profit and nonprofit educational institutions (primarily colleges and universities), and direct-to-students. We employ
sales representatives who call on faculty responsible for selecting books to be used in courses, and on the bookstores that serve such
institutions and their students. The textbook business is seasonal, with the majority of textbook sales occurring during the July-
through- October and December-through-January periods. There are active used and rental print textbook markets, which adversely
affect the sale of new textbooks. We are exploring opportunities to expand into the print rental market.
Book sales for STM, Professional and Education Publishing are generally made on a returnable basis with certain restrictions. We
provide for estimated future returns on sales made during the year based on historical return experience and current market trends.
Materials for book publications are obtained from authors throughout most of the world, utilizing the efforts of an editorial staff,
outside editorial advisors, and advisory boards. Most materials are originated by the authors themselves or as a result of suggestion or
solicitations by editors and advisors. We enter into agreements with authors that state the terms and conditions under which the
materials will be published, the name in which the copyright will be registered, the basis for any royalties, and other matters. Most of
the authors are compensated with royalties, which vary depending on the nature of the product. We may make advance royalty
payments against future royalties to authors of certain publications. Royalty advances are reviewed for recoverability and a reserve for
loss is maintained, if appropriate.
We continue to add new titles, revise existing titles, and discontinue the sale of others in the normal course of our business, and we
also create adaptations of original content for specific markets based on customer demand. Our general practice is to revise our
textbooks approximately every three years, if warranted, and to revise other titles as appropriate. Subscription-based products are
updated on a more frequent basis.
We generally contract with independent printers and binderies globally for their services. Management believes that adequate printing
and binding facilities and sources of paper and other required materials are available to it, and that it is not dependent upon any single
supplier.
In fiscal year 2016, we entered into an agreement to outsource our US-based book distribution operations to Cengage Learning, with
the continued aim of improving efficiency in our distribution activities and moving to a more variable cost model. As of April 30,
2019, we had one global warehousing and distribution facility remaining, which is in the United Kingdom.
We develop content in a digital format that can be used for both digital and print products, resulting in productivity and efficiency
savings, and enabling print-on-demand delivery. Book content is available online through Wiley Online Library (delivered through our
Literatum platform), WileyPLUS, Wiley Custom Select, and other proprietary platforms. Digital books are delivered to intermediaries,
including Amazon, Apple, Google and Ingram/Vital-Source, for re-sale to individuals in various industry-standard formats, which are
now the preferred deliverable for licensees of all types, including foreign language publishers. Digital books are also licensed to
libraries through aggregators. Specialized formats for digital textbooks go to distributors servicing the academic market, and digital
book collections are sold by subscription through independent third-party aggregators servicing distinct communities. Custom
deliverables are provided to corporations, institutions, and associations to educate their employees, generate leads for their products,
and extend their brands. Content from digital books is also used to create online articles, mobile apps, newsletters, and promotional
collateral. This continual re-use of content improves margins, speeds delivery, and helps satisfy a wide range of customer needs. Our
online presence not only enables us to deliver content online, but also to sell more books. The growth of online booksellers benefits us
because they provide unlimited virtual “shelf space” for our entire backlist.
Publishing alliances and franchise products are important to our strategy. Professional publishing alliance partners include the AICPA,
the CFA Institute, ACT (American College Test), IEEE, American Institute of Chemical Engineers, and many others. Education
publishing alliance partners include Microsoft®, Blackboard, Instructure, and the Culinary Institute of America. The ability to join
Wiley’s product development, sales, marketing, distribution, and technology with a partner’s content, technology, and/or brand name
has contributed to our success.
We also promote active and growing custom professional and education publishing programs. Our custom professional publications
are used by professional organizations for internal promotional or incentive programs and include digital and print books written
specifically for a customer and customizations of existing publications to include custom cover art, such as imprints, messages, and
slogans. More specific are customized For Dummies publications, which leverage the power of this well-known brand to meet the
specific information needs of a wide range of organizations around the world. Our custom education publishing program offers an
array of tools and services designed to put the creation of customized content in instructors’ hands to create high-quality, affordable
education solutions tailored to meet individual classroom needs. Through Wiley Custom Select, an online custom textbook system,
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instructors can build print and digital materials tailored to their specific course needs and add their own content to create a customized
solution.
Courseware (WileyPLUS)
We offer high-quality online learning solutions, including WileyPLUS, a research-based, online environment for effective teaching and
learning that is integrated with a complete digital textbook. WileyPLUS improves student learning through instant feedback,
personalized learning plans, and self-evaluation tools, as well as a full range of course-oriented activities, including online planning,
presentations, study, homework, and testing. In selected courses, WileyPLUS includes a personalized adaptive learning component,
Orion, which is based on cognitive science. Orion helps to build student proficiency on topics while improving the effectiveness of
their study time. It assists educators in identifying areas that need reinforcement and measures student engagement and proficiency
throughout the course.
Test Preparation and Certification
The Test Preparation and Certification business represents learning solutions, training activities and print and digital formats that are
delivered to customers directly through online digital delivery platforms, bookstores, online booksellers, and other customers.
Products include CPAExcel, a modular, digital platform comprised of online self-study, videos, mobile apps, and sophisticated
planning tools to help professionals prepare for the CPA exam, and test preparation products for the CFA®, CMA, CIA®, CMT®,
FRN®, FINRA, Banking, and PMP® exams.
Licensing, Distribution, Advertising, and Other
Licensing and distribution services are made available to other publishers under agency arrangements. We also engage in co-
publishing titles with international publishers and receive licensing revenue from photocopies, reproductions, translations, and digital
uses of our content. Wiley also realizes advertising revenue from branded Web sites (e.g., Dummies.com, etc.) and online applications.
Solutions:
Our Solutions segment provides online program management services for higher education institutions and learning, development, and
assessment services for businesses and professionals. Key growth strategies include developing new products and services for existing
university partners, increasing enrollments for online program management programs, signing new and prestigious university partners,
and developing new digital learning solutions by integrating our professional assessment products and services with our Corporate
Learning content and technology.
Solutions revenue by product type are Education Services, Professional Assessment, and Corporate Learning. The graphs below
present Solutions revenue by product type for the years ended April 30, 2019 and 2018:
Education Services
As student demand for online degree and certificate programs continues to increase, traditional institutions are partnering with online
program management providers to develop and support these programs. Education Services include market research, marketing,
student recruitment, enrollment support, proactive retention support, academic services to design courses, faculty support, and access
to the Engage Learning Management System, which facilitates the online education experience. Graduate degree programs include
Business Administration, Finance, Accounting, Healthcare, Engineering, Communications, and others. Revenue is derived from pre-
negotiated contracts with institutions that provide for a share of tuition generated from students who enroll in a program. As of April
30, 2019, the legacy Education Services business had 39 university partners and 276 degree programs under contract.
On November 1, 2018, Wiley acquired The Learning House, Inc. (“Learning House”) headquartered in Louisville (KY). Learning
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House provides online program management services including graduate and undergraduate programs; short courses, boot camps, and
other skills training and credentialing for students and professionals; pathway services for international students; professional
development services for teachers; and learning solutions for corporate clients.
Corporate Learning
The Corporate Learning business offers online learning and training solutions for global corporations, universities, and small and
medium-sized enterprises, which are sold on a subscription or fee basis. Learning formats and modules on topics such as leadership
development, value creation, client orientation, change management and corporate strategy are delivered on a cloud-based Learning
Management System (“LMS”) platform that hosts over 20,000 content assets (videos, digital learning modules, written files, etc.) in
17 languages. Its Mohive offering also provides a collaborative e-learning publishing and program creation system. Revenue growth is
derived from legacy markets, such as France, England, and other European markets, and newer markets, such as the U.S. and Brazil.
In addition, content and LMS offerings are continuously refreshed and expanded to serve a wider variety of customer needs. These
digital learning solutions are sold directly to corporate customers either direct or through our partners.
Professional Assessment
Our professional assessment services include pre-hire screening and post-hire personality assessments, which are delivered to business
customers through online digital delivery platforms, either directly or through an authorized distributor network of independent
consultants, trainers, and coaches. Wiley’s leadership assessment offerings also include Kouzes and Posner’s Leadership Practices
Inventory® and The Five Behaviors of a Cohesive TeamTM.
Our assessment tools enable employers to optimize candidate selections and develop the full potential of their employees. These
solutions include pre-hire assessments, including those designed to measure and match personality, knowledge, skills, managerial fit,
loyalty, and values, and post-hire assessments, focused on measuring sales and managerial effectiveness, employee performance, and
career potential.
Employees
As of April 30, 2019, we employed approximately 5,700 persons on a full-time equivalent basis worldwide.
Financial Information About Business Segments
The information set forth in Note 19, “Segment Information,” of the Notes to Consolidated Financial Statements and Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K are incorporated
herein by reference.
Available Information
Our Internet address is www.wiley.com. We make available, free of charge, on or through our website, our Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports that we file or furnish
pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, as soon as reasonably practicable
after we electronically file these materials with, or furnish them to, the SEC. The information contained on, or that may be accessed
through, our website is not incorporated by reference into, and is not a part of, this Form 10-K.
Item 1A. Risk Factors
You should carefully consider all of the information set forth in this Form 10-K, including the following risk factors, before deciding
to invest in any of our securities. The risks below are the most significant risks we face but are not the only risk factors we face.
Additional risks not currently known to us or that we presently deem insignificant could impact our consolidated financial position
and results of operations. Our business, consolidated financial position, and results of operations could be materially adversely
affected by any of these risks. The trading price of our securities could decline due to any of these risks, and investors in our securities
may lose all or part of their investment.
The trading price of the shares of our common stock may fluctuate materially, and investors of our common stock could incur
substantial losses.
Our stock price may fluctuate materially. The stock market in general has experienced significant volatility that has often been
unrelated to the operating performance of companies. As a result of this volatility, investors may not be able to sell their common
stock at or above the price paid for the shares. The market price for our common stock may be influenced by many factors, including:
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actual or anticipated changes in our consolidated operating results;
variances between actual consolidated operating results and the expectations of securities analysts, investors and the financial
community;
changes in financial estimates by us or by any securities analysts who might cover our stock;
conditions or trends in our industry, the stock market or the economy;
the level of demand for our stock, the stock market price and volume fluctuations of comparable companies;
announcements by us or our competitors of new product or service offerings, significant acquisitions, strategic partnerships
or divestitures;
announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;
capital commitments;
investors’ general perception of the Company and our business;
recruitment or departure of key personnel; and
sales of our common stock, including sales by our directors and officers or specific stockholders.
If we are unable to introduce new technologies, products, and services, our ability to be profitable may be adversely affected.
We must continue to invest in technology and other innovations to adapt and add value to our products and services to remain
competitive. This is particularly true in the current environment, where investment in new technology is ongoing and there are rapid
changes in the products competitors are offering, the products our customers are seeking, and our sales and distribution channels. In
some cases, investments will take the form of internal development; in others, they may take the form of an acquisition. There are
uncertainties whenever developing or acquiring new products and services, and it is often possible that such new products and services
may not be launched, or, if launched, may not be profitable or as profitable as existing products and services.
The demand for digital and lower cost books could impact our sales volumes and pricing in an adverse way.
A common trend facing each of our businesses is the digitization of content and proliferation of distribution channels through the
internet and other electronic means, which are replacing traditional print formats. The trend to digital content has also created
contraction in the print book retail market which increases the risk of bankruptcy for certain retail customers, potentially leading to the
disruption of short-term product supply to consumers, as well as potential bad debt write-offs. New distribution channels, such as
digital formats, the internet, online retailers, and growing delivery platforms (e.g. tablets and e-readers), combined with the
concentration of retailer power, present both risks and opportunities to our traditional publishing models, potentially impacting both
sales volumes and pricing.
As the market has shifted to digital products, customer expectations for lower-priced products have increased due to customer
awareness of reductions in production costs and the availability of free or low-cost digital content and products. As a result, there has
been pressure to sell digital versions of products at prices below their print versions. Increased customer demand for lower prices
could reduce our revenue.
We publish educational content for undergraduate, graduate, and advanced placement students, lifelong learners, and in Australia, for
secondary school students. Due to growing student demand for less expensive textbooks, many college bookstores, online retailers and
other entities offer used or rental textbooks to students at lower prices than new textbooks. The internet has made the used and rental
textbook markets more efficient and has significantly increased student access to used and rental books. Further expansion of the used
and rental book markets could further adversely affect our sales of print textbooks, subsequently affecting our consolidated financial
position and results of operations.
A reduction in enrollment at colleges and universities could adversely affect the demand for our higher education products.
Enrollment in U.S. colleges and universities can be adversely affected by many factors, including changes in government and private
student loan and grant programs, uncertainty about current and future economic conditions, increases in tuition, general decreases in
family income and net worth, and a perception of uncertain job prospects for graduates. In addition, enrollment levels at colleges and
universities outside the United States are influenced by global and local economic factors, local political conditions, and other factors
that make predicting foreign enrollment levels difficult. Reductions in expected levels of enrollment at colleges and universities both
within and outside the United States could adversely affect demand for our higher education products, which could adversely impact
our consolidated financial position and results of operations.
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The competitive pressures we face in our business, as well as our ability to retain our business relationships with our authors and
professional societies, could adversely affect our consolidated financial position and results of operations.
We operate in highly competitive markets. Success and continued growth depend greatly on developing new products and the means
to deliver them in an environment of rapid technological change. Attracting new authors and professional societies while retaining our
existing business relationships is critical to our success. If we are unable to retain our existing business relationships with authors and
professional societies, this could have an adverse impact on our consolidated financial position and results of operations.
Our intellectual property rights may not be protected, which could adversely affect our consolidated financial position and results of
operations.
A substantial portion of our publications are protected by copyright, held either in our name, in the name of the author of the work, or
in the name of a sponsoring professional society. Such copyrights protect our exclusive right to publish the work in many countries
abroad for specified periods, in most cases, the author’s life plus 70 years, but in any event, a minimum of 50 years for works
published after 1978. Our ability to continue to achieve our expected results depends, in part, upon our ability to protect our
intellectual property rights. Our consolidated financial position and results of operations may be adversely affected by lack of legal
and/or technological protections for its intellectual property in some jurisdictions and markets.
Adverse publicity could negatively impact our reputation, which could adversely affect our consolidated financial position and results
of operations.
Our professional customers worldwide rely upon many of our publications to perform their jobs. It is imperative that we consistently
demonstrate our ability to maintain the integrity of the information included in our publications. Adverse publicity, whether valid or
not, may reduce demand for our publications and adversely affect our consolidated financial position and results of operations.
In our journal publishing business we have a trade concentration and credit risk related to subscription agents, and in our book
business the industry has a concentration of customers in national, regional, and online bookstore chains. Changes in the financial
position and liquidity of our subscription agents and customers, could adversely impact our consolidated financial position and
results of operations.
In the journal publishing business, subscriptions are primarily sourced through journal subscription agents who, acting as agents for
library customers, facilitate ordering by consolidating the subscription orders/billings of each subscriber with various publishers. Cash
is generally collected in advance from subscribers by the subscription agents and is principally remitted to us between the months of
December and April. Although at fiscal year-end we had minimal credit risk exposure to these agents, future calendar-year
subscription receipts from these agents are highly dependent on their financial condition and liquidity.
Subscription agents account for approximately 20% of total annual consolidated revenue and one affiliated group of subscription
agents accounts for approximately 10% of total annual consolidated revenue.
Our book business is not dependent upon a single customer; however, the industry is concentrated in national, regional, and online
bookstore chains. Although no one book customer accounts for more than 8% of total consolidated revenue and 11% of accounts
receivable at April 30, 2019, the top 10 book customers account for approximately 13% of total consolidated revenue and
approximately 21% of accounts receivable at April 30, 2019. We maintain approximately $25 million of trade credit insurance,
covering balances due from certain named customers, subject to certain limitations and annual renewal.
Changes in laws, tariffs, and regulations, including regulations related to open access, could adversely impact our consolidated
financial position and results of operations.
We maintain operations in Asia, Australia, Canada, Europe, and the United States. The conduct of our business, including the sourcing
of content, distribution, sales, marketing, and advertising, is subject to various laws and regulations administered by governments
around the world. Changes in laws, regulations, or government policies, including tax regulations and accounting standards, may
adversely affect our future consolidated financial position and results of operations.
The scientific research publishing industry generates much of its revenue from paid customer subscriptions to online and print journal
content. There is debate within government, academic, and library communities whether such journal content should be made
available for free, immediately or following a period of embargo after publication, referred to as “open access,” For instance, certain
governments and privately held funding bodies have implemented mandates that require journal articles derived from government-
funded research to be made available to the public at no cost after an embargo period. Open access can be achieved in two ways:
Green, which enables authors to publish articles in subscription based journals and self–archive the author accepted version of the
article for free public use after an embargo period, and Gold, which enables authors to publish their articles in journals that provide
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immediate free access to the final version of the article on the publisher’s Web site, and elsewhere under permissive licensing terms,
following payment of an APC. These mandates have the potential to put pressure on subscription-based publications. If such
regulations are widely implemented, our consolidated financial position and results of operations could be adversely affected.
To date, the majority of governments that have taken a position on open access have favored the green model and have generally
specified embargo periods of twelve months. The publishing community generally takes the view that this period should be sufficient
to protect subscription revenues, provided that publishers’ platforms offer sufficient added value to the article. Governments in Europe
have been more supportive of the gold model, which thus far is generating incremental revenue for publishers with active open access
programs. A number of European administrations are showing interest in a business model which combines the purchasing of
subscription content with the purchase of open access publishing for authors in their country. This development removes an element of
risk by fixing revenues from that market, provided that the terms, price, and rate of transition negotiated are acceptable.
The uncertainty surrounding the implementation and effect of Brexit may cause increased economic volatility, affecting our operations
and business.
In June 2016, voters in the U.K. approved an advisory referendum to withdraw from the European Union, commonly referred to as
"Brexit." On March 29, 2017, the U.K. formally notified the European Council of the U.K.'s intention to withdraw from the European
Union under Article 50 of the Treaty of Lisbon. The notice began the two-year negotiation period to establish the withdrawal terms.
The U.K.'s separation was to become effective on March 29, 2019. However, on April 12, 2019, the European Union agreed to an
extension to October 31, 2019. A withdrawal without a trade agreement in place could significantly disrupt the free movement of
goods, services, and people between the U.K. and the European Union, and result in increased legal and regulatory complexities, as
well as potential higher costs of conducting business in Europe. Additional Brexit-related impacts on our business could include
potential inventory shortages in the U.K., increased regulatory burdens and costs to comply with U.K.-specific regulations and higher
transportation costs for our products coming into and out of the U.K. Further, the uncertainty surrounding the terms of the U.K.'s
withdrawal and its consequences could adversely impact consumer and investor confidence and could affect sales or regulation of our
products. Any of these effects, among others, could materially and adversely affect our business and consolidated financial position
and results of operations.
A disruption or loss of data sources could limit our collection and use of certain kinds of information, which could adversely impact
our communication with our customers.
A number of our businesses rely extensively upon content and data from external sources. Data is obtained from public records,
governmental authorities, customers and other information companies, including competitors. Legal regulations, such as the European
Union’s General Data Protection Regulation (“GDPR”), relating to internet communications, privacy and data protection, e-
commerce, information governance, and use of public records, are becoming more prevalent worldwide. The disruption or loss of data
sources, either because of changes in the law or because data suppliers decide not to supply them, may impose limits on our collection
and use of certain kinds of information about individuals and our ability to communicate such information effectively with our
customers. In addition, GDPR imposes a strict data protection compliance regime with severe penalties of up to 4% of worldwide
revenue or €20 million, whichever is greater.
If we are unable to retain key employees and other personnel, our consolidated financial condition or results of operations may be
adversely affected.
We have a significant investment in our employees around the world. We offer competitive salaries and benefits in order to attract and
retain the highly skilled workforce needed to sustain and develop new products and services required for growth. Employment and
benefit costs are affected by competitive market conditions for qualified individuals, and factors such as healthcare and retirement
benefit costs.
We are highly dependent on the continued services of key employees who have in-depth market and business knowledge and/or key
relationships with business partners. The loss of the services of key personnel for any reason and our inability to replace them with
suitable candidates quickly or at all, as well as any negative market perception resulting from such loss, could have a material adverse
effect on our business, consolidated financial position, and results of operation.
We may not realize the anticipated cost savings and benefits from, or our business may be disrupted by, our business transformation
and restructuring efforts.
We continue to transform our business from a traditional publishing model to a global provider of content-enabled solutions with a
focus on digital products and services. The acquisitions of Deltak.edu, LLC (“Deltak”), Inscape Holdings, Inc. (“Inscape”), Profiles
International (“Profiles”), CrossKnowledge Group Limited (“CrossKnowledge”), and The Learning House, Inc. (“Learning House”),
comprise our Solutions reporting segment and, along with Atypon in our Research segment, represent examples of strategic initiatives
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that were implemented as part of our business transformation. We will continue to explore opportunities to develop new business
models and enhance the efficiency of our organizational structure. The rapid pace and scope of change increases the risk that not all of
our strategic initiatives will deliver the expected benefits within the anticipated timeframes. In addition, these efforts may somewhat
disrupt our business activities, which could adversely affect our consolidated financial position and results of operations.
We continue to restructure and realign our cost base with current and anticipated future market conditions. Significant risks associated
with these actions that may impair our ability to achieve the anticipated cost savings or that may disrupt our business include delays in
the implementation of anticipated workforce reductions in highly regulated locations outside of the U.S., decreases in employee
morale, the failure to meet operational targets due to the loss of key employees, and disruptions of third parties to whom we have
outsourced business functions. In addition, our ability to achieve the anticipated cost savings and other benefits from these actions
within the expected timeframe is subject to many estimates and assumptions. These estimates and assumptions are subject to
significant economic, competitive, and other uncertainties, some of which are beyond our control. If these estimates and assumptions
are incorrect, if we experience delays, or if other unforeseen events occur, our business and consolidated financial position and results
of operations could be adversely affected.
We may not realize the anticipated cost savings and processing efficiencies associated with the outsourcing of certain business
processes.
We have outsourced certain business functions, principally in technology, content management, printing, manufacturing, warehousing,
fulfillment, distribution, returns processing, and certain other transactional processing functions, to third-party service providers to
achieve cost savings, and efficiencies. If these third-party service providers do not perform effectively, we may not be able to achieve
the anticipated cost savings, and depending on the function involved, we may experience business disruption or processing
inefficiencies, all with potential adverse effects on our consolidated financial position and results of operations.
We may be susceptible to information technology risks that may adversely impact our business, consolidated financial position and
results of operations.
Information technology is a key part of our business strategy and operations. As a business strategy, Wiley’s technology enables us to
provide customers with new and enhanced products and services and is critical to our success in migrating from print to digital
business models. Information technology is also a fundamental component of all of our business processes, collecting and reporting
business data, and communicating internally and externally with customers, suppliers, employees, and others.
Our business is dependent on information technology systems to support our businesses. We provide internet-based products and
services to our customers. We also use complex information technology systems and products to support our business activities,
particularly in infrastructure, and as we move our products and services to an increasingly digital delivery platform.
We face technological risks associated with internet-based product and service delivery in our businesses, including with respect to
information technology capability, reliability and security, enterprise resource planning, system implementations and upgrades.
Failures of our information technology systems and products (including because of operational failure, natural disaster, computer
virus, or hacker attacks) could interrupt the availability of our internet-based products and services, result in corruption or loss of data
or breach in security, and result in liability or reputational damage to our brands and/or adversely impact our consolidated financial
position and results of operations.
Management has designed and implemented policies, processes and controls to mitigate risks of information technology failure and to
provide security from unauthorized access to our systems. In addition, we have disaster recovery plans in place to maintain business
continuity. The size and complexity of our information technology and information security systems, and those of our third-party
vendors with whom we contract, make such systems potentially vulnerable to cyber-attacks common to most industries from
inadvertent or intentional actions by employees, vendors, or malicious third parties. Such attacks are of ever-increasing levels of
sophistication and are made by groups and individuals with a wide range of motives. While we have taken steps to address these risks,
there can be no assurance that a system failure, disruption, or data security breach would not adversely affect our business and could
have an adverse impact on our consolidated financial position and results of operations.
We are continually improving and upgrading our computer systems and software. We are in the process of implementing a new global
Enterprise Resource Planning (“ERP”) system as part of a multi-year plan to integrate and upgrade our operational and financial
systems and processes. As of April 30, 2019, we have completed the implementation of record-to-report, purchase-to-pay, and several
other business processes within all locations through fiscal year 2017. We completed the implementation of order-to-cash for certain
businesses in May 2018 and may continue to roll out additional processes and functionality of the ERP system in phases in the
foreseeable future. Implementation of a new ERP system involves risks and uncertainties. Any disruptions, delays, or deficiencies in
the design or implementation of a new system could result in increased costs, disruptions in operations, or delays in the collection of
cash from our customers, as well as having an adverse effect on our ability to timely report our financial results, all of which could
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materially adversely affect our business, consolidated financial position and results of operations.
Cyber risk and the failure to maintain the integrity of our operational or security systems or infrastructure, or those of third parties
with which we do business, could have a material adverse effect on our business, consolidated financial condition, and results of
operations.
Cyber-attacks and hackers are becoming more sophisticated and pervasive. Our business is dependent on information technology
systems to support our businesses. We provide internet-based products and services to our customers. We also use complex
information technology systems and products to support our business activities, particularly in infrastructure and as we move our
products and services to an increasingly digital delivery platform. Across our businesses, we hold personal data, including that of
employees and customers.
Efforts to prevent cyber-attacks and hackers from entering our systems are expensive to implement and may limit the functionality of
our systems. Individuals may try to gain unauthorized access to our systems and data for malicious purposes, and our security
measures may fail to prevent such unauthorized access. Cyber-attacks and/or intentional hacking of our systems could adversely affect
the performance or availability of our products, result in loss of customer data, adversely affect our ability to conduct business, or
result in theft of our funds or proprietary information, the occurrence of which could have an adverse impact on our consolidated
financial position and results of operations.
Fluctuations in interest rates and foreign currency exchange rates could materially impact our consolidated financial condition and
results of operations.
Non-U.S. revenues, as well as our substantial non-U.S. net assets, expose our consolidated results to volatility from changes in foreign
currency exchange rates. Non-U.S. dollar revenues accounted for 46% of our total consolidated revenues for fiscal year 2019, which
primarily includes revenues in British pound sterling of 26% and euro of 12%. In addition, our interest-bearing loans and borrowings
are subject to risk from changes in interest rates. These risks and the measures we have taken to help mitigate them are discussed in
Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of this Annual Report on Form 10-K. We may, from
time-to-time, use derivative instruments to hedge such risks. Notwithstanding our efforts to foresee and mitigate the effects of changes
in external market or fiscal circumstances, we cannot predict with certainty changes in foreign currency exchange rates and interest
rates, inflation, or other related factors affecting our business, consolidated financial position and results of operations.
We may not be able to mitigate the impact of inflation and cost increases, which could have an adverse impact on our consolidated
financial position and results of operations.
From time to time, we experience cost increases reflecting, in part, general inflationary factors. There is no guarantee that we can
increase selling prices or reduce costs to fully mitigate the effect of inflation on our costs, which may adversely impact our
consolidated financial position and results of operations.
Changes in tax laws, including regulations and other guidance in connection with the U.S. Federal tax legislation originally known as
the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), could have a material impact on our consolidated financial position and results of
operations.
We are subject to tax laws within the jurisdictions in which we conduct business, including the U.S. and many foreign jurisdictions. In
addition to the Tax Act in the U.S., changes in tax laws and interpretations in other jurisdictions where we do business, such as the
U.K. and Germany, could significantly impact the taxation of our non-U.S. earnings. This could have a material impact on our
consolidated financial position and results of operations as most of our income is earned outside the U.S. In addition, we are subject to
audit by tax authorities and are regularly audited by various tax authorities. Although we believe our tax estimates are reasonable, the
final determination of tax audits could be materially different from our historical income tax provisions and accruals and could have a
material impact on our consolidated financial position and results of operations.
Challenges and uncertainties associated with operating in developing markets has a higher risk due to political instability, economic
volatility, crime, terrorism, corruption, social and ethnic unrest, and other factors, which may adversely impact our consolidated
financial position and results of operations.
We sell our products to customers in certain sanctioned and previously sanctioned developing markets where we do not have
operating subsidiaries. We do not own any assets or liabilities in these markets except for trade receivables. In the year ended April
30, 2019, we recorded an immaterial amount of revenue and net earnings related to sales to Cuba, Sudan, Syria and Iran. While sales
in these markets are not material to our consolidated financial position and results of operations, adverse developments related to the
risks associated with these markets may cause actual results to differ from historical and forecasted future consolidated operating
results.
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We have certain technology development operations in Russia and Sri Lanka related to software development and architecture, digital
content production, and system testing services. Due to the political instability within these regions, there is the potential for future
government embargos and sanctions, which could disrupt our operations in this area. While we have developed business continuity
plans to address these issues, further adverse developments in the region could have a material impact on our consolidated financial
position and results of operations.
Approximately 19% of Research journal articles are sourced from authors in China. Any restrictions on exporting intellectual property
could adversely affect our business and consolidated financial position and results of operations.
Changes in global economic conditions could impact our ability to borrow funds and meet our future financing needs.
Changes in global financial markets have not had, nor do we anticipate they will have, a significant impact on our liquidity. Due to our
significant operating cash flow, financial assets, access to capital markets, and available lines of credit and revolving credit
agreements, we continue to believe that we have the ability to meet our financing needs for the foreseeable future. As market
conditions change, we will continue to monitor our liquidity position. However, there can be no assurance that our liquidity or our
consolidated financial position and results of operations will not be adversely affected by possible future changes in global financial
markets and global economic conditions. Unprecedented market conditions including illiquid credit markets, volatile equity markets,
dramatic fluctuations in foreign currency rates, and economic recession could affect future results.
Changes in pension costs and related funding requirements may impact our consolidated financial position and results of operations.
We provide defined benefit pension plans for certain employees worldwide. Our Board of Directors approved amendments to the U.S.,
Canada and U.K. defined benefit plans that froze the future accumulation of benefits effective June 30, 2013, December 31, 2015, and
April 30, 2015, respectively. The funding requirements and costs of these plans are dependent upon various factors, including the
actual return on plan assets, discount rates, plan participant population demographics, and changes in pension regulations. Changes in
these factors affect our plan funding, consolidated financial position, and results of operations.
We may not be able to realize the expected benefits of our growth strategies, including successfully integrating acquisitions, which
could adversely impact our consolidated financial position and results of operations.
Our growth strategy includes title, imprint, and other business acquisitions, including knowledge-enabled services, which complement
our existing businesses. Acquisitions may have a substantial impact on our consolidated financial position and results of operations.
Acquisitions involve risks and uncertainties, including difficulties in integrating acquired operations and in realizing expected
opportunities, cost synergies, diversions of management resources, and loss of key employees, challenges with respect to operating
new businesses, and other uncertainties.
As a result of acquisitions, we may record a significant amount of goodwill and other identifiable intangible assets and we may never
realize the full carrying value of these assets.
As a result of acquisitions, we record a significant amount of goodwill and other identifiable intangible assets, including customer
relationships, trademarks and developed technologies. At April 30, 2019, we had $1,095.7 million of goodwill and $865.6 million of
intangible assets, of which $217.1 million are indefinite-lived intangible assets, on our Consolidated Statements of Financial Position.
The intangible assets are principally composed of content and publishing rights, customer relationships, and brands and trademarks.
Failure to achieve business objectives and financial projections could result in an asset impairment charge, which would result in a
non-cash charge to our consolidated results of operations. Goodwill and intangible assets with indefinite lives are tested for
impairment on an annual basis and also when events or changes in circumstances indicate that impairment may have occurred.
Intangible assets with determinable lives, which were $648.5 million at April 30, 2019, are tested for impairment only when events or
changes in circumstances indicate that an impairment may have occurred. Determining whether an impairment exists can be difficult
as a result of increased uncertainty and current market dynamics and requires management to make significant estimates and
judgments. A non-cash intangible asset impairment charge could have a material adverse effect on our consolidated financial position
and results of operations.
If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis
could be impaired.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act (“Sarbanes-Oxley Act”)
and the rules and regulations of the New York Stock Exchange. The Sarbanes-Oxley Act requires, among other things, that we
maintain effective disclosure controls and procedures and internal control over financial reporting. We are required to perform system
and process evaluations and testing of our internal control over financial reporting to allow management to report on the effectiveness
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of our internal control over financial reporting in our Annual Report on Form 10-K, as required by Section 404 of the Sarbanes-Oxley
Act. This may require us to incur substantial additional professional fees and internal costs to further expand our accounting and
finance functions and expend significant management efforts.
We may in the future discover material weaknesses in our system of internal financial and accounting controls and procedures that
could result in a material misstatement of our financial statements. In addition, our internal control over financial reporting will not
prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that misstatements due to errors or fraud will not occur or that all control issues
and instances of fraud will be detected.
If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable
to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If that were
to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by the New York Stock
Exchange, the SEC, or other regulatory authorities.
Item 1B. Unresolved Staff Comments
None
17
Item 2.
Properties
We occupy office, warehouse, and distribution facilities in various parts of the world, as listed below (excluding those locations with
less than 10,000 square feet of floor area, none of which is considered material property). All of the buildings and the equipment
owned or leased are believed to be in good operating condition and are suitable for the conduct of our business.
Location
United States:
New Jersey
Indiana
California
Massachusetts
Illinois
Florida
Minnesota
Texas
Colorado
Kentucky
International:
Australia
Canada
England
France
Germany
Jordan
Singapore
Russia
China
India
Greece
Purpose
Owned or Leased
Approx. Sq. Ft.
Corporate Headquarters
Office
Offices
Office
Office
Office
Office
Office
Office
Office
Office
Offices
Office
Distribution Centers
Offices
Offices
Offices
Office
Office
Office
Office
Office
Offices
Distribution Centers
Office
Office
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Owned
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
294,000
185,000
166,000
11,000
26,000
52,000
58,000
22,000
11,000
15,000
47,000
34,000
12,000
298,000
80,000
70,000
36,000
104,000
18,000
24,000
35,000
27,000
18,000
12,000
25,000
16,000
Item 3. Legal Proceedings
The information set forth in Note 15, “Commitment and Contingencies,” of the Notes to Consolidated Financial Statements is
incorporated herein by reference.
We are involved in routine litigation in the ordinary course of our business. In the opinion of management, the ultimate resolution of
all pending litigation will not have a material effect upon our consolidated financial position or results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
18
Information About Our Executive Officers
Set forth below are the current executive officers of the Company. Each of the officers listed will serve until the next organizational
meetings of the Board of Directors of the Company and until each of the respective successors are duly elected and qualified.
Name, Current and Former Positions
BRIAN A. NAPACK
President and Chief Executive Officer and Director
March 2012 – Senior Advisor, Providence Equity Partners LLC
Age
First Elected to
Current Position
57
December 2017
JOHN A. KRITZMACHER
Chief Financial Officer and Executive Vice President, Operations
October 2012 – Senior Vice President of Business Operations, Organizational Planning & Structure at
58
July 2013
WebMD Health Corp
MATTHEW S. KISSNER
Executive Vice President, Group Executive
December 2017 – Chairman of Company's Board of Directors
May 2017 – Interim Chief Executive Officer of the Company
October 2015 – Chairman of Company's Board of Directors
GARY M. RINCK
Executive Vice President, General Counsel
2004 – Senior Vice President, General Counsel
JUDY VERSES
Executive Vice President, Research
October 2011 – President – Global Enterprise and Education, Rosetta Stone Inc.
CHRISTOPHER F. CARIDI
Senior Vice President, Corporate Controller and Chief Accounting Officer
March 2014 – Vice President Finance, Thomson Reuters
September 2009 – Vice President, Controller/Global Head of Accounting Operations, Thomson
Reuters
KEVIN MONACO
Senior Vice President, Treasurer and Tax
October 2009 – SVP, Finance, Treasurer and Investor Relations, Coty Inc.
AREF MATIN
Executive Vice President, Chief Technology Officer
February 2015 – Executive Vice President, Chief Technology Officer, Ascend Learning
July 2012 – Executive Vice President, Chief Technology Officer, Pearson Learning Technologies &
Pearson Higher Education
TANELI D. RUDA
Executive Vice President, Chief Strategy Officer
March 2018 – Head of Corporate Strategy, Thomson Reuters
March 2014 – SVP and Managing Director, Global Trade Management, Thomson Reuters
January 2010 – SVP, Strategy, Thomson Reuters
65
February 2019
67
September 2014
62
October 2016
53
March 2017
55
October 2018
60
May 2018
45
July 2018
19
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our Class A and Class B shares are listed on the New York Stock Exchange under the symbols JW.A and JW.B, respectively.
On a quarterly basis, the Board of Directors considers the payment of cash dividends based upon its review of earnings, our financial
position, and other relevant factors. As of May 31, 2019, the approximate number of holders of our Class A and Class B Common
Stock were 758 and 57, respectively, based on the holders of record.
During the year ended April 30, 2017, our Board of Directors approved an additional share repurchase program of four million shares
of Class A or B Common Stock. During the fourth quarter of 2019, we made the following purchases of Class A Common Stock
under this publicly announced stock repurchase program.
Total Number
of Shares Purchased
Average Price
Paid Per Share
Total Number
of Shares Purchased
as Part of a Publicly
Announced Program
Maximum Number
of Shares that
May be Purchased
Under the Program
February 2019
March 2019
April 2019
Total
Item 6.
Selected Financial Data
Dollars (in millions, except per share data)
Revenue, net
Operating Income (c)
Net Income (a)
Working Capital (d)
Contract Liability (Deferred Revenue) in Working
Capital (d)
Total Assets
Long-Term Debt
Shareholders' Equity
Per Share Data
Earnings Per Share
Basic
Diluted
Cash Dividends
Class A Common
Class B Common
$
$
$
$
$
— $
557,665
—
557,665 $
—
44.83
—
44.83
—
557,665
—
557,665
2,446,640
1,888,975
1,888,975
1,888,975
2015
1,822.4
237.7
176.9
(62.8)
(372.1)
3,004.2
650.1
1,055.0
2019
1,800.1 $
224.0
168.3
(379.8)
(507.4)
2,937.0
478.8
1,181.3
For the Years Ended April 30, (a)(b)
2017
2016
2018
1,718.5 $
211.5
113.6
(428.1)
1,796.1 $
231.5
192.2
(394.3)
1,727.0 $
188.1
145.8
(111.1)
(486.4)
2,839.5
360.0
1,190.6
(436.2)
2,606.2
365.0
1,003.1
(426.5)
2,921.1
605.0
1,037.1
2.94 $
2.91 $
1.32 $
1.32 $
3.37 $
3.32 $
1.28 $
1.28 $
1.98 $
1.95 $
1.24 $
1.24 $
2.51 $
2.48 $
1.20 $
1.20 $
3.01
2.97
1.16
1.16
(a) See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for a discussion of the
factors that contributed to our consolidated operating results for the three years ended April 30, 2019. Certain tax benefits and
charges included in the years ended April 30, 2019 – 2015 include:
The year ended April 30, 2019 includes a favorable benefit of $2.9 million, or $0.05 per share in connection with the
reduction in our deferred tax liabilities as a result of a lower U.S. state tax rate resulting from more favorable apportionment
factors in 2019. Refer to Note 12, “Income Taxes,” in the Notes to Consolidated Financial Statements for more information.
The year ended April 30, 2018 includes a favorable impact of $25.1 million ($0.43 per share) from the U.S. government
enacted comprehensive Federal tax legislation originally known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). Refer
to Note 12, “Income Taxes,” in the Notes to Consolidated Financial Statements for more information.
The year ended April 30, 2017 includes the effect of the German Tax litigation of $49.1 million ($0.85 per share).
The years ended April 30, 2017 and 2016 include tax benefits of $2.6 million ($0.04 per share) and $5.9 million ($0.10 per
share), respectively, principally associated with a reduction in our deferred tax liabilities from consecutive tax legislation
enacted in the United Kingdom that reduced the U.K. corporate income tax rates.
The year ended April 30, 2015 includes a non-recurring tax benefit of $3.1 million ($0.05 per share) related to tax deductions
claimed on the write-up of certain foreign tax assets to fair market value.
20
(b) On May 1, 2018, we adopted the U.S. accounting standard regarding revenue recognition ("Topic 606," or "ASC 606"). The
adoption of Topic 606 did not have a material impact to our consolidated results of operations. Refer to Note 2, " Summary of
Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," in the Notes to Consolidated
Financial Statements for more information.
(c) Due to the retrospective adoption of Accounting Standards Update (“ASU”) 2017-07, “Compensation—Retirement Benefits
(Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,”, total net
benefits (costs) of $8.1 million and $(5.3) million related to the non-service components of defined benefit and other post-
employment benefit plans were reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense)
for the years ended April 30, 2018 and 2017, respectively. Total net benefits related to the non-service components of defined
benefit and other post-employment benefit plans were $8.8 million for the year ended April 30, 2019. Refer to Note 2, "Summary
of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," in the Notes to Consolidated
Financial Statements for more information.
(d) The primary driver of the negative working capital is unearned contract liabilities (deferred revenue) related to subscriptions for
which cash has been collected in advance. Cash received in advance for subscriptions is used by us for a number of purposes,
including acquisitions, debt repayments, funding operations, dividend payments, and purchasing treasury shares. The contract
liabilities (deferred revenue) will be recognized as income when the products are shipped or made available online to the
customers over the term of the subscription period.
21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information in our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should
be read together with our Consolidated Financial Statements and related notes set forth in Part II, Item 8, as well as the discussion
included above, “Cautionary Notice Regarding Forward-Looking Statements “Safe Harbor” Statement under the Private Securities
Litigation Reform Act of 1995” and “Non-GAAP Financial Measures,” along with Part I, Item 1A, “Risk Factors,” of this Annual
Report on Form 10-K. All amounts and percentages are approximate due to rounding and all dollars are in thousands, except per share
amounts or where otherwise noted. When we cross-reference to a “Note,” we are referring to our “Notes to Consolidated Financial
Statements,” unless the context indicates otherwise.
Recent Events
On July 1, 2019, we completed the acquisition of Zyante Inc. ("Zyante"), a leading provider of computer science and STEM
education courseware. Under the terms of the agreement, Zyante shareholders received $56 million in cash. Zyante will be
included in our Education Publishing segment.
On June 28, 2019, our Board of Directors declared a quarterly dividend of $0.34 per share, or approximately $19.2 million,
on our Class A and Class B Common Stock. The dividend is payable on July 24, 2019 to shareholders of record on July 10,
2019.
On May 31, 2019, we completed the acquisition of certain assets of Knewton, Inc. (“Knewton”), included in our Publishing
segment. Knewton is a provider of affordable courseware and adaptive learning technology for an undisclosed amount.
On May 30, 2019, we amended and restated our existing credit agreement with a (i) five-year revolving credit facility in an
aggregate principal amount up to $1.25 billion, and (ii) a five-year term loan A facility consisting of $250 million.
Fourth Quarter Highlights
Increase in GAAP Results: Revenue of $491.2 million, an increase of 3%, Operating Income of $80.0 million, an increase of
10% and Diluted EPS of $1.10, an increase of 19%;
Non-GAAP Adjusted Results on a constant currency basis: Adjusted Revenue increase of 7%, Adjusted Operating Income
increase of 14%, and Adjusted EPS increase of 19%;
Non-GAAP Adjusted Results on a constant currency basis and excluding the impact from Learning House acquisition:
Adjusted Revenue increase of 3%, Adjusted Operating Income increase of 17%, and Adjusted EPS increase of 26%.
Results of Operations
FISCAL YEAR 2019 AS COMPARED TO FISCAL YEAR 2018 SUMMARY RESULTS
Revenue:
Revenue for the year ended April 30, 2019 was flat at $1,800 million, as compared with prior year. On a constant currency basis,
revenue increased 2% as compared with prior year. This increase was primarily due to the following:
the incremental impact of the acquisition of Learning House on November 1, 2018, which contributed $31.5 million of
revenue,
increased revenue in our Research segment primarily driven by Open Access; and to a lesser extent, Licensing, Reprints,
Backfiles, and Other offerings; and,
increased revenue in all of our Solutions segment businesses, excluding the impact of Learning House.
These increases were offset by declines in Publishing print product sales.
Refer to Note 4, “Acquisition,” for more information related to the acquisition of Learning House.
See the “Segment Operating Results” below for additional details on each segment’s revenue and contribution to profit performance.
Cost of Sales:
Cost of sales for the year ended April 30, 2019 increased $23.7 million, or 4%, as compared with prior year. On a constant currency
basis, cost of sales increased 6%. This increase was primarily due to the following factors:
the incremental impact of Learning House, primarily due to marketing and employment related costs,
an increase in legacy Education Services business marketing costs of $8.1 million primarily due to increased investments to
support revenue growth;
22
higher royalty costs of $6.6 million; and, to a lesser extent,
higher employment costs of $3.4 million.
These increases were offset by lower inventory costs of $5.8 million primarily due to lower Publishing print sales.
In connection with the acquisition of Learning House, we changed our accounting policy for certain advertising and marketing costs
incurred by our Education Services business to fulfill performance obligations from contracts with educational institutions. Under the
new accounting policy, these costs are included in Cost of Sales whereas they were previously included in Operating and
Administrative Expenses on the Consolidated Statements of Income. Including these expenses in Cost of Sales will better align these
costs with the related revenue and conform with the presentation of such costs for Learning House. This change in accounting policy
was applied retrospectively. The amount reclassified for the year ended April 30, 2018 was $45.8 million. Refer to “Change in
Accounting Policy” in Note 2, “Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting
Standards,” for more information on the accounting policy change and Note 4, “Acquisition,” for more information related to the
acquisition of Learning House.
Gross Profit Margin:
Gross profit margin for the year ended April 30, 2019 was 69.2% compared with 70.4% in the prior year. On a constant currency
basis, the gross profit margin would have been 69.3%.
Operating and Administrative Expenses:
Operating and administrative expenses for the year ended April 30, 2019 increased $6.8 million, or 1%, as compared with prior year
and 2% on a constant currency basis. The increase was primarily due to higher costs related to increased resources in editorial
resources to increase article output, as well as higher marketing, advertising and sales costs and the incremental impact of the
acquisition of Learning House. These factors were partially offset by lower technology costs and the impairment charge in the prior
year related to one of our Publishing brands of $3.6 million.
Restructuring and Related Charges:
In the years ended April 30, 2019 and 2018, we recorded pre-tax restructuring charges of $3.1 million and $28.6 million, respectively,
related to the Restructuring and Reinvestment Program.
These charges are reflected in Restructuring and Related Charges on the Consolidated Statements of Income and summarized in the
following table:
Charges by Segment:
Research
Publishing
Solutions
Corporate Expenses
Total Restructuring and Related Charges
Charges (Credits) by Activity:
Severance
Consulting and Contract Termination Costs
Other activities
Total Restructuring and Related Charges
2019
2018
Total Charges
Incurred to Date
$
$
$
$
1,131 $
650
878
459
3,118 $
5,257 $
6,443
3,695
13,171
28,566 $
1,456 $
526
1,136
3,118 $
27,213 $
1,815
(462)
28,566 $
26,544
39,581
7,125
96,378
169,628
116,259
21,155
32,214
169,628
The charges above are net of changes in estimates for previously accrued restructuring charges. Other Activities for the year ended
April 30, 2019 reflect lease impairment related costs. The credits in Other Activities for the year ended April 30, 2018 mainly reflect
changes in estimates for previously accrued restructuring charges related to facility lease reserves.
We currently do not anticipate any further material charges related to the Restructuring and Reinvestment Program.
Amortization of Intangibles:
Amortization of intangibles was $54.7 million for the year ended April 30, 2019, an increase of $6.4 million as compared with prior
23
year. On a constant currency basis, amortization of intangibles increased 14%. The increase in amortization was primarily due to the
acquisition of intangibles as part of the acquisition of Learning House and, to a lesser extent, in the Research segment due to the
timing of the acquisitions of publishing rights in the second half of 2018.
Operating Income:
Operating income was $224.0 million for the year ended April 30, 2019, a decrease of $7.5 million, or 3%, as compared with prior
year. On a constant currency basis, excluding the impact from Learning House, which reported an operating loss of $8.0 million, and
restructuring charges and the brand impairment charge in the prior year, operating income decreased 6%, due to higher expenses,
partially offset by higher revenue.
Interest Expense:
Interest expense for the year ended April 30, 2019 increased $2.8 million to $16.1 million on a reported basis. This increase was due
to a higher average debt balances outstanding, which included borrowings for the funding of the acquisition of Learning House, and a
higher weighted average effective borrowing rate.
Foreign Exchange Transaction (Losses) Gains:
Foreign exchange transaction losses were $6.0 million for the year ended April 30, 2019 and were primarily due to the net impact of
the change in average foreign exchange rates as compared to the U.S. dollar on our intercompany accounts receivable and payable
balances. For the year ended April 30, 2018, foreign exchange transaction losses were $12.8 million which were primarily due to the
impact of changes in average foreign exchange rates as compared to the U.S. dollar on our intercompany and third-party accounts
receivable and payable balances.
Provision for Income Taxes:
The following table summarizes the effective tax rate for the years ended April 30, 2019 and 2018:
Effective tax rate as reported
State tax adjustment in 2019
Deferred Tax from the Tax Act Rate Change
Effective tax rate excluding the deferred tax from the Tax Act and state tax adjustment
2019
2018
21.0%
1.3%
(0.1)%
22.2%
10.2%
—
11.7%
21.9%
The effective tax rate for the year ended April 30, 2019 was greater than the rate for the year ended April 30, 2018 due to the net
deferred tax benefit from the Tax Act in the year ended April 30, 2018 compared to the relatively small net deferred benefit in the year
ended April 30, 2019 from state tax apportionment changes.
The effective tax rate was equal to the U.S. statutory rate for the year ended April 30, 2019 as the increase from higher taxes on non-
U.S. income and various other items was offset by a state tax benefit from more favorable apportionment factors which reduced our
deferred tax liabilities, net of federal benefit.
The Tax Act
The information set forth in Note 12, "Income Taxes” under the caption "The Tax Act," is incorporated herein by reference and further
describes the impact of the Tax Act.
Diluted Earnings Per Share (“EPS”):
EPS for the year ended April 30, 2019 was $2.91 per share compared with $3.32 per share in the prior year. Excluding the impact of
the items included in the table below, Adjusted EPS for the year ended April 30, 2019 decreased 14% to $2.96 per share compared
with $3.43 per share in the prior year.
24
Below is a reconciliation of our GAAP EPS to Non-GAAP Adjusted EPS:
GAAP EPS
Adjustments:
Restructuring and related charges
Foreign exchange losses on intercompany transactions
Impact of Tax Cuts and Job Act
Impact of reduction in certain U.S. state tax rates in 2019
Non-GAAP Adjusted EPS
2019
2018
2.91 $ 3.32
0.04
0.06
—
(0.05)
0.39
0.15
(0.43)
—
2.96 $ 3.43
$
$
On a constant currency basis, Adjusted EPS decreased 8% due to lower Adjusted Operating Income. Adjusted EPS for the year ended
April 30, 2019 was also lower as compared with prior year due to an $0.15 per share dilutive impact of the Learning House
acquisition.
Publishing Technology Services (Atypon)
35,968
32,907
9%
Total Research Revenue
$
937,313 $
934,395
—
SEGMENT OPERATING RESULTS:
RESEARCH:
Revenue:
Journal Subscriptions
Open Access
Licensing, Reprints, Backfiles, and Other
Total Journal Revenue
Cost of Sales
Gross Profit
Gross Profit Margin
Operating Expenses (a)
Amortization of Intangibles
Restructuring Charges (See Note 7)
Contribution to Profit
Contribution Margin
2019
2018
% Change
% Change
w/o FX (b)
$
$
661,055 $
54,671
185,619
901,345 $
677,685
41,997
181,806
901,488
(2)%
30%
2%
—
254,338
247,654
3%
$
682,975 $
72.9%
686,741
73.5%
(1)%
394,870
28,099
1,131
383,329
26,829
5,257
3%
5%
(78)%
4%
6%
(78)%
$
258,875 $
27.6%
271,326
29.0%
(5)%
(1)%
—
33%
4%
3%
9%
3%
5%
2%
(a) Due to the retrospective adoption of ASU 2017-07, total net benefits related to defined benefit and other post-employment benefit
plans were reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense). The amount for the
year ended April 30, 2018 for the Research segment was $4.2 million. Refer to Note 2, "Summary of Significant Accounting
Policies, Recently Issued, and Recently Adopted Accounting Standards," for more information.
(b) Adjusted to exclude FX impact and Restructuring Charges.
Revenue:
Research revenue for the year ended April 30, 2019 increased $2.9 million, or flat as compared with prior year. On a constant currency
basis, revenue increased 3%, compared with prior year, primarily due to continued strong growth in publication volumes for Open
Access, particularly hybrid journals.
Gross Profit:
Gross profit for the year ended April 30, 2019 decreased 1% compared with prior year and, on a constant currency basis, increased
2%. This was due to higher revenues, partially offset by higher costs of sales, primarily due to increased royalty costs.
25
Gross profit margin was 72.9% compared with prior year of 73.5%. On a constant currency basis, gross profit margin would have
been 73%.
Contribution to Profit:
Contribution to profit decreased 5% to $258.9 million for the year ended April 30, 2019 as compared with the prior year. On a
constant currency basis and excluding restructuring charges, contribution to profit decreased 1% as compared with prior year. This
decrease was due to higher operating costs partially offset by higher gross profit. The higher operating costs include additional
resources in editorial to support increased journal publishing of $11.2 million, increased costs related to advertising and marketing of
$3.0 million, and sales resources of $2.5 million, which were partially offset by lower administrative costs.
Society Partnerships
For calendar year 2019, 17 new society contracts were signed, with combined annual revenue of approximately $5.4 million, and 4
society contracts were not renewed with combined annual revenue of approximately $1.8 million.
Projekt DEAL
In the third quarter of 2019, we completed a new agreement with a national consortium representing all 700 German academic
institutions. This new three-year agreement provides those German libraries and their researchers with both subscriptions access and
open access publishing. We expect to generate modestly more revenue from this new arrangement and the opportunity to grow
revenue through higher publishing volumes.
2019
2018
% Change
% Change
w/o FX (b)
PUBLISHING:
Revenue:
STM and Professional Publishing
Education Publishing
Courseware (WileyPLUS)
Test Preparation and Certification
Licensing, Distribution, Advertising and Other
$
265,719 $
157,579
63,485
40,606
46,803
287,315
187,178
59,475
35,534
48,146
(8)%
(16)%
7%
14%
(3)%
Total Publishing Revenue
$
574,192 $
617,648
(7)%
(6)%
(14)%
7%
15%
(1)%
(6)%
(7)%
(5)%
(4)%
1%
(90)%
(100)%
178,050
194,900
(9)%
$
396,142 $
69.0%
422,748
68.4%
(6)%
268,425
8,166
650
—
282,958
8,108
6,443
3,600
(5)%
1%
(90)%
(100)%
$
118,901 $
20.7%
121,639
19.7%
(2)%
(8)%
Cost of Sales
Gross Profit
Gross Profit Margin
Operating Expenses (a)
Amortization of Intangibles
Restructuring Charges (see Note 7)
Publishing brand impairment charge
Contribution to Profit
Contribution Margin
(a) Due to the retrospective adoption of ASU 2017-07, total net benefits related to defined benefit and other post-employment benefit
plans were reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense). The amount for the
year ended April 30, 2018 for the Publishing segment was $2.3 million. Refer to Note 2, "Summary of Significant Accounting
Policies, Recently Issued, and Recently Adopted Accounting Standards," for more information.
(b) Adjusted to exclude FX impact and Restructuring Charges, and in the year ended April 30, 2018, a Publishing brand impairment
charge was also excluded.
Revenue:
Publishing revenue decreased 7% to $574.2 million on a reported basis, and 6% on a constant currency basis as compared with prior
26
year. The decrease was primarily due to a decline in Education Publishing and STM and Professional Publishing due to a continued
shift in market demand for print products. This decline was partially offset by an increase in volume of Test Preparation and
Certification product offerings and an increase in WileyPLUS mainly due to the timing of revenue recognition.
Gross Profit:
Gross profit decreased 6% as compared with prior year and 5% on a constant currency basis, due to the decline in Education
Publishing and STM and Professional Publishing revenue; partially offset by a decrease in inventory costs and to a lesser extent, book
composition and product development amortization expense.
Contribution to Profit:
Contribution to profit decreased 2% to $118.9 million for the year ended April 30, 2019 as compared with the prior year. On a
constant currency basis and excluding restructuring charges and a brand impairment charge in the prior year, contribution to profit
decreased 8% as compared with the prior year. This decrease was primarily due to lower gross profit, partially offset by, lower
operating expenses including employee related costs, content related costs and, to a lesser extent, technology costs.
SOLUTIONS:
Revenue:
Education Services
Professional Assessment
Corporate Learning
Total Solutions Revenue
Cost of Sales (a)
Gross Profit
Gross Profit Margin
Operating Expenses (a)
Amortization of Intangibles
Restructuring Charges (see Note 7)
Contribution to Profit
Contribution Margin
2019
2018
% Change
% Change
w/o FX (b)
$
$
$
$
157,549 $
65,889
65,126
119,131
61,094
63,835
32%
8%
2%
288,564 $
244,060
18%
122,337
88,462
38%
166,227 $
57.6%
155,598
63.8%
7%
32%
8%
6%
19%
39%
8%
131,989
18,393
878
116,513
13,291
3,695
13%
38%
(76)%
15%
39%
(76)%
14,967 $
5.2%
22,099
9.1%
(32)%
(39)%
(a) In connection with the acquisition of Learning House, we changed our accounting policy for certain advertising and marketing
costs incurred by our Education Services business to fulfill performance obligations from contracts with educational institutions.
Under the new accounting policy, these costs are included in Cost of Sales whereas they were previously included in Operating
and Administrative Expenses on the Consolidated Statements of Income. The impact of this reclassification was an increase to
Cost of Sales and a corresponding decrease to Operating and Administrative Expenses of $45.8 million for the year ended April
30, 2018. This reclassification had no impact on Revenue, net or Contribution to Profit. Refer to “Change in Accounting Policy”
in Note 2, “Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards,” for
more information on the accounting policy change and Note 4, “Acquisition,” for more information related to the acquisition of
Learning House.
(b) Adjusted to exclude FX impact and Restructuring Charges.
Revenue:
Solutions revenue increased 18% to $288.6 million on a reported basis and 19% on a constant currency basis as compared with prior
year. The increase was mainly driven by the impact of the acquisition of Learning House on November 1, 2018 which contributed
$31.5 million in revenue, and to a lesser extent, higher revenue in the legacy Education Services business, Professional Assessment
services and Corporate Learning.
27
Gross Profit:
Gross profit increased 7% to $166.2 million, and 8%, on a constant currency basis, as compared with prior year. The increase is
primarily due to the impact of higher revenues as described above, partially offset by higher costs of sales due to the incremental
impact of the acquisition of Learning House and higher marketing related costs of $8.1 million, due to the legacy Education Services
business primarily due to increased investments to support revenue growth; and to a lesser extent, higher composition and product
development amortization and employment related costs.
Contribution to Profit:
Contribution to profit for the year ended April 30, 2019 includes an operating loss from Learning House of $8.0 million. On a
constant currency basis, excluding restructuring charges and the impact from Learning House, contribution to profit decreased 8% as
compared with prior year. This was due to higher operating expenses, including increased sales related costs, content costs, and, to a
lesser extent, increased technology costs. These factors were partially offset by lower administrative costs.
Legacy Education Services Partners and Programs:
As of April 30, 2019, we had 39 university partners and 276 programs under contract.
CORPORATE EXPENSES:
Corporate Expenses for the year ended April 30, 2019 decreased 8% to $168.8 million as compared with prior year. On a constant
currency basis and excluding restructuring charges, these expenses decreased 1%. This decrease was primarily due to lower
employment related costs, including incentive compensation costs, partially offset by higher stock-based compensation expense of
$2.3 million and costs associated with strategic planning of $1.4 million.
FISCAL YEAR 2018 AS COMPARED TO FISCAL YEAR 2017 SUMMARY RESULTS
Revenue:
Revenue for the year ended April 30, 2018 increased 5% to $1,796.1 million, or 1% on a constant currency basis as compared with
prior year. The increase was mainly driven by an increase in Research revenue due to a full year of revenue from the Atypon
acquisition in the year ended April 30, 2018 and growth in Open Access and, to a lesser extent, higher Education Services (OPM)
revenue in Solutions. These increases were partially offset by a decline in Publishing revenue, primarily in STM and in Professional
and Education Publishing, which reflected market conditions.
See the "Segment Operating Results" below for additional details on each segment's revenue and contribution to profit performance.
Cost of Sales and Gross Profit:
Cost of Sales for the year ended April 30, 2018 increased 6% to $531.0 million, or 3% on a constant currency basis as compared with
prior year. The increase was primarily a result of higher revenues and higher royalty costs on Research journals due to title mix and an
increase in new titles at a higher royalty rate.
Gross profit margin for the year ended April 30, 2018 was 70.4% and decreased slightly compared with the prior year on a constant
currency basis, primarily in our Publishing segment as a result of the decline in revenue.
As noted above, in connection with the acquisition of Learning House, we changed our accounting policy for certain advertising and
marketing costs incurred by our Education Services business to fulfill performance obligations from contracts with educational
institutions. Under the new accounting policy, these costs are included in Cost of Sales whereas they were previously included in
Operating and Administrative Expenses on the Consolidated Statements of Income. The amount reclassified for the year ended April
30, 2018 and 2017 was $45.8 million and $40.0 million, respectively. Refer to “Change in Accounting Policy” in Note 2, “Summary
of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards,” for more information on the
accounting policy change and Note 4, “Acquisition,” for more information related to the acquisition of Learning House.
Operating and Administrative Expenses:
Operating and administrative expenses for the year ended April 30, 2018 increased 1% to $956.8 million, but decreased 1% on a
constant currency basis as compared with prior year due to the following:
lower technology costs in the current year of $18 million associated with our ERP implementation and other reductions in
28
outsourcing and system development consulting costs;
a one-time pension settlement charge in the prior year related to changes in our retiree and long-term disability plans of $9
million; and
savings from operational excellence initiatives and restructuring activities.
The factors were partially offset by:
one-time benefits in the prior year related to the changes in our retiree and long-term disability plans of $4 million and a life
insurance recovery of $2 million;
a full year of costs in the year ended April 30, 2018 associated with the Atypon acquisition, which resulted in an incremental
impact of $9 million;
an increase in strategy consultation costs in the current year of $7 million; and
an impairment charge in the current year related to one of our Publishing brands of $4 million.
Restructuring and Related Charges:
Beginning in the year ended April 30, 2013, we initiated a program (the “Restructuring and Reinvestment Program”) to restructure
and realign its cost base with current and anticipated future market conditions. We are targeting a majority of the cost savings
achieved to improve margins and earnings, while the remainder will be reinvested in high-growth digital business opportunities.
In the years ended April 30, 2018 and 2017, we recorded pre-tax restructuring charges of $29 million and $13 million, respectively,
related to this program. These charges are reflected in Restructuring and Related Charges on the Consolidated Statements of Income
and summarized in the following table:
2018
2017
Charges by Segment:
Research
Publishing
Solutions
Corporate Expenses
Total Restructuring and Related Charges
Charges (Credits) by Activity:
Severance
Process reengineering consulting
Other activities
Total Restructuring and Related Charges
$
$
$
$
5,257 $
6,443
3,695
13,171
28,566 $
27,213 $
1,815
(462)
28,566 $
1,949
1,596
1,787
8,023
13,355
8,386
148
4,821
13,355
The credits in Other Activities in 2018 mainly reflect changes in estimates for previously accrued restructuring charges related to
facility lease reserves. Other Activities for the year ended April 30, 2017, reflect facility relocation and lease impairment related costs.
Amortization of Intangibles:
Amortization of intangibles for the year ended April 30, 2018 declined 3% to $48 million, or 5% on a constant currency basis
compared with prior year. The decrease was a result of the completion of amortization of certain acquired intangible assets.
Interest Expense:
Interest expense for the year ended April 30, 2018 decreased $4 million to $13 million on a reported and constant currency basis. This
decrease was due to lower average debt balances outstanding, partially offset by a higher average effective borrowing rate.
Foreign Exchange Transaction (Losses) Gains:
We reported foreign exchange transaction losses of $13 million for the year ended April 30, 2018 compared to gains of $0.4 million in
the prior year. The losses in the year ended April 30, 2018 were primarily due to the impact of the change in average foreign exchange
rates as compared to the U.S. dollar on our intercompany and third-party accounts receivable and payable balances.
29
Provision for Income Taxes:
The following table summarizes the effective tax rate for the years ended April 30, 2018 and 2017:
Effective tax rate as reported
Estimated net impact in the year ended April 30, 2018 of non-recurring items from Tax Act
Impact of unfavorable German court decision in the year ended April 30, 2017
Impact of reduction in U.K. statutory rate on deferred tax balances in the year ended April 30, 2017
Effective tax rate excluding the impact of non-recurring items from the Tax Act in the year ended April
30, 2018 and the unfavorable German court decision and U.K. tax rate reduction in the year ended
April 30, 2017
2018
2017
10.2%
11.7
—
—
40.5%
—
(25.7)
1.3
21.9%
16.1%
On December 22, 2017, the U.S. government enacted comprehensive Federal tax legislation originally known as the Tax Cuts and
Jobs Act of 2017 (the "Tax Act"). In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax
Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118"), which allowed us to record provisional amounts related to the
effect of the Tax Act during a measurement period not to extend beyond one year of the enactment date. As the Tax Act was passed in
December 2017, and ongoing guidance and accounting interpretation were expected over the 12 months following enactment, we
considered the accounting of the transition tax, deferred tax re-measurements, and other items to be provisional due to the forthcoming
guidance and our ongoing analysis of final data and tax positions.
The effective tax rate was lower in the year ended April 30, 2018 as compared with the year ended April 30, 2017 due to the net tax
benefit from non-recurring items in the Tax Act and the effect of the German Tax litigation in the year ended April 30, 2017 as
described below. Estimated non-recurring items in the Tax Act reduced our income tax expense by approximately $25 million
($0.43/share) or a reduction in our effective tax rate of 11.7 percentage points for the year ended April 30, 2018. Excluding the effect
of the Tax Act, the rate was 21.9% for the year ended April 30, 2018.
The rate excluding the benefit from the non-recurring items in the Tax Act was lower than the U.S. statutory rate for the year ended
April 30, 2018, primarily due to lower rates applicable to non-U.S. earnings.
German Tax Litigation Expense: In the year ended April 30, 2017, the German Federal Fiscal Court affirmed a lower court decision
disallowing deductions related to a stepped-up basis in certain assets. As a result, we incurred an income tax charge of approximately
$49 million ($0.85 per share).
Deferred Tax Benefit from U.K. Statutory Tax Rate Change: In the year ended April 30, 2016, the U.K. reduced its statutory rate to
19% beginning April 1, 2017 and 18% beginning April 1, 2020, and in the year ended April 30, 2017, the U.K. further reduced its
statutory rate beginning on April 1, 2020, from 18% to 17%. This resulted in a non-cash deferred tax benefit from the re-measurement
of our applicable U.K. deferred tax balances of $6 million ($0.10 per share) in the year ended April 30, 2016 and $3 million ($0.04 per
share) in the year ended April 30, 2017.
The Tax Act
The information set forth in Note 12, "Income Taxes” of the Notes to Consolidated Financial Statements under the caption "The Tax
Act," is incorporated herein by reference and further describes the impact of the Tax Act.
EPS:
EPS for the year ended April 30, 2018 was $3.32 per share compared with $1.95 per share in the prior year. EPS results included the
following items, which impacted comparability:
GAAP EPS
Adjustments:
Restructuring and related charges
Foreign exchange losses on intercompany transactions
Estimated impact of the Tax Act
Pension settlement
Unfavorable tax decisions
Deferred income tax benefit on U.K. tax rate change
Non-GAAP Adjusted EPS
30
2018
2017
3.32 $ 1.95
0.39
0.15
(0.43)
—
—
—
0.15
0.01
—
0.09
0.85
(0.04)
3.43 $ 3.01
$
$
Excluding the impact of the items included above, Adjusted EPS for the year ended April 30, 2018 increased 14% to $3.43 per share
compared with $3.01 per share in the prior year. On a constant currency basis, Adjusted EPS increased 3%.
Publishing Technology Services (Atypon)
32,907
19,066
73%
Total Research Revenue
$
934,395 $
853,489
9%
SEGMENT OPERATING RESULTS:
RESEARCH:
Revenue:
Journal Subscriptions
Open Access
Licensing, Reprints, Backfiles, and Other
Total Journal Revenue
Cost of Sales
Gross Profit
Gross Profit Margin
Operating Expenses (a)
Amortization of Intangibles
Restructuring Charges (See Note 7)
Contribution to Profit
Contribution Margin
2018
2017
% Change
% Change
w/o FX (b)
$
$
677,685 $
41,997
181,806
901,488 $
639,720
30,633
164,070
834,423
6%
37%
11%
8%
247,654
219,773
13%
$
$
686,741 $
73.5%
633,716
74.3%
383,329
26,829
5,257
354,986
26,133
1,949
271,326 $
29.0%
250,648
29.4%
8%
8%
3%
8%
(1)%
—
34%
8%
3%
73%
4%
8%
3%
6%
—
(a) Due to the retrospective adoption of ASU 2017-07, total net benefits related to defined benefit and other post-employment benefit
plans were reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense). The amounts for the
years ended April 30, 2018 and 2017 for the Research segment were $4.2 million and $1.6 million, respectively. Refer to Note 2,
"Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," for more
information.
(b) Adjusted to exclude FX impact and Restructuring Charges
Revenue:
Research revenue increased 9% to $934.4 million, or 4% on a constant currency basis as compared with prior year. The increase was
primarily due to:
a full year of revenue from Atypon, which was acquired in September 2016, of which $14 million was the incremental
impact;
Open Access growth driven by the strong performance of existing titles and, to a lesser extent, new title launches; and
other Journal revenue increases, particularly in reprints, backfiles and the licensing of intellectual content.
As of April 30, 2018, calendar year 2018 journal subscription renewals were 2% higher than calendar year 2017 on a constant
currency basis with approximately 97% of targeted business under contract.
Gross Profit:
Gross Profit increased 8% to $686.7 million, or 3% on a constant currency basis as compared with prior year. The increase was driven
by higher revenues. Gross profit margin declined by 80 basis points due primarily to higher journal royalty costs associated with title
mix and an increase in new titles at higher royalty rates. We anticipate that we will continue to experience gross margin pressure due
to higher journal royalty rates in the year ended April 30, 2019. To offset this gross margin pressure, we will continue to pursue
additional operations efficiencies.
31
Contribution to Profit:
Contribution to Profit increased 8% to $271.3 million as compared with prior year. On a constant currency basis and excluding
restructuring charges, contribution to profit decreased 1% as compared with prior year as the increase in gross profit was offset by
higher operating expenses.
The increase in operating expenses was primarily due to:
a full year of costs in the year ended April 30, 2018 from Atypon which resulted in an incremental impact of $9 million;
higher employment-related costs of $5 million, which included higher incentive compensation from the achievement of
certain financial goals and targets;
higher content and editorial costs of $3 million; and
an increase in product technology costs of $5 million.
These factors were partially offset by savings from operational excellence initiatives and restructuring activities.
Society Partnerships
For calendar year 2018, 15 new society contracts were signed, with combined annual revenue of approximately $14 million, and 10
society contracts were not renewed with combined annual revenue of approximately $3 million.
PUBLISHING:
Revenue:
STM and Professional Publishing
Education Publishing
Courseware (WileyPLUS)
Test Preparation and Certification
Licensing, Distribution, Advertising, and Other
Total Publishing Revenue
Cost of Sales
Gross Profit
Gross Profit Margin
Operating Expenses (a)
Amortization of Intangibles
Restructuring Charges (see Note 7)
Publishing brand impairment charge
Contribution to Profit
Contribution Margin
2018
2017
% Change
% Change
w/o FX (b)
287,315 $
187,178
59,475
35,534
48,146
291,255
196,343
62,348
35,609
47,894
(1)%
(5)%
(5)%
—
1%
617,648 $
633,449
(2)%
194,900
194,837
—
422,748 $
68.4%
438,612
69.2%
(4)%
(3)%
(6)%
(5)%
—
(2)%
(4)%
(1)%
(5)%
282,958
8,108
6,443
3,600
121,639 $
19.7%
302,682
9,803
1,596
—
124,531
19.7%
(7)%
(17)%
(7)%
(17)%
(2)%
1%
$
$
$
$
(a) Due to the retrospective adoption of ASU 2017-07, total net benefits related to defined benefit and other post-employment benefit
plans were reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense). The amounts for the
years ended April 30, 2018 and 2017 for the Publishing segment were $2.3 million and $1.2 million, respectively. Refer to Note
2, "Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," for more
information.
(b) Adjusted in the years ended April 30, 2018 and 2017 to exclude FX impact and Restructuring Charges, and in the year ended
April 30, 2018 also excludes a Publishing brand impairment charge.
Revenue:
Publishing revenue decreased 2% to $617.6 million, or 4% on a constant currency basis as compared with prior year. The decline was
driven by lower print book revenues, particularly in Education Publishing, due to overall softness in the market as well as other retail
options such as rental and digital. Also contributing to the decline in Publishing revenue was a decline in Courseware (WileyPLUS),
primarily due to the timing of revenue recognition associated with multi-semester offerings, which are recognized in periods extending
32
7%
2%
6%
5%
3%
7%
7%
2%
(1)%
3%
1%
5%
(1)%
(6)%
across two semesters.
Gross Profit:
Gross Profit decreased 4% to $422.7 million, or 5% on a constant currency basis as compared with prior year. The decrease was
mainly driven by the decline in revenues, partially offset by lower inventory costs due to cost savings initiatives.
Contribution to Profit:
Contribution to Profit decreased 2% to $121.6 million as compared with prior year. On a constant currency basis and excluding
restructuring charges and a brand impairment charge in the first quarter of the year ended April 30, 2018, contribution to profit
increased 1%. This was primarily due to lower operating expenses, which were primarily savings from operational excellence
initiatives and restructuring activities.
2018
2017
%
Change
% Change
w/o FX (b)
SOLUTIONS:
Revenue:
Education Services
Professional Assessment
Corporate Learning
$
119,131 $
61,094
63,835
111,638
59,868
60,086
Total Solutions Revenue
$
244,060 $
231,592
Cost of Sales (a)
Gross Profit
Gross Profit Margin
Operating Expenses (a)
Amortization of Intangibles
Restructuring Charges (see Note 7)
Contribution to Profit
Contribution Margin
$
$
88,462
86,184
155,598 $
63.8%
145,408
62.8%
116,513
13,291
3,695
115,066
13,733
1,787
1%
(3)%
22,099 $
9.1%
14,822
6.4%
49%
56%
(a) In connection with the acquisition of Learning House, we changed our accounting policy for certain advertising and marketing
costs incurred by our Education Services business to fulfill performance obligations from contracts with educational institutions.
Under the new accounting policy, these costs are included in Cost of Sales whereas they were previously included in Operating
and Administrative Expenses on the Consolidated Statements of Income. The impact of this reclassification was an increase to
Cost of Sales and a corresponding decrease to Operating and Administrative Expenses of $45.8 million and $40.0 million for the
years ended April 30, 2018 and 2017, respectively. This reclassification had no impact on Revenue, net or Contribution to Profit.
Refer to “Change in Accounting Policy” in Note 2, “Summary of Significant Accounting Policies, Recently Issued, and Recently
Adopted Accounting Standards,” for more information on the accounting policy change and Note 4, “Acquisition,” for more
information related to the acquisition of Learning House.
(b) Adjusted to exclude FX impact and Restructuring Charges.
Revenue:
Solutions revenue increased 5% to $244.1 million, or 3%, on a constant currency basis as compared with prior year, mainly driven by
growth in Education Services tuition revenue growth due to higher enrollments, partially offset by a decline in Corporate Learning
(CrossKnowledge) where French government funding slowed for unemployment initiatives and blended learning programs.
Gross Profit:
Gross Profit increased 7% to $155.6 million, or 5% on a constant currency basis as compared with prior year. The increase primarily
reflected the impact of higher revenue.
A 100-basis-point improvement in gross profit margin was due to higher revenues and increased efficiency in recruiting Education
33
partially offset by:
Services students, which resulted in lower recruitment costs.
Contribution to Profit:
Contribution to Profit increased 49% to $22.1 million as compared with prior year. On a constant currency basis and excluding
restructuring charges, contribution to profit increased 56%, primarily due to the improvement in gross profit partially offset by higher
operating expenses, including higher advertising and marketing expenses of $6 million to support sales growth.
Education Services Partners and Programs
As of April 30, 2018, we had 34 university partners and 239 programs under contract.
CORPORATE EXPENSES:
Corporate Expenses were $183.6 million and $178.5 million in the years ended April 30, 2018 and 2017, respectively. On a constant
currency basis and excluding restructuring charges and a one-time pension settlement charge in the prior year, these expenses
decreased 2%, primarily due to the following:
lower technology costs of approximately $10 million driven by reduced spending on our ERP system and other reductions in
depreciation, outsourcing, and systems development consulting costs; and
savings from operational excellence initiatives and restructuring activities;
strategy consultation costs in the current year of $7.1 million; and
one-time benefits in the prior year related to changes in our retiree and long-term disability plans of $4.2 million and a life
insurance recovery of $2 million.
FISCAL YEAR 2020 OUTLOOK
(amounts in millions, except Adjusted EPS)
We are currently in the process of realigning our existing reporting structure to our new strategic focus areas. This realignment will
include the following changes to our segment reporting structure: (1) Education and Professional Publishing, which now consists of
the current Publishing segment plus our Corporate Learning and Professional Assessment businesses, and (2) Education Services,
which will now include our OPM businesses, including Learning House. Our Research segment will be renamed Research Publishing
and Platforms and will continue to include our current Research and Atypon businesses.
Item
Revenue
Research Publishing & Platforms
Education & Professional Publishing
Education Services
Adjusted EBITDA
Adjusted EPS
Free Cash Flow
Fiscal Year
2019 Actual
Fiscal Year 2020 Outlook
Constant Currency
$
$
$
$
1,800
937
705
158
388
2.96
149
$
$
$
$
1,840 - 1,870
950-960
690-700
200-210
360-375
2.45-2.55
210-230
Fiscal year 2020 Adjusted EPS is expected to decline primarily due to non-cash amortization expense related to acquisitions
and increased investment to grow and optimize Research and Education Services.
Forward-looking metrics include impact from Learning House and Knewton acquisitions.
Fiscal year 2020 results exclude the impact of the first quarter of fiscal year 2020 restructuring charges related to our multi-
year Business Optimization Program. We anticipate approximately $15 million to $20 million of restructuring charges, of
which approximately $10 million to $15 million to be severance-related costs and the remainder to be related to non-cash
costs. We estimate that this multi-year program will potentially yield approximately $30 million in operating savings over
time, with half of those savings to be realized in fiscal year 2020.
Fiscal year 2020 Outlook reflects fiscal year 2019 average exchange rates.
34
Adjusted EBITDA:
Below is a reconciliation of GAAP net income to Non-GAAP EBITDA and Adjusted EBITDA:
Net Income
Interest expense
Provision for income taxes
Depreciation and amortization
Non-GAAP EBITDA
Restructuring and related (credits) charges
Foreign exchange transaction losses
Interest and other income
Non-GAAP Adjusted EBITDA
LIQUIDITY AND CAPITAL RESOURCES:
Principal Sources of Liquidity
Year Ended
April 30,
2019
$
$
168,263
16,121
44,689
161,155
390,228
3,118
6,016
(11,100)
388,262
We believe that our operating cash flow, together with our revolving credit facilities and other available debt financing, will be
adequate to meet our operating, investing, and financing needs in the foreseeable future, although there can be no assurance that
continued or increased volatility in the global capital and credit markets will not impair our ability to access these markets on terms
commercially acceptable. We do not have any off-balance-sheet debt.
As of April 30, 2019, we had cash and cash equivalents of $92.9 million, of which approximately $81.0 million, or 87% was located
outside the U.S. Maintenance of these cash and cash equivalent balances outside the U.S. does not have a material impact on the
liquidity or capital resources of our operations. Notwithstanding the Tax Act which generally eliminated federal income tax on future
cash repatriation to the U.S., cash repatriation may be subject to state and local taxes or withholding or similar taxes. As described in
Note 12, “Income Taxes,” of the Notes to Consolidated Financial Statements, since April 30, 2018, we no longer intend to
permanently reinvest earnings outside the U.S. We have a $2.0 million liability related to the estimated taxes that would be incurred
upon repatriating certain non-U.S. earnings.
As of April 30, 2019, we had $478.8 million of debt outstanding and approximately $623.9 million of unused borrowing capacity
under our Revolving Credit and other facilities. Our credit agreement contains certain restrictive covenants related to our consolidated
leverage ratio and interest coverage ratio, which we were in compliance with as of April 30, 2019.
On May 30, 2019, we entered into a credit agreement that amended and restated the existing agreement. The credit agreement
provides for senior unsecured credit facilities comprised of a (i) five-year revolving credit facility in an aggregate principal amount up
to $1.25 billion, and (ii) a five-year term loan A facility consisting of $250 million. The agreement contains certain customary
affirmative and negative covenants, including a financial covenant in the form of a consolidated net leverage ratio and consolidated
interest coverage ratio. We incurred approximately $4.0 million of costs related to this agreement.
Contractual Obligations and Commercial Commitments
A summary of contractual obligations and commercial commitments, excluding unrecognized tax benefits further described in Note
12, “Income Taxes,” of the Notes to the Consolidated Financial Statements, as of April 30, 2019 is as follows:
Total Debt
Interest on Debt (1)
Non-Cancelable Leases
Minimum Royalty Obligations
Other Operating Commitments
Total
Payments Due by Period
Total
Within
Year 1
2–3
Years
4–5
Years
After 5
Years
$
$
478.8 $
31.9
248.6
469.8
57.4
1,286.5 $
— $
17.5
30.9
101.1
36.1
185.6 $
478.8 $
14.4
50.5
160.1
20.8
724.6 $
— $
—
37.8
106.1
0.5
144.4 $
—
—
129.4
102.5
—
231.9
(1) Interest on Debt includes the effect of our interest rate swap agreements and the estimated future interest payments on our
35
unhedged variable rate debt, assuming that the interest rates as of April 30, 2019 remain constant until the maturity of the debt.
Analysis of Historical Cash Flow
The following table shows the changes in our Consolidated Statements of Cash Flows for the years ended April 30, 2019, 2018 and
2017.
Net Cash Provided by Operating Activities
Net Cash Used in Investing Activities
Net Cash Used in Financing Activities
Effect of Foreign Currency Exchange Rate Changes on Cash, Cash Equivalents and
$
Restricted Cash
2019
Year Ended April 30,
2018
250,831 $
(301,502)
(17,595)
382,322 $
(177,411)
(96,831)
2017
314,903
(243,010)
(346,172)
(8,443)
3,661
(31,011)
Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders,
as it represents cash available to repay debt, pay common dividends, and fund share repurchases and new acquisitions. Below are the
details of Free Cash Flow less Product Development Spending for the years ended April 30, 2019, 2018, and 2017.
Cash flow from operations is seasonally a use of cash in the first half of Wiley’s fiscal year principally due to the timing of collections
for annual journal subscriptions, which occurs in the beginning of the second half of our fiscal year.
Free Cash Flow less Product Development Spending:
Net Cash Provided by Operating Activities
Less: Additions to Technology, Property and Equipment
Less: Product Development Spending
Free Cash Flow less Product Development Spending
Net Cash Provided by Operating Activities
2019 compared to 2018
2019
Year Ended April 30,
2018
250,831 $
(77,167)
(24,426)
149,238 $
382,322 $
(114,225)
(36,503)
231,594 $
$
$
2017
314,903
(105,058)
(43,603)
166,242
Net Cash Provided by Operating Activities in the year ended April 30, 2019 decreased $131.5 million compared to the year ended
April 30, 2018 to $250.8 million primarily due to the following factors:
lower net earnings adjusted for non-cash items of $24 million, including Learning House;
the unfavorable net impact on accounts receivable and deferred revenue (contract liabilities) from the delay in billings and
subsequent collections of calendar year 2019 journal subscriptions of $57 million;
the net use of cash for other working capital items, including the payment of accounts payable and accrued liabilities of $26
million, primarily due to timing of payments and lower accruals for incentive compensation;
a net use of cash related to employee retirement plan contributions of $13 million, which includes a $10.0 million tax-
advantage discretionary contribution to the U.S. Employees' Retirement Plan in fiscal year 2019; and
certain one-time closing costs related to the Learning House acquisition of $10 million.
Our negative working capital was $379.8 million and $394.3 million as of April 30, 2019, and April 30, 2018, respectively, due to the
seasonality of our businesses. The primary driver of the negative working capital is unearned contract liabilities (deferred revenue)
related to subscriptions for which cash has been collected in advance. Cash received in advance for subscriptions is used by us for a
number of purposes, including acquisitions, debt repayments, funding operations, dividend payments and purchasing treasury shares.
Our change in working capital of $14.6 million was primarily due to the delay in billings and subsequent cash collections for calendar
year 2019 subscriptions partly related to our ERP transition. We estimate that approximately $35 million of cash collections for
calendar year 2019 journal subscriptions collections were delayed into fiscal year 2020.
The contract liabilities (deferred revenue) will be recognized as income when the products are shipped or made available online to the
customers over the term of the subscription. Current liabilities as of April 30, 2019 and as of April 30, 2018 includes $507.4 million
and $486.4 million, respectively, primarily related to deferred subscription revenue for which cash was collected in advance.
36
We expect that our fiscal year 2020 cash flow from operations will benefit from the expected recovery on the timing of journal
subscriptions collections. We expect timing related changes in working capital will not be as pronounced as we enter into fiscal 2021.
During that time, we expect our cash flow from operations and financial position to continue to provide us with the opportunity and
capacity to execute our strategies.
2018 compared to 2017
Net Cash Provided by Operating Activities in the year ended April 30, 2018 increased $67.4 million from the year ended April 30,
2017 to $382.3 million. This was primarily due to:
a $40.7 million favorable impact on accounts payable from the timing of vendor payments;
a $12.1 million favorable impact from lower employee retirement plan contributions; and
a $15.7 million favorable impact on accounts receivable from the timing of customer payments.
The factors above were partially offset by a $15.0 million unfavorable impact from higher taxes paid in the year ended April 30, 2018
as compared with prior year.
Our negative working capital was $394.3 million and $428.1 million as of April 30, 2018, and April 30, 2017, respectively. The
primary driver of the negative working capital is unearned deferred revenue related to subscriptions for which cash has been collected
in advance. Cash received in advance for subscriptions is used by us for a number of purposes, including funding operating activities,
acquisitions, debt repayments, dividend payments, and repurchasing treasury shares. The deferred revenue will be recognized as
income when the products are shipped or made available online to the customers over the term of the subscription period. Current
liabilities as of April 30, 2018 include $486.4 million of such deferred subscription revenue for which cash was collected in advance.
The $33.8 million change in working capital was primarily due to the seasonality of our businesses and the impact from the changes in
accounts receivable and accounts payable discussed above. For the year ended April 30, 2019, working capital performance from
accounts receivable and accounts payable is expected to be in line with the year ended April 30, 2018.
Net Cash Used in Investing Activities
2019 compared to 2018
Net Cash Used in Investing Activities in the year ended April 30, 2019 was $301.5 million compared to $177.4 million in the prior
year. The increase was due to $190.4 million of net cash used to acquire Learning House. This was partially offset by a decrease of
$37.1 million due to lower spending for technology, property and equipment in the year ended April 30, 2019 as a result of the May
2018 implementation of our enterprise resource planning system (“ERP”) order to cash release for journal subscriptions and the
completion of our headquarters renovations. In addition, a $12.1 million decrease in product development spending, which was
primarily due to the adoption of Topic 606 whereby certain costs to fulfill contracts, which were previously included in product
development spending are now included in cash flow from operations. As well as a decrease of $17.2 million in cash used for the
acquisition of publication rights.
Projected capital spending for Technology, Property and Equipment and Product Development Spending for the year ended April 30,
2020 is forecast to be approximately $125 million. Projected spending for author advances, which is classified as an operating activity,
is forecast to be approximately $134 million for the year ended April 30, 2020.
2018 compared to 2017
Net Cash Used in Investing Activities in the year ended April 30, 2018 was $177.4 million, compared to $243.0 million in the prior
year. The decrease in net cash used in investing activities in the year ended April 30, 2018 was primarily due to:
our investment in the year ended April 30, 2017 in acquisitions of $125.9 million compared to no investments in the year
ended April 30, 2018. The year ended April 30, 2017 includes cash used for the acquisitions of Atypon ($121 million) and
Ranku ($5 million), net of cash acquired;
partially offset by:
$60.4 million in proceeds we received in the year ended April 30, 2017 related to the settlement of a foreign exchange
forward contract that was entered into in the year ended April 30, 2016 to manage foreign currency exposures on
intercompany loans.
37
Net Cash Used In Financing Activities
2019 compared to 2018
Net Cash Used In Financing Activities was $17.6 million in the year ended April 30, 2019 compared to $96.8 million in fiscal year
2018. This decrease in cash used in financing activities was due to an increase in net borrowings of $128.7 million in the year ended
April 30, 2019 compared to the year ended April 30, 2018. This was partially offset by $25.5 million of lower cash proceeds from the
exercise of stock options and an increase in cash used of $20.3 million to repurchase shares of our Class A Common Stock.
During the year ended April 30, 2019, we repurchased 1,191,496 shares of Class A Common stock at an average price of $50.35
compared to 713,177 shares of Class A Common Stock at an average price of $55.65 in the prior year. In the year ended April 30,
2019, we increased our quarterly dividend to shareholders by 3% to $1.32 per share annualized versus $1.28 per share annualized in
the prior year.
As of April 30, 2019, we had authorization from our Board of Directors to purchase up to 1,888,975 additional shares.
2018 compared to 2017
Net Cash Used in Financing Activities was $96.8 million in the year ended April 30, 2018 compared to $346.2 million in the year
ended April 30, 2017. This decrease in cash used was due to lower net debt repayments in the year ended April 30, 2018. Net debt
repayments in the year ended April 30, 2018 were $8.6 million compared to $240.0 million in the prior year.
During the year ended April 30, 2018, we repurchased 713,177 shares of common stock at an average price of $55.65, compared to
953,188 shares at an average price of $52.80 in the prior year. As of April 30, 2018, we had authorization from our Board of Directors
to purchase up to 3,080,471 additional shares.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS, ACCOUNTING GUIDANCE, AND
DISCLOSURE REQUIREMENTS
We are subject to numerous recently issued statements of financial accounting standards, accounting guidance, and disclosure
requirements. The information set forth in Note 2, “Summary of Significant Accounting Policies, Recently Issued and Recently
Adopted Accounting Standards,” of the Notes to Consolidated Financial Statements of this Form 10-K is incorporated by reference
and describes these new accounting standards.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
The preparation of our Consolidated Financial Statements and related disclosures in conformity with U.S. GAAP requires our
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities as of the date of the financial statements and revenue and expenses during the reporting period. These estimates
include, among other items, revenue recognition, sales return reserves, allocation of acquisition purchase price to assets acquired and
liabilities assumed, goodwill and indefinite-lived intangible assets, intangible assets with finite lives and other long-lived assets, and
retirement plans. We review these estimates and assumptions periodically using historical experience and other factors and reflect the
effects of any revisions on the Consolidated Financial Statements in the period we determine any revisions to be necessary. Actual
results could differ from those estimates, which could affect the reported results. Note 2, “Summary of Significant Accounting
Policies, Recently Issued and Recently Adopted Accounting Standards” of the “Notes to Consolidated Financial Statements” includes
a summary of the significant accounting policies and methods used in preparation of our Consolidated Financial Statements. Set forth
below is a discussion of our more critical accounting policies and methods.
Revenue Recognition:
See Note 3, “Revenue Recognition, Contracts with Customers,” of the Notes to Consolidated Financial Statements for details of our
revenue recognition policy.
Sales Return Reserves:
The process that we use to determine our sales returns and the related reserve provision charged against revenue is based on applying
an estimated return rate to current year returnable print book sales. This rate is based upon an analysis of actual historical return
experience in the various markets and geographic regions in which we do business. We collect, maintain, and analyze significant
amounts of sales returns data for large volumes of homogeneous transactions. This allows us to make reasonable estimates of the
amount of future returns. All available data is utilized to identify the returns by market and as to which fiscal year the sales returns
38
apply. This enables management to track the returns in detail and identify and react to trends occurring in the marketplace, with the
objective of being able to make the most informed judgments possible in setting reserve rates. Associated with the estimated sales
return reserves, we also include a related increase to inventory and a reduction to accrued royalties as a result of the expected returns.
Print book sales return reserves amounted to a net liability balance of $18.5 million and $18.6 million as of April 30, 2019 and 2018,
respectively.
The reserves are reflected in the following accounts of the Consolidated Statements of Financial Position – increase (decrease):
Accounts receivable, net (1)
Inventories, net
Accrued royalties
Contract liability (Deferred revenue) (1)
Decrease in Net Assets
2019
— $
3,739 $
(3,653) $
25,934 $
(18,542) $
2018
(28,302)
4,626
(5,048)
—
(18,628)
$
$
$
$
$
(1) Due to the adoption of the new revenue standard (See Note 3, Revenue Recognition, Contracts with Customers), the sales return
reserve as of April 30, 2019 of $25.9 million is recorded in Contract Liability (Deferred Revenue). In prior periods, the sales return
reserve of $28.3 million was recorded as a reduction to Accounts Receivable, net on the Consolidated Statements of Financial
Position.
A one percent change in the estimated sales return rate could affect net income by approximately $1.5 million. A change in the pattern
or trends in returns could also affect the estimated allowance.
Allocation of Acquisition Purchase Price to Assets Acquired and Liabilities Assumed:
In connection with acquisitions, we allocate the cost of the acquisition to the assets acquired and the liabilities assumed based on the
estimates of fair value for such items, including intangible assets and technology acquired. Such estimates include discounted
estimated cash flows expected to be generated by those assets and the expected useful lives based on historical experience and current
market trends to be achieved from the acquisition and the expected tax basis of assets acquired. We may use a third-party valuation
consultant to assist in the determination of such estimates.
Goodwill and Indefinite-lived Intangible Assets:
Goodwill is reviewed for possible impairment at least annually on a reporting unit level during the fourth quarter of each year. A
review of goodwill may be initiated before or after conducting the annual analysis if events or changes in circumstances indicate the
carrying value of goodwill may no longer be recoverable.
A reporting unit is the operating segment unless, at businesses one level below that operating segment– the “component” level–
discrete financial information is prepared and regularly reviewed by management, and the component has economic characteristics
that are different from the economic characteristics of the other components of the operating segment, in which case the component is
the reporting unit.
As part of the annual impairment test, we may conduct an assessment of qualitative factors to determine whether it is more likely than
not that the fair value of a reporting unit is less than its carrying amount. In a qualitative assessment, we would consider the
macroeconomic conditions, including any deterioration of general conditions and industry and market conditions, including any
deterioration in the environment where the reporting unit operates, increased competition, changes in the products/services and
regulatory and political developments, cost of doing business, overall financial performance, including any declining cash flows and
performance in relation to planned revenues and earnings in past periods, other relevant reporting unit specific facts, such as changes
in management or key personnel or pending litigation, and events affecting the reporting unit, including changes in the carrying value
of net assets.
If an optional qualitative goodwill impairment assessment is not performed, we are required to determine the fair value of each
reporting unit using the two-step process. In step one, we compare the fair value of each of our reporting units with goodwill to its
carrying value, including the goodwill allocated to the reporting unit. If the fair value of the reporting unit exceeds its carrying value,
there is no indication of impairment and no further testing is required. If the fair value of the reporting unit is less than the carrying
value, we must perform step two of the impairment test to measure the amount of impairment loss, if any. In step two, the reporting
unit’s fair value is allocated to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a
hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit were being acquired
in a business combination. If the implied fair value of the reporting unit’s goodwill is less than the carrying value, the difference is
recorded as an impairment loss.
39
We derive an estimate of fair values for each of our reporting units using a combination of an income approach and a market
approach, each based on an applicable weighting. We assess the applicable weighting based on such factors as current market
conditions and the quality and reliability of the data. Absent an indication of fair value from a potential buyer or similar specific
transactions, we believe that the use of these methods provides a reasonable estimate of a reporting unit’s fair value.
Fair value computed by these methods is arrived at using a number of factors, including projected future operating results, anticipated
future cash flows, effective income tax rates, comparable marketplace data within a consistent industry grouping, and the cost of
capital. There are inherent uncertainties, however, related to these factors and to our judgment in applying them to this analysis.
Nonetheless, we believe that the combination of these methods provides a reasonable approach to estimate the fair value of our
reporting units. Assumptions for sales, net earnings, and cash flows for each reporting unit were consistent among these methods.
Annual Goodwill Impairment Test
As of February 1, 2019, we completed step one of our annual goodwill impairment test for our reporting units. We concluded that the
fair values of these reporting units were above their carrying values and, therefore, there was no indication of impairment.
Income Approach Used to Determine Fair Values
The income approach is based upon the present value of expected cash flows. Expected cash flows are converted to present value
using factors that consider the timing and risk of the future cash flows. The estimate of cash flows used is prepared on an unleveraged
debt-free basis. We use a discount rate that reflects a market-derived weighted average cost of capital. We believe that this approach is
appropriate because it provides a fair value estimate based upon the reporting unit’s expected long-term operating and cash flow
performance. The projections are based upon our best estimates of projected economic and market conditions over the related period
including growth rates, estimates of future expected changes in operating margins, and cash expenditures. Other significant estimates
and assumptions include terminal value long-term growth rates, provisions for income taxes, future capital expenditures, and changes
in future cashless, debt-free working capital.
Market Approach Used to Determine Fair Values
The market approach used estimates the fair value of the reporting unit by applying multiples of operating performance measures to
the reporting unit’s operating performance (the “Guideline Public Company Method”). These multiples are derived from comparable
publicly-traded companies with similar investment characteristics to the reporting unit, and such comparable data are reviewed and
updated as needed annually. We believe that this approach is appropriate because it provides a fair value estimate using multiples from
entities with operations and economic characteristics comparable to our reporting units and Wiley.
The key estimates and assumptions that are used to determine fair value under this market approach include current and forward 12-
month operating performance results, as applicable, and the selection of the relevant multiples to be applied. Under the Guideline
Public Company Method, a control premium, or an amount that a buyer is usually willing to pay over the current market price of a
publicly traded company, is considered and applied, to the calculated equity values to adjust the public trading value upward for a
100% ownership interest, where applicable.
In order to assess the reasonableness of the calculated fair values of our reporting units, we also compare the sum of the reporting
units’ fair values to our market capitalization and calculate an implied control premium (the excess of the sum of the reporting units’
fair values over the market capitalization). We evaluate the control premium by comparing it to control premiums of recent
comparable market transactions. If the implied control premium is not reasonable in light of these recent transactions, we will
reevaluate our fair value estimates of the reporting units by adjusting the discount rates and/or other assumptions.
If our assumptions and related estimates change in the future, or if we change our reporting unit structure or other events and
circumstances change (such as a sustained decrease in the price of our common stock, a decline in current market multiples, a
significant adverse change in legal factors or business climates, an adverse action or assessment by a regulator, heightened
competition, strategic decisions made in response to economic or competitive conditions, or a more-likely-than-not expectation that a
reporting unit or a significant portion of a reporting unit will be sold or disposed of), we may be required to record impairment charges
in future periods. Any impairment charges that we may take in the future could be material to our consolidated results of operations
and financial condition.
See Note 11, “Goodwill and Intangible Assets,” of the Notes to Consolidated Financial Statements for details of our goodwill balance
and the goodwill review performed in 2019 and other related information.
40
Intangible Assets with Finite Lives and Other Long-Lived Assets:
Finite-lived intangible assets principally consist of brands, trademarks, content and publication rights, customer relationships, and
non-compete agreements and are amortized over their estimated useful lives. The most significant factors in determining the estimated
lives of these intangibles are the history and longevity of the brands, trademarks, and content and publication rights acquired
combined with the strength of cash flows.
Intangible assets with finite lives as of April 30, 2019, are amortized on a straight line basis over the following weighted average
estimated useful lives: content and publishing rights – 34 years, customer relationships – 18 years, brands and trademarks – 16 years,
non-compete agreements – 3 years.
Assets with finite lives are evaluated for impairment upon a significant change in the operating or macroeconomic environment. In
these circumstances, if an evaluation of the projected undiscounted cash flows indicates impairment, the asset is written down to its
estimated fair value based on the discounted future cash flows.
Retirement Plans:
We provide defined benefit pension plans for certain employees worldwide. Our Board of Directors approved amendments to the U.S.,
Canada and U.K. defined benefit plans that froze the future accumulation of benefits effective June 30, 2013, December 31, 2015, and
April 30, 2015, respectively. Under the amendments, no new employees will be permitted to enter these plans and no additional
benefits for current participants for future services will be accrued after the effective dates of the amendments.
The accounting for benefit plans is highly dependent on assumptions concerning the outcome of future events and circumstances,
including discount rates, long-term return rates on pension plan assets, healthcare cost trends, compensation increases and other
factors. In determining such assumptions, we consult with outside actuaries and other advisors.
The discount rates for the U.S., Canada and U.K. pension plans are based on the derivation of a single-equivalent discount rate using a
standard spot rate curve and the timing of expected benefit payments as of the balance sheet date. The spot rate curves are based upon
portfolios of corporate bonds rated at Aa or above by a respected rating agency. The discount rate for Germany is based on a similar
published index with a duration comparable to that of the plan’s liabilities. The expected long-term rates of return on pension plan
assets are estimated using market benchmarks for equities, real estate, and bonds applied to each plan’s target asset allocation and are
estimated by asset class, including an anticipated inflation rate. The expected long-term rates are then compared to the historic
investment performance of the plan assets as well as future expectations and estimated through consultation with investment advisors
and actuaries. Salary growth and healthcare cost trend assumptions are based on our historical experience and future outlook. While
we believe that the assumptions used in these calculations are reasonable, differences in actual experience or changes in assumptions
could materially affect the expense and liabilities related to our defined benefit pension plans. A hypothetical one percent increase in
the discount rate would increase net income and decrease the accrued pension liability by approximately $1.4 million and $135.1
million, respectively. A one percent decrease in the discount rate would decrease net income and increase the accrued pension liability
by approximately $0.6 million and $165.9 million, respectively. A one percent change in the expected long-term rate of return would
affect net income by approximately $4.7 million.
41
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk primarily related to interest rates, foreign exchange, and credit risk. It is our policy to monitor these
exposures and to use derivative financial investments and/or insurance contracts from time to time to reduce fluctuations in earnings
and cash flows when it is deemed appropriate to do so. We do not use derivative financial instruments for trading or speculative
purposes.
Interest Rates:
From time to time, we may use interest rate swaps, collars, or options to manage our exposure to fluctuations in interest rates. It is
management’s intention that the notional amount of interest rate swaps be less than the variable rate loans outstanding during the life
of the derivatives.
The information set forth in Note 14, "Derivatives Instruments and Hedging Activities," of the Notes to Consolidated Financial
Statements under the caption "Interest Rate Contracts," is incorporated herein by reference.
On an annual basis, a hypothetical one percent change in interest rates for the $128.8 million of unhedged variable rate debt as of
April 30, 2019 would affect net income and cash flow by approximately $1.0 million.
Foreign Exchange Rates:
Fluctuations in the currencies of countries where we operate outside the U.S. may have a significant impact on financial results. We
are primarily exposed to movements in British pound sterling, euros, Canadian and Australian dollars, and certain currencies in Asia.
The Statements of Financial Position of non-U.S. business units are translated into U.S. dollars using period-end exchange rates for
assets and liabilities and the Statements of Income are translated into U.S. dollars using weighted-average exchange rates for revenues
and expenses. The percentage of Consolidated Revenue for the year ended April 30, 2019 recognized in the following currencies (on
an equivalent U.S. dollar basis) were approximately: 54% U.S dollar, 26% British pound sterling, 12% euro, and 8% other currencies.
Our significant investments in non-U.S. businesses are exposed to foreign currency risk. Adjustments resulting from translating assets
and liabilities are reported as a separate component of Accumulated Other Comprehensive Loss within Shareholders’ Equity under the
caption Foreign Currency Translation Adjustment. During the year ended April 30, 2019, we recorded foreign currency translation
losses in other comprehensive income of approximately $60.5 million primarily as a result of the fluctuations of the U.S. dollar
relative to the British pound sterling and, to a lesser extent, the euro.
Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses on the Consolidated
Statements of Income as incurred. Under certain circumstances, we may enter into derivative financial instruments in the form of
foreign currency forward contracts to hedge against specific transactions, including intercompany purchases and loans.
We may enter into forward exchange contracts to manage our exposure on certain foreign currency denominated assets and liabilities.
As of April 30, 2019, and 2018, we did not maintain any open forward contracts.
The information set forth in Note 14, "Derivatives Instruments and Hedging Activities," of the Notes to Consolidated Financial
Statements under the caption "Foreign Currency Contracts," is incorporated herein by reference.
Customer Credit Risk:
In the journal publishing business, subscriptions are primarily sourced through journal subscription agents who, acting as agents for
library customers, facilitate ordering by consolidating the subscription orders/billings of each subscriber with various publishers. Cash
is generally collected in advance from subscribers by the subscription agents and is principally remitted to us between the months of
December and April. Although at fiscal year-end we had minimal credit risk exposure to these agents, future calendar-year
subscription receipts from these agents are highly dependent on their financial condition and liquidity. Subscription agents account for
approximately 20% of total annual consolidated revenue and one affiliated group of subscription agents accounts for approximately
10% of total annual consolidated revenue.
Our book business is not dependent upon a single customer; however, the industry is concentrated in national, regional, and online
bookstore chains. Although no one book customer accounts for more than 8% of total consolidated revenue and 11% of accounts
receivable at April 30, 2019, the top 10 book customers account for approximately 13% of total consolidated revenue and
approximately 21% of accounts receivable at April 30, 2019. We maintain approximately $25 million of trade credit insurance,
covering balances due from certain named customers, subject to certain limitations and annual renewal.
42
Disclosure of Certain Activities Relating to Iran:
The European Union, Canada and the U.S. have imposed sanctions on business relationships with Iran, including restrictions on
financial transactions and prohibitions on direct and indirect trading with listed “designated persons.” In the year ended April 30,
2019, we recorded an immaterial amount of revenue and net earnings related to the sale of scientific and medical content to certain
publicly funded universities, hospitals and institutions that meet the definition of the “Government of Iran” as defined under section
560.304 of title 31, Code of Federal Regulations. We assessed our business relationship and transactions with Iran and believe we are
in compliance with the regulations governing the sanctions. We intend to continue in these or similar sales as long as they continue to
be consistent with all applicable sanction-related regulations.
43
Item 8.
Financial Statements and Supplementary Data
The following Consolidated Financial Statements and Notes are filed as part of this report.
John Wiley & Sons, Inc. and Subsidiaries
Reports of Independent Registered Public Accounting Firm
Financial Statements
Consolidated Statements of Financial Position - April 30, 2019 and 2018
Consolidated Statements of Income for the years ended April 30, 2019, 2018, and 2017
Consolidated Statements of Comprehensive Income for the years ended April 30, 2019, 2018, and 2017
Consolidated Statements of Cash Flows for the years ended April 30, 2019, 2018, and 2017
Consolidated Statements of Shareholders’ Equity for the years ended April 30, 2019, 2018, and 2017
Notes to Consolidated Financial Statements
Note 1. Description of Business
Note 2. Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards
Note 3. Revenue Recognition, Contracts with Customers
Note 4. Acquisition
Note 5. Reconciliation of Weighted Average Shares Outstanding
Note 6. Accumulated Other Comprehensive Loss
Note 7. Restructuring and Related Charges
Note 8. Inventories
Note 9. Product Development Assets
Note 10. Technology, Property, and Equipment
Note 11. Goodwill and Intangible Assets
Note 12. Income Taxes
Note 13. Debt and Available Credit Facilities
Note 14. Derivative Instruments and Activities
Note 15. Commitment and Contingencies
Note 16. Retirement Plans
Note 17. Stock-Based Compensation
Note 18. Capital Stock and Changes in Capital Accounts
Note 19. Segment Information
Note 20. Supplementary Quarterly Financial Information–Results By Quarter (Unaudited)
Note 21. Subsequent Events
Financial Statement Schedule
Schedule II – Valuation and Qualifying Accounts for the years ended April 30, 2019, 2018, and 2017
49
50
51
52
54
55
55
63
69
71
71
71
72
73
73
74
76
79
79
80
81
85
87
88
90
91
97
44
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To our Shareholders
John Wiley & Sons, Inc.:
The management of John Wiley & Sons, Inc. and subsidiaries is responsible for establishing and maintaining adequate internal control
over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
Under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the framework in Internal Control
– Integrated Framework issued by COSO, our management concluded that our internal control over financial reporting was effective
as of April 30, 2019.
Changes in Internal Control over Financial Reporting:
The Company acquired Learning House during fiscal year 2019, which represented approximately 1% of total consolidated assets,
excluding goodwill and intangibles which are included within the scope of the assessment, and approximately 2% of total consolidated
revenues of the Company as of and for the year ended April 30, 2019. Learning House was excluded from the Company's assessment
of the effectiveness of the Company’s internal control over financial reporting as of April 30, 2019.
We are in the process of implementing a new global enterprise resource planning system (“ERP”) that will enhance our business and
financial processes and standardize our information systems. We have completed the implementation of record-to-report, purchase-to-
pay and several other business processes within all locations and will continue to roll out the ERP in phases over the next year.
As with any new information system we implement, this application, along with the internal controls over financial reporting included
in this process, will require testing for effectiveness. In connection with this ERP implementation, we are updating our internal
controls over financial reporting, as necessary, to accommodate modifications to our business processes and accounting procedures.
We do not believe that the ERP implementation will have an adverse effect on our internal control over financial reporting.
Except as described above, there were no changes in our internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting during fiscal year 2019.
The effectiveness of our internal control over financial reporting as of April 30, 2019 has been audited by KPMG LLP, an independent
registered public accounting firm, as stated in their report which is included herein.
The Company’s Corporate Governance Principles, Committee Charters, Business Conduct and Ethics Policy and the Code of Ethics
for Senior Financial Officers are published on our web site at www.wiley.com under the “About Wiley—Corporate Governance”
captions. Copies are also available free of charge to shareholders on request to the Corporate Secretary, John Wiley & Sons, Inc., 111
River Street, Hoboken, NJ 07030-5774.
/s/ Brian A. Napack
Brian A. Napack
President and Chief Executive Officer
/s/ John A. Kritzmacher
John A. Kritzmacher
Chief Financial Officer and
Executive Vice President, Operations
/s/ Christopher F. Caridi
Christopher F. Caridi
Senior Vice President, Corporate Controller and
Chief Accounting Officer
July 1, 2019
45
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
John Wiley & Sons, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of John Wiley & Sons, Inc. and subsidiaries (the
Company) as of April 30, 2019 and 2018, the related consolidated statements of income, comprehensive income, shareholders’ equity,
and cash flows for each of the years in the three-year period ended April 30, 2019, and the related notes and financial statement
schedule (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of April 30, 2019 and 2018, and the results of its operations and its cash
flows for each of the years in the three-year period ended April 30, 2019, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of April 30, 2019, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our
report dated July 1, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial
reporting.
Change in Accounting Principle
As described in Note 2 to the consolidated financial statements, the Company has elected to change its method of accounting for
certain advertising and marketing costs. This change in accounting principle has been retrospectively applied to the accompanying
consolidated financial statements for the fiscal years ended April 30, 2018 and 2017.
As described in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue
recognition effective May 1, 2018 due to the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with
Customers.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2002.
New York, New York
July 1, 2019
46
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
John Wiley & Sons, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited John Wiley & Sons, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of April 30,
2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of April 30, 2019, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated statements of financial position of the Company as of April 30, 2019 and 2018, and the related
consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year
period ended April 30, 2019, and the related notes and financial statement schedule (collectively, the consolidated financial
statements), and our report dated July 1, 2019 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired Learning House during fiscal year 2019, and management excluded from its assessment of the effectiveness of
the Company’s internal control over financial reporting as of April 30, 2019, Learning House’s internal control over financial
reporting associated with approximately 1% of total consolidated assets, excluding goodwill and intangibles which are included within
the scope of the assessment, and approximately 2% of total consolidated revenues of the Company as of and for the year ended April
30, 2019. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over
financial reporting of Learning House.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report On Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
47
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
New York, New York
July 1, 2019
48
John Wiley & Sons, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Dollars in thousands
Assets:
Current Assets
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Prepaid expenses and other current assets
Total Current Assets
Product Development Assets
Royalty Advances, net
Technology, Property and Equipment, net
Intangible Assets, net
Goodwill
Other Non-Current Assets
Total Assets
Liabilities and Shareholders’ Equity:
Current Liabilities
Accounts payable
Accrued royalties
Contract liability (Deferred revenue)
Accrued employment costs
Accrued income taxes
Other accrued liabilities
Total Current Liabilities
Long-Term Debt
Accrued Pension Liability
Deferred Income Tax Liabilities
Other Long-Term Liabilities
Total Liabilities
Shareholders’ Equity
Preferred Stock, $1 par value: Authorized – 2 million, Issued – 0
Class A Common Stock, $1 par value: Authorized – 180 million, Issued – 70,126,963 and
70,110,603 as of April 30, 2019 and 2018, respectively
Class B Common Stock, $1 par value: Authorized – 72 million, Issued – 13,054,707 and
13,071,067 as of April 30, 2019 and 2018, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss):
Foreign currency translation adjustment
Unamortized retirement costs, net of tax
Unrealized (loss) gain on interest rate swap, net of tax
Total accumulated other comprehensive loss, net of tax
Less: Treasury Shares At Cost (Class A – 22,633,869 and 21,853,257 as of April 30, 2019 and
2018, respectively, Class B – 3,917,574 and 3,917,574 of April 30, 2019 and 2018,
respectively)
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
See accompanying Notes to Consolidated Financial Statements.
49
$
$
$
April 30,
2019
2018
92,890 $
294,867
35,582
67,441
490,780
62,470
36,185
289,021
865,572
1,095,666
97,308
2,937,002 $
169,773
212,377
39,489
58,332
479,971
78,814
37,058
289,934
848,071
1,019,801
85,802
2,839,451
90,980 $
78,062
507,365
97,230
21,025
75,900
870,562
90,097
73,007
486,353
116,179
13,927
94,748
874,311
478,790
166,331
143,775
96,197
1,755,655
360,000
190,301
143,518
80,764
1,648,894
—
—
70,127
70,111
13,055
422,305
1,931,074
(312,107)
(196,057)
(574)
(508,738)
13,071
407,120
1,834,057
(251,573)
(191,026)
3,019
(439,580)
(746,476)
1,181,347
2,937,002 $
(694,222)
1,190,557
2,839,451
$
John Wiley & Sons, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Dollars in thousands, except per share data
For the Years Ended April 30,
2018 (1)(2)
2019
2017 (1)(2)
Revenue, net
$
1,800,069 $
1,796,103 $
1,718,530
Costs and Expenses
Cost of sales (2)
Operating and administrative expenses (1)(2)
Restructuring and related charges
Amortization of intangibles
Total Costs and Expenses
Operating Income
Interest Expense
Foreign Exchange Transaction (Losses) Gains
Interest and Other Income (Expense) (1)
Income Before Taxes
Provision for Income Taxes
Net Income
Earnings Per Share
Basic
Diluted
Weighted Average Number of Common Shares Outstanding
Basic
Diluted
554,722
963,582
3,118
54,658
1,576,080
531,024
956,822
28,566
48,230
1,564,642
500,794
943,242
13,355
49,669
1,507,060
223,989
231,461
211,470
(16,121)
(6,016)
11,100
(13,274)
(12,819)
8,563
212,952
44,689
213,931
21,745
(16,938)
421
(3,837)
191,116
77,473
168,263 $
192,186 $
113,643
2.94 $
2.91 $
3.37 $
3.32 $
1.98
1.95
57,192
57,840
57,043
57,888
57,337
58,199
$
$
$
See accompanying Notes to Consolidated Financial Statements.
(1) Due to the retrospective adoption of Accounting Standards Update (“ASU”) 2017-07, “Compensation—Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,”, total net benefits (costs) of $8.1
million and $(5.3) million related to the non-service components of defined benefit and other post-employment benefit plans were
reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense) for the years ended April 30, 2018 and
2017, respectively. Total net benefits (costs) related to the non-service components of defined benefit and other post-employment benefit
plans were $8.8 million for the year ended April 30, 2019. Refer to Note 2, "Summary of Significant Accounting Policies, Recently Issued,
and Recently Adopted Accounting Standards," in the Notes to Consolidated Financial Statements for more information.
(2) In connection with the acquisition of The Learning House, Inc. (“Learning House”), we changed our accounting policy for certain
advertising and marketing costs incurred by our Education Services business to fulfill performance obligations from contracts with
educational institutions. Under the new accounting policy, these costs are included in Cost of Sales whereas they were previously included
in Operating and Administrative Expenses on the Consolidated Statements of Income. Including these expenses in Cost of Sales will better
align these costs with the related revenue and conform with the presentation of such costs for Learning House. This change in accounting
policy was applied retrospectively.
The Consolidated Statements of Income for the years ended April 30, 2018, and 2017 have been reclassified to reflect this change in
accounting policy. The impact of this reclassification was an increase to Cost of Sales and a corresponding decrease to Operating and
Administrative Expenses of $45.8 million and $40.0 million for the years ended April 30, 2018, and 2017, respectively. This
reclassification had no impact on Revenue, net, Operating Income, Net Income, or Earnings per Share. Refer to “Change in Accounting
Policy” in Note 2, "Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," for more
information on the accounting policy change and Note 4, “Acquisition,” in the Notes to Consolidated Financial Statements for more
information related to the acquisition of Learning House.
50
John Wiley & Sons, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in thousands
For the Years Ended April 30,
2018
2019
2017
Net Income
$
168,263 $
192,186 $
113,643
Other Comprehensive (Loss) Income:
Foreign currency translation adjustment
Unrealized retirement costs, net of tax benefit of $1,337, $252, and $3,286,
respectively
Unrealized (loss) gain on interest rate swaps, net of tax benefit (expense) of
$1,161, $(459), and $(1,709), respectively
Total Other Comprehensive (Loss) Income
(60,534)
67,639
(51,292)
(5,031)
(524)
(11,097)
(3,593)
(69,158)
592
67,707
2,788
(59,601)
Comprehensive Income
$
99,105 $
259,893 $
54,042
See accompanying Notes to Consolidated Financial Statements.
51
John Wiley & Sons, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands
Operating Activities
Net Income
Adjustments to reconcile net income to net cash provided by operating activities:
$
168,263 $
192,186 $
113,643
For the Years Ended April 30,
2018
2017
2019
Amortization of intangibles
Amortization of product development assets
Depreciation and amortization of technology, property and equipment
Restructuring charges
Deferred income tax benefit on U.K. rate changes
Stock-based compensation expense
Excess tax benefits from stock-based compensation
Employee retirement plan expense
Royalty advances
Earned royalty advances
Impairment of publishing brand
Foreign currency gains (losses)
Unfavorable tax litigation
One-time pension settlement
Other non-cash credits
Changes in Operating Assets and Liabilities
Accounts receivable, net
Inventories, net
Accounts payable
Accrued royalties
Contract liability (Deferred revenue)
Accrued income taxes
Restructuring payments
Other accrued liabilities
Employee retirement plan contributions
Other
Net Cash Provided by Operating Activities
Investing Activities
Product development spending
Additions to technology, property and equipment
Acquisitions of publication rights and other
Businesses acquired in purchase transactions, net of cash acquired
Proceeds from settlement of foreign exchange forward contracts
Net Cash Used in Investing Activities
Financing Activities
Repayment of long-term debt
Borrowing of long-term debt
Purchase of treasury shares
Change in book overdrafts
Cash dividends
Net proceeds from exercise of stock options and other
Excess tax benefits from stock-based compensation
Net Cash Used in Financing Activities
Effects of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash (1)
Cash, Cash Equivalents and Restricted Cash (1)
(Decrease)/Increase for year
Balance at beginning of year
Balance at end of year
Cash Paid During the Year for
Interest
54,658
37,079
69,418
3,118
—
18,327
—
5,236
(129,949)
129,125
—
6,016
—
—
(11,934)
(52,939)
3,820
7,369
6,169
18,106
9,613
(15,219)
(32,713)
(40,470)
(2,262)
250,831
(24,426)
(77,167)
(9,494)
(190,415)
—
(301,502)
(476,246)
596,320
(59,994)
(5,674)
(75,752)
3,751
—
(17,595)
(8,443)
48,230
41,432
64,327
28,566
—
11,244
—
7,388
(122,602)
116,620
3,600
12,819
—
—
(30,752)
(14,209)
13,517
16,543
3,664
36,243
(565)
(30,595)
1,022
(27,550)
11,194
382,322
(36,503)
(114,225)
(26,683)
—
—
(177,411)
(467,915)
459,304
(39,688)
(4,191)
(73,542)
29,201
—
(96,831)
3,661
(76,709)
170,257
93,548
111,741
58,516
170,257
49,669
40,209
66,683
13,355
(2,575)
17,552
(414)
13,169
(112,370)
114,647
—
(421)
49,029
8,842
(6,450)
(29,886)
8,003
(24,182)
4,325
22,692
19,479
(22,854)
10,367
(39,687)
2,078
314,903
(43,603)
(105,058)
(28,842)
(125,924)
60,417
(243,010)
(923,007)
683,000
(50,326)
(214)
(71,545)
15,506
414
(346,172)
(31,011)
(305,290)
363,806
58,516
$
14,867 $
12,221 $
15,733
52
Income taxes, net of refunds
$
48,264 $
48,709 $
33,674
Non-cash items:
Non-cash items associated with the acquisition of Learning House:
Warrants to purchase 0.4 million shares of Wiley Class A Common Stock issued in
connection with the Learning House acquisition
$
565
—
—
See accompanying Notes to Consolidated Financial Statements.
(1) Due to the retrospective adoption of ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” we are now required
to include restricted cash as part of the change in cash, cash equivalents, and restricted cash. As a result, amounts which were
previously classified as cash flows from operating activities have been reclassified as they are recognized in the total change in
cash, cash equivalents and restricted cash. Refer to Note 2, "Summary of Significant Accounting Policies, Recently Issued, and
Recently Adopted Accounting Standards," in the Notes to Consolidated Financial Statements for more information.
53
John Wiley & Sons, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Dollars in thousands
Common
Stock
Class A
Common
Stock
Class B
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Loss
Total
Shareholder’s
Equity
Balance at April 30, 2016
$
69,798 $
13,392 $
368,698 $1,673,325 $(640,421) $
(447,686) $
1,037,106
Restricted Shares Issued under Stock-
based Compensation Plans
Net (Payments)/Proceeds from Exercise
of Stock Options and Other
Excess Tax Benefits from Stock-based
Compensation
Stock-based Compensation Expense
Purchase of Treasury Shares
Class A Common Stock Dividends ($1.24
per share)
Class B Common Stock Dividends ($1.24
per share)
Common Stock Class Conversions
Comprehensive Income (Loss), Net of
Tax
Balance at April 30, 2017
Restricted Shares Issued under Stock-
based Compensation Plans
Net Proceeds from Exercise of Stock
Options and Other
Stock-based Compensation Expense
Purchase of Treasury Shares
Class A Common Stock Dividends ($1.28
per share)
Class B Common Stock Dividends ($1.28
per share)
Common Stock Class Conversions
Comprehensive Income, Net of Tax
Balance at April 30, 2018
$
Restricted Shares Issued under Stock-
based Compensation Plans
Net Proceeds from Exercise of Stock
Options and Other
Stock-based Compensation Expense
Purchase of Treasury Shares
Class A Common Stock Dividends ($1.32
per share)
Class B Common Stock Dividends ($1.32
per share)
Common Stock Class Conversions
Issuance of Warrants Related to
Acquisition of a Business
Adjustment Due to Adoption of New
Revenue Standard
Comprehensive Income (Loss), Net of
Tax
Balance at April 30, 2019
—
—
—
—
—
—
—
—
—
—
—
—
—
288
—
(296)
(7,617)
—
8,013
8,849
—
6,657
414
17,552
—
—
—
—
—
— (50,326)
— (60,143)
— (11,402)
—
—
—
—
—
—
—
—
—
—
—
—
—
396
15,506
414
17,552
(50,326)
(60,143)
(11,402)
(8)
—
70,086 $
—
13,096 $
— 113,643
—
387,896 $1,715,423 $(676,077) $
$
(59,601)
(507,287) $
54,042
1,003,137
—
—
—
—
—
—
—
—
—
—
(7,646)
(10)
7,968
15,686
11,184
—
—
13,515
60
—
— (39,688)
— (61,813)
—
—
—
—
—
—
—
25
—
70,111 $
—
(25)
—
13,071 $
— (11,729)
—
—
— 192,186
—
—
—
407,120 $1,834,057 $(694,222) $
—
—
67,707
(439,580) $
—
—
—
—
—
—
16
—
—
—
—
—
—
—
—
(16)
—
—
(8,544)
3
8,826
4,837
18,327
—
(1,086)
—
—
—
— (59,994)
— (63,684)
— (12,068)
—
—
565
—
—
4,503
—
—
—
—
—
—
—
—
—
—
—
—
—
—
312
29,201
11,244
(39,688)
(61,813)
(11,729)
—
259,893
1,190,557
285
3,751
18,327
(59,994)
(63,684)
(12,068)
—
565
4,503
—
70,127 $
—
13,055 $
— 168,263
—
422,305 $1,931,074 $(746,476) $
$
(69,158)
(508,738) $
99,105
1,181,347
See accompanying Notes to Consolidated Financial Statements.
54
Note 1 – Description of Business
John Wiley & Sons, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The Company, founded in 1807, was incorporated in the state of New York on January 15, 1904. Throughout this report, when we
refer to “Wiley,” the “Company,” “we,” “our,” or “us,” we are referring to John Wiley & Sons, Inc. and all of our subsidiaries, except
where the context indicates otherwise.
We are a global research and learning company. Through our Research segment, we provide scientific, technical, medical, and
scholarly journals, as well as related content and services, to academic, corporate, and government libraries, learned societies, and
individual researchers and other professionals. The Publishing segment provides scientific, professional, and education books and
related content in print and digital formats, as well as test preparation services and course workflow tools, to libraries, corporations,
students, professionals, and researchers. The Solutions segment provides online program management services for higher education
institutions and learning, development, and assessment services for businesses and professionals. We have operations primarily
located in the United States, United Kingdom (“U.K.”), Germany, Russia, Singapore, and France.
Note 2 – Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards
Summary of Significant Accounting Policies
Basis of Presentation:
Our Consolidated Financial Statements include all of the accounts of the Company and our subsidiaries. We have eliminated all
intercompany transactions and balances in consolidation. All amounts are in thousands, except per share amounts, and approximate
due to rounding.
Change in Accounting Policy:
In connection with the acquisition of Learning House (See Note 4, “Acquisition”), we changed our accounting policy for certain
advertising and marketing costs incurred by our Education Services business to fulfill performance obligations from contracts with
educational institutions. Under the new accounting policy, these costs are included in Cost of Sales whereas they were previously
included in Operating and Administrative Expenses on the Consolidated Statements of Income. Including these expenses in Cost of
Sales will better align these costs with the related revenue and conform with the presentation of such costs for Learning House. This
change in accounting policy was applied retrospectively.
The Consolidated Statements of Income for the years ended April 30, 2018 and 2017 have been reclassified to reflect this change in
accounting policy. The impact of this reclassification was an increase to Cost of Sales and a corresponding decrease to Operating and
Administrative Expenses of $45.8 million and $40.0 million for the years ended April 30, 2018 and 2017, respectively. This
reclassification had no impact on Revenue, net, Operating Income, Net Income, or Earnings per Share on the Consolidated Statements
of Income.
Reclassifications:
Certain prior year amounts have been reclassified to conform to the current year’s presentation.
Use of Estimates:
The preparation of our Consolidated Financial Statements and related disclosures in conformity with U.S. GAAP requires our
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities as of the date of the financial statements and revenue and expenses during the reporting period. These estimates
include, among other items, revenue recognition, sales return reserves, allocation of acquisition purchase price to assets acquired and
liabilities assumed, goodwill and indefinite-lived intangible assets, intangible assets with finite lives and other long-lived assets, and
retirement plans. We review these estimates and assumptions periodically using historical experience and other factors and reflect the
effects of any revisions on the Consolidated Financial Statements in the period we determine any revisions to be necessary. Actual
results could differ from those estimates, which could affect the reported results.
55
Book Overdrafts:
Under our cash management system, a book overdraft balance exists for our primary disbursement accounts. This overdraft represents
uncleared checks in excess of cash balances in individual bank accounts. Our funds are transferred from other existing bank account
balances or from lines of credit as needed to fund checks presented for payment. As of April 30, 2019 and 2018, book overdrafts of
$7.4 million and $13.1 million, respectively, were included in Accounts Payable on the Consolidated Statements of Financial Position.
Revenue Recognition:
See Note 3, “Revenue Recognition, Contracts with Customers,” of the Notes to Consolidated Financial Statements for details of our
revenue recognition policy.
Cash and Cash Equivalents:
Cash and cash equivalents consist of highly liquid investments with an original maturity of three months or less at the time of purchase
and are stated at cost, which approximates market value, because of the short-term maturity of the instruments.
Allowance for Doubtful Accounts:
The estimated allowance for doubtful accounts is based on a review of the aging of the accounts receivable balances, historical write-
off experience, credit evaluations of customers, and current market conditions. A change in the evaluation of a customer’s credit could
affect the estimated allowance. The allowance for doubtful accounts is shown as a reduction of Accounts Receivable, net on the
Consolidated Statements of Financial Position and amounted to $14.3 million and $10.1 million as of April 30, 2019 and 2018,
respectively.
Sales Return Reserves:
The process that we use to determine our sales returns and the related reserve provision charged against revenue is based on applying
an estimated return rate to current year returnable print book sales. This rate is based upon an analysis of actual historical return
experience in the various markets and geographic regions in which we do business. We collect, maintain and analyze significant
amounts of sales returns data for large volumes of homogeneous transactions. This allows us to make reasonable estimates of the
amount of future returns. All available data is utilized to identify the returns by market and to which fiscal year the sales returns apply.
This enables management to track the returns in detail and identify and react to trends occurring in the marketplace, with the objective
of being able to make the most informed judgments possible in setting reserve rates. Associated with the estimated sales return
reserves, we also include a related increase to inventory and a reduction to accrued royalties as a result of the expected returns. Print
book sales return reserves amounted to a net liability balance of $18.5 million and $18.6 million as of April 30, 2019 and 2018,
respectively.
The reserves are reflected in the following accounts of the Consolidated Statements of Financial Position – increase (decrease):
Accounts receivable, net (1)
Inventories, net
Accrued royalties
Contract liability (Deferred revenue) (1)
Decrease in Net Assets
2019
2018
— $
3,739 $
(3,653) $
25,934 $
(18,542) $
(28,302)
4,626
(5,048)
—
(18,628)
$
$
$
$
$
(1) Due to the adoption of the new revenue standard, See Note 3, Revenue from Contracts with Customers the sales return reserve as of
April 30, 2019 of $25.9 million is recorded in Contract Liability (Deferred Revenue). In prior periods, the sales return reserve of $28.3
million was recorded as a reduction to Accounts Receivable, net on the Consolidated Statements of Financial Position.
Inventories:
Inventories are carried at the lower of cost or market. U.S. book inventories aggregating $21.0 million and $24.0 million at April 30,
2019 and 2018, respectively, are valued using the last-in, first-out (LIFO) method. All other inventories are valued using the first-in,
first-out (FIFO) method.
Reserve for Inventory Obsolescence:
A reserve for inventory obsolescence is estimated based on a review of damaged, obsolete, or otherwise unsalable inventory. The
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review encompasses historical unit sales trends by title, current market conditions, including estimates of customer demand compared
to the number of units currently on hand, and publication revision cycles. The inventory obsolescence reserve is reported as a
reduction of the Inventories, net balance on the Consolidated Statements of Financial Position and amounted to $15.8 million and
$18.2 million as of April 30, 2019 and 2018, respectively.
Product Development Assets:
Product development assets consist of book composition costs and other product development costs. Costs associated with developing
a book publication are expensed until the product is determined to be commercially viable. Book composition costs represent the costs
incurred to bring an edited commercial manuscript to publication, which include typesetting, proofreading, design, illustration costs,
and digital formatting. Book composition costs are capitalized and are generally amortized on a double-declining basis over their
estimated useful lives, ranging from 1 to 3 years. Other product development costs represent the costs incurred in developing software,
platforms, and digital content to be sold and licensed to third parties. Other product development costs are capitalized and generally
amortized on a straight-line basis over their estimated useful lives. As of April 30, 2019, the weighted average estimated useful life of
other product development costs was approximately 5 years.
Royalty Advances:
Royalty advances are capitalized and, upon publication, are expensed as royalties earned based on sales of the published works.
Royalty advances are reviewed for recoverability and a reserve for loss is maintained, if appropriate.
Shipping and Handling Costs:
Costs incurred for third party shipping and handling are primarily reflected in Operating and Administrative Expenses on the
Consolidated Statements of Income. We incurred $32.7 million, $33.7 million, and $39.1 million in shipping and handling costs in the
years ended April 30, 2019, 2018, and 2017, respectively.
Advertising Expense:
Advertising costs are expensed as incurred. We incurred $89.5 million, $68.3 million, and $61.4 million in advertising costs in the
years ended April 30, 2019, 2018, and 2017, respectively, and these costs are included in Cost of Sales and Operating and
Administrative Expenses on the Consolidated Statements of Income. Advertising costs of $53.7 million, $38.3 million, and $32.4
million were included in Cost of Sales in the years ended April 30, 2019, 2018, and 2017, respectively. Advertising costs of $35.8
million, $30.0 million, and $29.0 million were included in Operating and Administrative Expenses in the years ended April 30, 2019,
2018, and 2017, respectively. Refer to the section above “Change in Accounting Policy” for more information regarding the
reclassification of certain advertising and marketing costs incurred by our Education Services business to fulfill performance
obligations from contracts with educational institutions.
Technology, Property, and Equipment:
Technology, property, and equipment is recorded at cost. Major renewals and improvements are capitalized, while maintenance and
repairs are expensed as incurred.
Technology, property and equipment is depreciated using the straight-line method based upon the following estimated useful lives:
Computer Software – 3 to 10 years, Computer Hardware – 3 to 5 years; Buildings and Leasehold Improvements – the lesser of the
estimated useful life of the asset up to 40 years or the duration of the lease; Furniture, Fixtures, and Warehouse Equipment – 5 to 10
years.
Costs incurred for computer software internally developed or obtained for internal use are capitalized during the application
development stage and expensed as incurred during the preliminary project and post-implementation stages. Costs incurred during the
application development stage include costs of materials and services and payroll and payroll-related costs for employees who are
directly associated with the software project. Such costs are amortized over the expected useful life of the related software, which is
generally 3 to 5 years. Costs related to the investment in our Enterprise Resource Planning and related systems are amortized over an
expected useful life of 10 years. Maintenance, training, and upgrade costs that do not result in additional functionality are expensed as
incurred.
Allocation of Acquisition Purchase Price to Assets Acquired and Liabilities Assumed:
In connection with acquisitions, we allocate the cost of the acquisition to the assets acquired and the liabilities assumed based on the
estimates of fair value for such items, including intangible assets and technology acquired. Such estimates include discounted
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estimated cash flows to be generated by those assets and the expected useful lives based on historical experience and current market
trends to be achieved from the acquisition and the expected tax basis of assets acquired. We may use a third-party valuation consultant
to assist in the determination of such estimates.
Goodwill and Indefinite-lived Intangible Assets:
Goodwill represents the excess of the aggregate of the following: (1) consideration transferred, (2) the fair value of any noncontrolling
interest in the acquiree, and (3) if the business combination is achieved in stages, the acquisition-date fair value of our previously held
equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities
assumed.
Indefinite-lived intangible assets primarily consist of brands, trademarks, content, and publishing rights and are typically characterized
by intellectual property with a long and well-established revenue stream resulting from strong and well-established imprint/brand
recognition in the market.
We use the acquisition method of accounting for all business combinations and do not amortize goodwill or intangible assets with
indefinite useful lives. Goodwill and intangible assets with indefinite useful lives are tested for possible impairment annually during
the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate that the asset might be
impaired.
Intangible Assets with Finite Lives and Other Long-Lived Assets:
Finite-lived intangible assets principally consist of brands, trademarks, content and publication rights, customer relationships, and
non-compete agreements and are amortized over their estimated useful lives. The most significant factors in determining the estimated
lives of these intangibles are the history and longevity of the brands, trademarks, and content and publication rights acquired
combined with the strength of cash flows.
Intangible assets with finite lives as of April 30, 2019, are amortized on a straight line basis over the following weighted average
estimated useful lives: content and publishing rights – 34 years, customer relationships – 18 years, brands and trademarks – 16 years,
non-compete agreements – 3 years.
Assets with finite lives are evaluated for impairment upon a significant change in the operating or macroeconomic environment. In
these circumstances, if an evaluation of the projected undiscounted cash flows indicates impairment, the asset is written down to its
estimated fair value based on the discounted future cash flows.
Derivative Financial Instruments:
From time to time, we enter into foreign exchange forward and interest rate swap contracts as a hedge against foreign currency asset
and liability commitments, changes in interest rates, and anticipated transaction exposures, including intercompany purchases. All
derivatives are recognized as assets or liabilities and measured at fair value. Derivatives that are not determined to be effective hedges
are adjusted to fair value with a corresponding adjustment to earnings. We do not use financial instruments for trading or speculative
purposes.
Foreign Currency Gains/Losses:
We maintain operations in many non-U.S. locations. Assets and liabilities are translated into U.S. dollars using end-of-period
exchange rates and revenues and expenses are translated into U.S. dollars using weighted average rates. Our significant investments in
non-U.S. businesses are exposed to foreign currency risk. Foreign currency translation adjustments are reported as a separate
component of Accumulated Other Comprehensive Loss within Shareholders’ Equity. During the year ended April 30, 2019, we
recorded $60.5 million of foreign currency translation losses primarily as a result of the fluctuations of the U.S. dollar relative to the
British pound sterling and, to a lesser extent, the euro. Foreign currency transaction gains or losses are recognized on the Consolidated
Statements of Income as incurred.
Stock-Based Compensation:
We recognize stock-based compensation expense based on the fair value of the stock-based awards on the grant date, reduced by an
estimate for future forfeited awards. As such, stock-based compensation expense is only recognized for those awards that are expected
to ultimately vest. The fair value of stock-based awards is recognized in net income generally on a straight-line basis over the requisite
service period. The grant date fair value for stock options is estimated using the Black-Scholes option-pricing model. The
determination of the assumptions used in the Black-Scholes model required us to make judgments and estimates, which include the
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expected life of an option, the expected volatility of our Common Stock over the estimated life of the option, a risk-free interest rate,
and the expected dividend yield. Judgment was also required in estimating the amount of stock-based awards that may be forfeited.
Stock-based compensation expense associated with performance-based stock awards is based on actual financial results for targets
established three years in advance. The cumulative effect on current and prior periods of a change in the estimated number of
performance share awards, or estimated forfeiture rate, is recognized as an adjustment to earnings in the period of the revision. If
actual results differ significantly from estimates, our stock-based compensation expense and consolidated results of operations could
be impacted.
Recently Adopted Accounting Standards
Stock Compensation – Scope of Modification Accounting
In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-09,
“Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” which clarifies when changes to the terms or
conditions of a share-based payment award require an entity to apply modification accounting. Under the new guidance, modification
accounting is only required if the fair value, vesting conditions or classification (equity or liability) of the new award are different
from the original award immediately before the original award is modified. We adopted ASU 2017-09 on May 1, 2018 and there was
no impact to our consolidated financial statements. The new guidance must be applied prospectively to awards modified on or after
the adoption date. The future impact of ASU 2017-09 will be dependent on the nature of future stock award modifications.
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The guidance requires that the service cost component of net
pension and postretirement benefit costs be reported in the same line item as other compensation costs arising from services rendered
by the pertinent employees during the period, while the other components of net benefit costs must be reported separately from the
service cost component and below operating income. The guidance also allows only the service cost component to be eligible for
capitalization when applicable. We adopted ASU 2017-07 on May 1, 2018. The new guidance must be applied retrospectively for the
presentation of net benefit costs in the income statement and prospectively for the capitalization of the service cost component of net
benefit costs.
The effect of retrospectively adopting this guidance resulted in a reclassification of net benefits (costs) of $8.1 million and $(5.3)
million from Operating and Administrative Expenses to Interest and Other Income (Expense) on the Consolidated Statements of
Income for the years ended April 30, 2018 and 2017, respectively. The amount included in Interest and Other Income (Expense) on
the Consolidated Statements of Income for the year ended April 30, 2019 was a net benefit of $8.8 million. We do not capitalize any
service costs.
Business Combinations: Clarifying the Definition of a Business
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”,
which clarifies the definition of a business in order to allow for the evaluation of whether transactions should be accounted for as
acquisitions or disposals of assets or business. We adopted ASU 2017-01 on May 1, 2018 and the adoption had no impact for us in
fiscal year 2019. The future impact of ASU 2017-01 will be dependent upon the nature of future acquisitions or dispositions made by
us.
Statement of Cash Flows: Restricted Cash
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” ASU 2016-18 requires
that entities include restricted cash and restricted cash equivalents with cash and cash equivalents in the beginning-of-period and end-
of-period total amounts shown on the Statement of Cash Flows. We adopted ASU 2016-18 on May 1, 2018. Retrospective transition
method is to be applied to each period presented. As a result of this retrospective adoption, the reclassification of restricted cash into a
change in total cash resulted in a reduction in Cash Provided By Operating Activities of $0.5 million for the year ended April 30,
2018. There was no impact for the year ended April 30, 2017.
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The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statements
of Financial Position that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows.
Cash and cash equivalents
Restricted cash included in Prepaid expenses and other current
assets
Total cash, cash equivalents, and restricted cash shown in the
Consolidated Statement of Cash Flows
$
$
92,890 $
169,773 $
58,516 $
363,806
658
484
—
—
93,548 $
170,257 $
58,516 $
363,806
April 30, 2019 April 30, 2018 April 30, 2017 April 30, 2016
Income taxes: Intra-Entity Transfers of Assets Other than Inventory
In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”,
which simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current U.S.
GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to
an outside party. The new guidance states that an entity should recognize the income tax consequences of an intra-entity transfer of an
asset other than inventory when the transfer occurs. Consequently, the amendments in this Standard eliminate the exception for an
intra-entity transfer of an asset other than inventory. We adopted ASU 2016-16 on May 1, 2018. The adoption of ASU 2016-16 did
not have a material impact to our consolidated financial statements.
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments,” which provides clarification on classifying a variety of activities within the Statement of Cash Flows. We adopted
ASU 2016-15 on May 1, 2018. The adoption of ASU 2016-15 did not have a material impact to our consolidated statements of cash
flows.
Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities.” Subsequently, the FASB issued ASU 2018-03, “Technical Corrections and
Improvements to Financial Instruments-Overall.” ASU 2016-01 requires equity investments except those under the equity method of
accounting to be measured at fair value with the changes in fair value recognized in net income. The amendment simplifies the
impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify
impairment. In addition, it also requires enhanced disclosures about investments. We adopted ASU 2016-01 on May 1, 2018. The
adoption of ASU 2016- 01 did not have a material impact to our consolidated financial statements.
Revenue from Contracts with Customers
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers," (Topic 606) which superseded most
existing revenue recognition guidance. We adopted ASU 2014-09 on May 1, 2018. The standard allows for either "full retrospective"
adoption, meaning the standard is applied to all periods presented, or "modified retrospective" adoption, meaning the standard is
applied only to the most current period presented in the financial statements. Subsequently, the FASB issued ASU 2016-08, "Revenue
from Contracts with Customers (Topic 606) – Principal versus Agent Considerations", ASU 2016-10, "Revenue from Contracts with
Customers (Topic 606) – Identifying Performance Obligations and Licensing", ASU 2016-12, "Revenue from Contracts with
Customers (Topic 606) – Narrow Scope Improvements and Practical Expedients", and ASU 2016-20, "Technical Corrections and
Improvements to Topic 606, Revenue from Contracts with Customers," which provide clarification and additional guidance related to
ASU 2014-09. We also adopted ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20 with ASU 2014-09 (collectively, the
“new revenue standard”) on May 1, 2018.
We utilized a comprehensive approach to assess the impact of the new revenue standard on our contract portfolio by reviewing our
current accounting policies and practices to identify differences that would result from applying the new revenue standard to our
revenue contracts. Additionally, we reviewed customer agreements representative of our business models and assessed whether
changes in revenue recognition were appropriate under the new revenue standard.
We adopted the new revenue standard as of May 1, 2018, using the modified retrospective method. The adoption of the new revenue
standard did not have a material impact to our consolidated revenues, financial position, or results of operations. Upon adoption, we
recorded an immaterial net increase to opening retained earnings resulting from the change in timing of when certain components of
our revenue are recognized as required under the new revenue standard as compared to historical policies. Such changes include:
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(i) perpetual licenses granted in connection with other deliverables; revenue that was previously recognized over the life of the
associated subscription for future content is now recognized at a point in time, which is when access to content is initially
granted,
(ii) customers’ unexercised rights; revenue which was previously recognized at the end of a pre-determined period for situations
where we have received a nonrefundable payment for a customer to receive a good or service and the customer has not
exercised such right is now recognized as revenue in proportion to the pattern of rights exercised by the customer,
(iii) recognition of estimated revenue from royalty agreements in the period of usage, and
(iv) recognition of revenue for certain arrangements with minimum guarantees on a time-based (straight-line) basis due to a
stand-ready obligation to provide additional rights to content.
The adoption of the new revenue standard resulted in the discontinuance of the historical practice of presenting accounts receivable
and deferred revenue balances on a net basis for some of our subscription licensing agreements where we have invoiced a customer in
advance of the related revenue being recognized and payment has not yet been received. As of April 30, 2018, the amounts that were
previously netted down from accounts receivable and deferred revenue were $59.5 million. The current policy for our subscription
licensing agreements is to record accounts receivable when performance occurs and recognize contract liabilities, at the earlier of cash
payment being received or the invoice is sent.
In addition, the adoption of the new revenue standard resulted in the reclassification of the sales return reserve provision to Contract
Liability (Deferred Revenue) from Accounts Receivable, Net on the Consolidated Statements of Financial Position. As of April 30,
2019 and 2018 the amount was $25.9 million and $28.3 million, respectively.
The impact of the adoption of the new revenue standard was not material to our Consolidated Statements of Income for the year ended
April 30, 2019; therefore, we have omitted the disclosure that summarizes the effect of the revenue recognition standard by line item
on our Consolidated Statements of Income. The impact to the Consolidated Statements of Financial Position was also not material by
line item, except for the reclassification of the sales return reserve provision to contract liability from accounts receivable, net. The
cumulative effect of the changes made to our Consolidated Statements of Financial Position at May 1, 2018 as a result of adoption of
the new revenue standard using the modified retrospective method were as follows:
Assets
Accounts receivable, net
Product development assets
Technology, property and equipment, net
Other non-current assets
Liabilities
Accrued royalties
Contract liability (Deferred revenue)
Deferred income tax liabilities
Retained earnings
Recently Issued Accounting Standards
April 30,
2018
Adjustments
due to
Adoption
May 1,
2018
$
212,377 $
78,814
289,934
85,802
93,349 $
(3,725)
(361)
5,274
305,726
75,089
289,573
91,076
73,007
486,353
143,518
$ 1,834,057 $
72,276
(731)
575,717
89,364
1,400
144,918
4,503 $ 1,838,560
Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud
Computing Arrangement That is a Service Contract
In August 2018, the FASB issued ASU 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU
2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with
the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective
for us on May 1, 2020, and interim periods within that fiscal year, with early adoption permitted. We are currently assessing the
impact the new guidance will have on our consolidated financial statements.
Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued ASU 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-
20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU 2018-14 removes certain
disclosures that are not considered cost beneficial, clarifies certain required disclosures and added additional disclosures. The standard
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is effective for us on May 1, 2021, with early adoption permitted. The amendments in ASU 2018-14 would need to be applied on a
retrospective basis. We are currently assessing the impact the new guidance will have on our disclosures.
Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the
Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 removes certain disclosures, modifies certain disclosures and
added additional disclosures. The standard is effective for us on May 1, 2020, with early adoption permitted. Certain disclosures in
ASU 2018-13 would need to be applied on a retrospective basis and others on a prospective basis. We are currently assessing the
impact the new guidance will have on our disclosures.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the FASB issued ASU 2018-02 “Income Statement—Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allows a reclassification from
accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The
standard is effective for us on May 1, 2019, and interim periods within that fiscal year, with early adoption permitted. We adopted
ASU 2018-02 on May 1, 2019. We did not elect to reclassify the income tax effects from comprehensive income to retained earnings
for the stranded tax effects resulting from the Tax Cuts and Jobs Act. Our policy for releasing the income tax effects from
accumulated other comprehensive income is when the corresponding pretax accumulated other comprehensive income items are
reclassified to earnings.
Targeted Improvements to Accounting for Hedging Activities
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for
Hedging Activities,” to simplify and improve the application and financial reporting of hedge accounting. Subsequently, in November
2018, the FASB issued ASU 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate
(SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. In April 2019, the FASB
issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and
Hedging, and Topic 825, Financial Instruments.” ASU 2017-12 eases the requirements for measuring and reporting hedge
ineffectiveness and clarifies that changes in the fair value of hedging instruments for cash flow, net investment, and fair value hedges
should be reflected in the same income statement line item as the earnings effect of the hedged item. The guidance also permits
entities to designate specific components in cash flow and interest rate hedges as the hedged risk, instead of using total cash flows.
ASU 2018-16 allows the use of the OIS rate based on the SOFR as a U.S. benchmark interest rate for hedge accounting purposes.
These ASUs are effective for us on May 1, 2019, with early adoption permitted. We adopted ASU 2017-12, 2018-16 and 2019-04, for
those portions related to ASU 2017-02, on May 1, 2019 and there was no impact to our consolidated financial statements at the date of
adoption. The future impact will depend upon any future hedging activities we may enter into.
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued ASU 2017-04, “Intangibles–Goodwill and Other (Topic 350): “Simplifying the Test for Goodwill
Impairment”, which simplifies the measurement of a potential goodwill impairment charge by eliminating the requirement to calculate
an implied fair value of the goodwill based on the fair value of a reporting unit’s other assets and liabilities. The new guidance
eliminates the implied fair value method and instead measures a potential impairment charge based on the excess of a reporting unit’s
carrying value compared to its fair value. The impairment charge cannot exceed the total amount of goodwill allocated to that
reporting unit. The standard is effective for us on May 1, 2020, with early adoption permitted. Based on our most recent annual
goodwill impairment test completed in the year ended April 30, 2019, we expect no initial impact on adoption.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on
Financial Instruments.” Subsequently, in May 2019, the FASB issued ASU 2019-05 - "Financial Instruments—Credit Losses (Topic
326): Targeted Transition Relief”, in April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial
Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” and in November 2018, the
FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”. ASU 2016-13 requires
entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which
includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking
information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement
users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and
underwriting standards of an entity’s portfolio. ASU 2016-13, ASU 2019-05, ASU 2019-04 and ASU 2018-19 are effective for us on
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May 1, 2020, including interim periods within those fiscal periods, with early adoption permitted. We are currently assessing the
impact the new guidance will have on our consolidated financial statements.
Leases
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)”. Subsequently, the FASB issued in March 2019, ASU 2019-
01, “Leases (Topic 842): Codification Improvements”, in December 2018 ASU 2018-20, “Leases (Topic 842): Narrow Scope
Improvements for Lessors”, and in July 2018 the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements” and
ASU 2018-10, “Codification Improvements to Topic 842, Leases”. ASU 2016-02 requires an entity to recognize a right-of-use asset
(“ROU”) and lease liability for all leases with terms of more than 12 months and provide enhanced disclosures. Recognition,
measurement, and presentation of expenses will depend on classification as a finance or operating lease. Similar modifications have
been made to lessor accounting in-line with revenue recognition guidance.
The new standard provides a number of optional practical expedients in transition. We expect to elect the practical expedients to forgo
a reassessment of (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or
existing leases, and (3) initial direct costs. We do not expect to elect the practical expedient allowing the use-of-hindsight which
would require us to reassess the lease term of our leases based on all facts and circumstances through the effective date. In addition,
we do not expect to elect the practical expedient pertaining to land easements.
In addition, the new standard provides as a practical expedient, certain policy elections for ongoing lease accounting to (i) not separate
nonlease components from the associated lease component if certain conditions are met, and (ii) not recognize ROU assets and lease
liabilities for leases that qualify as short-term. If the short-term recognition exemption is elected, we will not recognize ROU assets or
lease liabilities for existing short-term leases in transition. We expect to elect these policy elections.
The standard is effective for us on May 1, 2019, with early adoption permitted. A modified retrospective transition approach is
required, applying the new standard to all leases existing at the date of initial application. A company may choose to use either (1) its
effective date or (2) the beginning of the earliest comparative period presented in the financial statements as of its date of initial
application. We adopted the new standard on May 1, 2019 and used the effective date as the date of initial application. Accordingly,
previously reported financial information will not be updated, and the disclosures required under the new standard will not be
provided for dates and periods before May 1, 2019. We expect to recognize operating lease liabilities ranging from approximately
$175 to $185 million based on the present value of the remaining minimum rental payments for existing operating leases and ROU
assets ranging from approximately $135 to $145 million on our Consolidated Statements of Financial Position. Additionally, we are in
the process of implementing a lease accounting system for our leases, including the conversion of our existing lease data to a new
system and implementing relevant internal controls and procedures.
See Note 15, “Commitment and Contingencies,” of the Notes to Consolidated Financial Statements for details of our operating leases
and future commitments.
Note 3 — Revenue Recognition, Contracts with Customers
Revenue from contracts with customers is recognized using a five-step model consisting of the following: (1) identify the contract
with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the
transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) we satisfy a performance
obligation. Performance obligations are satisfied when we transfer control of a good or service to a customer, which can occur over
time or at a point in time. The amount of revenue recognized is based on the consideration to which we expect to be entitled in
exchange for those goods or services, including the expected value of variable consideration. The customer’s ability and intent to pay
the transaction price is assessed in determining whether a contract exists with the customer. If collectability of substantially all the
consideration in a contract is not probable, consideration received is not recognized as revenue unless the consideration is
nonrefundable, and we no longer have an obligation to transfer additional goods or services to the customer or collectability becomes
probable.
63
Disaggregation of Revenue
The following tables present our revenue from contracts with customers disaggregated by segment and product type for the years
ended April 30, 2019, 2018 and 2017:
2019
Years Ended April 30,
2018
2017
Research Publishing Solutions Total
Research Publishing Solutions Total
Research Publishing Solutions Total
Research:
Journals
Subscriptions
Open Access
Licensing, Reprints,
Backfiles and
Other
Publishing
$ 661,055$
54,671
— $
—
—$ 661,055$ 677,685$
54,671 41,997
—
—$
—
— $ 677,685$ 639,720$
41,997 30,633
—
— $
—
—$ 639,720
30,633
—
185,619
—
— 185,619 181,806
—
— 181,806 164,070
—
— 164,070
Technology
Services (Atypon) 35,968
—
—
35,968 32,907
—
—
32,907 19,066
—
—
19,066
Publishing:
STM and
Professional
Publishing
Education Publishing
Courseware
(WileyPLUS)
Test Preparation and
Certification
Licensing,
Distribution,
Advertising and
Other
Solutions:
Education Services
Professional
Assessment
Corporate Learning
Total
— 265,719
— 157,579
— 265,719
— 157,579
— 287,315
— 187,178
— 287,315
— 187,178
— 291,255
— 196,343
— 291,255
— 196,343
—
63,485
—
63,485
—
59,475
—
59,475
—
62,348
—
62,348
—
40,606
—
40,606
—
35,534
—
35,534
—
35,609
—
35,609
—
46,803
—
46,803
—
48,146
—
48,146
—
47,894
—
47,894
—
— 157,549 157,549
—
— 119,131 119,131
—
— 111,638 111,638
—
—
59,868
60,086
$ 937,313$ 574,192 $ 288,564$1,800,069$ 934,395$ 617,648$ 244,060 $1,796,103$ 853,489$ 633,449 $ 231,592$1,718,530
— 59,868
— 60,086
— 65,889
— 65,126
— 61,094
— 63,835
61,094
63,835
65,889
65,126
—
—
—
—
Description of Revenue Generating Activities
We generate our revenues from sales from our three reportable segments. We report our segment information in accordance with the
provisions of FASB ASC Topic 280, “Segment Reporting” (“FASB ASC Topic 280”). Our segment reporting structure consists of
three reportable segments, which are listed below, and a Corporate category:
● Research,
● Publishing, and
● Solutions.
Research Segment
Included within the Research segment are the following revenue streams:
Journal Subscriptions,
●
● Open Access,
● Licensing, Reprints, Backfiles and Other, and
● Publishing Technology Services (Atypon).
Journal Subscriptions
We publish approximately 1,700 academic research journals. We sell journal subscriptions directly through our sales representatives,
indirectly through independent subscription agents, through promotional campaigns, and through memberships in professional
societies for those journals that are sponsored by societies. Journal subscriptions are primarily licensed through contracts for digital
content available online through Wiley Online Library, which we migrated to our Literatum platform, acquired as part of our purchase
of Atypon Systems, Inc. (“Atypon”) in March 2018. Contracts are negotiated by us directly with customers or their subscription
64
agents. Subscription periods typically cover calendar years. Print journals are generally mailed to subscribers directly from
independent printers. We do not own or manage printing facilities. Subscription revenue is generally collected in advance.
In a typical journal subscription sale, there is a written agreement between us and our customer that cover multiple years. However,
we typically account for these agreements as one-year contracts because our enforceable rights under the agreements are subject to an
annual confirmation and negotiation process with the customer.
In journal subscriptions, multiple performance obligations exist, which include a stand-ready promise to provide access to new content
for one year and a perpetual license for access to historical journal content. The transaction price consists of fixed consideration.
We allocate revenue to the stand-ready promise to provide access to new content for one year based on its standalone selling price and
the revenue for new content is recognized over time as we have a continuous stand-ready obligation to provide the right of access to
additional intellectual property. The allocation of revenue to the perpetual licenses for access to historical journal content is done using
the expected cost plus a margin approach as permitted by the new revenue standard. Revenue is recognized at the point in time when
access to historical content is initially granted.
Open Access
Under the Author-Funded Access business model, accepted research articles are published subject to payment of Article Publication
Charges (“APCs”). All Author-Funded articles are immediately free to access online. Contributors of Author-Funded Access articles
retain many rights and typically license their work under terms that permit re-use. Author-Funded Access offers authors choices in
how to share and disseminate their work, and it serves the needs of researchers who may be required by their research funder to make
articles freely accessible without embargo. APCs are typically paid by the individual author or by the author’s funder, and payments
are often mediated by the author’s institution. We provide specific workflows and infrastructure to authors, funders and institutions to
support the requirements of the Author-Funded Access model.
Customers in open access are typically individual educational institutions or a consortium of universities. Under the Author-Funded
Access model, we have a signed contract with the customer that contains enforceable rights.
The Author-Funded Access model in a typical model includes an over-time single performance obligation that combines a promise to
host the customer’s content on our open access platform, and a promise to provide a discount on APCs of eligible users (as defined in
the contract) in exchange for an upfront payment. Enforceable right to payment occurs over time as we fulfill our obligation to provide
a discount to eligible users, as defined, on future APCs. Therefore, the upfront payment is deferred and recognized over time.
In January 2019, Wiley announced a new contractual arrangement in support of Open Access, a countrywide partnership agreement
with Projekt DEAL, a representative of nearly 700 academic institutions in Germany. This transformative three-year agreement
provides all Projekt DEAL institutions with access to read Wiley’s academic journals back to the year 1997, and researchers at Projekt
DEAL institutions can publish articles open access in Wiley’s journals. The partnership will better support institutions and researchers
in advancing open science, driving discovery, and developing and disseminating knowledge. We are compensated primarily through a
fee per article published.
65
Licensing, Reprints, Backfiles and Other
Licensing, Reprints, Backfiles, and Other includes advertising, backfile sales, the licensing of publishing rights, journal and article
reprints, and individual article sales. A backfile license provides access to a historical collection of Wiley journals, generally for a one-
time fee.
Within Licensing, the revenue derived from these contracts is primarily comprised of advance payments, including minimum
guarantees and sales- or usage-based royalty agreements. For our sales-or usage-based royalty agreements, we recognize revenue in
the period of usage based on the amounts earned. We record revenue under these arrangements for the amounts due and not yet
reported to us based on estimates of the sales or usage of these customers and pursuant to the terms of the contracts. We also have
certain licenses whereby we receive a non-refundable minimum guarantee against a volume-based royalty throughout the term of the
agreement. We recognize revenue for the minimum guarantee on a straight-line basis over the term of the agreement because of the
stand-ready promise to provide updates during the subscription period. We recognize volume-based royalty income only when
cumulative consideration exceeds the minimum guarantee.
Reprints contracts generally contain a single performance obligation which is the delivery of printed articles. Revenue is recognized at
the time of delivery of the printed articles.
For Backfiles, the performance obligation is the granting of a functional intellectual property license. Revenue is recognized at the
time the functional intellectual property license is granted.
Other includes our Article Select offering, whereby we have a single performance obligation to our customers to give access to an
article through the purchase of a token. The customer redeems the token for access to the article for a 24-hour period. The customer
purchases the tokens with an upfront cash payment. Revenue is recognized when access to the article is provided.
Publishing Technology Services (Atypon)
Atypon is a publishing software and service provider that enables scholarly and professional societies and publishers to deliver, host,
enhance, market, and manage their content on the web through the Literatum platform. The duration of these contracts is generally
multi-year ranging from 2-5 years. Atypon contracts typically include a single performance obligation for the implementation and
hosting subscription services. The transaction price is fixed which may include price escalators that are fixed increases per year, and
therefore, revenue is recognized upon the initiation of the subscription period and straight-lined over the contract period.
Publishing Segment
Included within the Publishing segment are the following revenue streams:
● STM (Scientific, Technical and Medical) and Professional Publishing,
● Education Publishing,
● Courseware (WileyPLUS),
● Test Preparation and Certification, and
● Licensing, Distribution, Advertising and Other.
STM (Scientific, Technical and Medical) and Professional Publishing and Education Publishing
STM books are sold and distributed globally in digital and print formats through multiple channels, including research libraries and
library consortia, independent subscription agents, direct sales to professional society members, bookstores, online booksellers, and
other customers.
Professional books, which include business and finance, technology, and other professional categories, as well as the For Dummies
brand, are sold to bookstores and online booksellers serving the general public, wholesalers who supply such bookstores, warehouse
clubs, college bookstores, individual practitioners, industrial organizations and government agencies. We employ sales representatives
who call upon independent bookstores, national and regional chain bookstores, and wholesalers. Sales of professional books also
result from direct mail campaigns, telemarketing, online access, advertising, and reviews in periodicals.
Education textbooks and related supplementary material and digital products are sold primarily to bookstores and online booksellers
serving both for-profit and nonprofit educational institutions (primarily colleges and universities), and direct-to-students. We employ
sales representatives who call on faculty responsible for selecting books to be used in courses, and on the bookstores that serve such
institutions and their students. The textbook business is seasonal, with the majority of textbook sales occurring during the July-
through-October and December-through-January periods. Book sales for STM, Professional and Education Publishing are generally
made on a returnable basis with certain restrictions.
66
Our performance obligations as it relates to STM, Professional and Education Publishing are primarily book products delivered in
both print and digital form which could include a single or multiple performance obligations based on the number of International
Standard Book Number (“ISBN’s”) purchased.
This revenue stream also includes variable consideration as it relates to discounts and returns for both print and digital books.
Discounts are identifiable by performance obligation and therefore are applied at the point of sale by performance obligation. The
process that we use to determine our sales returns and the related reserve provision charged against revenue is based on applying an
estimated return rate to current year returnable print book sales. This rate is based upon an analysis of actual historical return
experience in the various markets and geographic regions in which we do business. We collect, maintain and analyze significant
amounts of sales returns data for large volumes of homogeneous transactions. This allows us to make reasonable estimates of the
amount of future returns. All available data is utilized to identify the returns by market and to which fiscal year the sales returns apply.
This enables management to track the returns in detail and identify and react to trends occurring in the marketplace, with the objective
of being able to make the most informed judgments possible in setting reserve rates. Associated with the estimated sales return
reserves, we also include a related reduction in inventory and royalty costs as a result of the expected returns.
As it relates to print and digital books within the STM, Professional and Education Publishing, revenue is recognized at the point
when control of product transfers, which for print is upon shipment or for digital when fulfillment of the products has been rendered.
Courseware (WileyPLUS)
We offer high-quality online learning solutions, including WileyPLUS, a research-based, online environment for effective teaching
and learning that is integrated with a complete digital textbook. Courseware customers purchase access codes to utilize the product.
This could include a single or multiple performance obligations based on the number of course ISBN’s purchased. Revenue is
recognized when the access codes are activated and then over the applicable semester term such product relates to.
Test Preparation and Certification
to customers directly
The Test Preparation and Certification business represents learning solutions, training activities and print and digital formats that are
through online digital delivery platforms, bookstores, online booksellers, and other
delivered
customers. Products include CPAExcel, a modular, digital platform comprised of online self-study, videos, mobile apps, and
sophisticated planning tools to help professionals prepare for the CPA exam, and test preparation products for the CFA®, CMA,
CIA®, CMT®, FRN®, FINRA, Banking, and PMP® exams.
Test Preparation and Certification contracts are generally three-year agreements. This revenue stream includes multiple performance
obligations as it relates to the on-line and printed course materials, including such items as text books, e-books, video lectures,
flashcards, study guides and test banks. The transaction price is fixed; however, discounts are offered and returns of certain products
are allowed. We allocate revenue to each performance obligation based on its standalone selling price. Depending on the performance
obligation, revenue is recognized at the time the product is delivered and control has passed to the customer or over time due to our
stand-ready obligation to provide updates to the customer.
Licensing, Distribution, Advertising and Other
Licensing and distribution services are made available to other publishers under agency arrangements. We also engage in co-
publishing titles with international publishers and receive licensing revenue from photocopies, reproductions, translations, and digital
uses of our content. Wiley also realizes advertising revenue from branded Web sites (e.g., Dummies.com, etc.) and online
applications. Licensing, Distribution, Advertising and Other contracts are generally multi-year agreements.
Revenue derived from our licensing contracts is primarily comprised of advance payments and sales- or usage-based royalties.
Revenue for advance payments is recognized at the point in time that the functional intellectual property license is granted. For sales-
or usage- based royalties, we record revenue under these arrangements for the amounts due and not yet reported to us based on
estimates of the sales or usage of these customers and pursuant to the terms of the contracts.
Solutions Segment
Included within the Solutions segment are the following revenue streams:
● Education Services,
● Professional Assessment, and
● Corporate Learning.
67
Education Services
As student demand for online degree and certificate programs continues to increase, traditional institutions are partnering with online
program management providers to develop and support these programs. Education Services include market research, marketing,
student recruitment, enrollment support, proactive retention support, academic services to design courses, faculty support, and access
to the Engage Learning Management System, which facilitates the online education experience. Revenue is derived from pre-
negotiated contracts with institutions that provide for a share of tuition generated from students who enroll in a program. The duration
of Education Services contracts are generally multi-year agreements ranging from a period of 7-10 years, with some having optional
renewal periods.
Education Services includes a single performance obligation for the services provided because of the integrated technology and
services our institutional clients need to attract, enroll, educate and support students. Consideration is variable since it is based on the
number of students enrolled in a program. We begin to recognize revenue at the start of the delivery of the class within a semester,
which is also when the variable consideration contingency is resolved.
Professional Assessment
Our Professional Assessment services include pre-hire screening and post-hire personality assessments, which are delivered to
business customers through online digital delivery platforms, either directly or through an authorized distributor network of
independent consultants, trainers, and coaches. Professional Assessment services contracts are generally one year.
Professional Assessment includes a performance obligation to stand ready to provide assessments to our distributor’s customers or to
provide assessments direct to a customer. Revenue for Professional Assessments is recognized at the time the product or service is
provided or delivered. Consideration is allocated to assessments based on standalone selling prices. In addition, as it relates to
Professional Assessments customers' unexercised rights for situations where we have received a nonrefundable payment for a
customer to receive a good or service and the customer is not expected to exercise such right, we will recognize such “breakage”
amounts as revenue in proportion to the pattern of rights exercised by the customer.
Corporate Learning
The Corporate Learning business offers online learning and training solutions for global corporations, universities, and small and
medium-sized enterprises, which are sold on a subscription or fee basis. Learning formats and modules on topics such as leadership
development, value creation, client orientation, change management and corporate strategy are delivered on a cloud-based Learning
Management System (“LMS”) platform that hosts over 20,000 content assets (videos, digital learning modules, written files, etc.) in
17 languages. Its Mohive offering also provides a collaborative e-learning publishing and program creation system. Revenue growth is
derived from legacy markets, such as France, England, and other European markets, and newer markets, such as the U.S. and Brazil.
In addition, content and LMS offerings are continuously refreshed and expanded to serve a wider variety of customer needs. These
digital learning solutions are sold directly to corporate customers either direct or through our partners. Corporate Learning contracts
are generally multi-year agreements.
The transaction price consists of fixed consideration that is determined at the beginning of each year and received at the same time.
Within Corporate Learning there are multiple performance obligations which includes the licenses to learning content and the learning
application. Revenue is recognized over time as we have a continuous obligation to provide the right of access to the intellectual
property which includes the licenses and learning applications.
Accounts Receivable, net and Contract Liability (Deferred Revenue) Balances
When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services
to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue when, or as,
control of the products or services are transferred to the customer and all revenue recognition criteria have been met.
The following table provides information about receivables and contract liabilities from contracts with customers.
Balances from contracts with customers:
Accounts receivable, net (2)
Contract liability (Deferred revenue) (2)
Contract liability (Deferred revenue) (included in Other Long-Term Liabilities)
$
$
294,867 $
507,365
10,722 $
212,377 $
486,353
— $
82,490
21,012
10,722
April 30,
2019
April 30,
2018 (1)
Increase/
(Decrease)
68
(1) As noted above, prior period amounts have not been adjusted due to adoption of the new revenue standard under the modified
retrospective method.
(2) Due to the adoption of the new revenue standard, the sales return reserve as of April 30, 2019 of $25.9 million is recorded in
Contract Liability (Deferred Revenue). In prior periods, it was recorded as a reduction to Accounts Receivable, net on the
Consolidated Statements of Financial Position. At April 30, 2018 the sales return reserve was $28.3 million.
Revenue recognized for the year ended April 30, 2019 relating to the contract liability at April 30, 2018 after the adjustments for the
adoption of the new revenue standard on May 1, 2018 was $530.4 million.
Remaining Performance Obligations included in Contract Liability (Deferred Revenue)
As of April 30, 2019, the aggregate amount of the transaction price allocated to the remaining performance obligations is
approximately $518.1 million, which included the sales return reserve of $25.9 million. Excluding the sales return reserve, we expect
that approximately $481.5 million will be recognized in the next twelve months with the remaining $10.7 million to be recognized
thereafter.
Assets Recognized for the Costs to Fulfill a Contract
Costs to fulfill a contract are directly related to a contract that will be used to satisfy a performance obligation in the future and are
expected to be recovered. These types of costs are incurred in the following revenue streams, (1) Publishing Technology Services
(Atypon) and (2) Education Services.
Our assets associated with incremental costs to fulfill a contract were $8.9 million at April 30, 2019 and are included within Other
Non-Current Assets on our Consolidated Statements of Financial Position. We recorded amortization expense of $2.6 million during
the year ended April 30, 2019 related to these assets within Cost of Sales on the Consolidated Statements of Income. The costs related
to Education Services were previously included in Product Development Assets on our Consolidated Statements of Financial Position.
Certain costs related to Publishing Technology Services (Atypon) were previously included in Technology, Property and Equipment,
net on our Consolidated Statements of Financial Position.
Sales and value-added taxes are excluded from revenues. Shipping and handling costs, which are primarily incurred within the
Publishing segment, occur before the transfer of control of the related goods. Therefore, in accordance with the new revenue standard,
it is not considered a promised service to the customer and would be considered a cost to fulfill our promise to transfer the goods.
Costs incurred for third party shipping and handling are primarily reflected in Operating and Administrative Expenses on the
Consolidated Statements of Income. We incurred $32.7 million, $33.7 million, and $39.1 million in shipping and handling costs in the
years ended April 30, 2019, 2018 and 2017 respectively.
Note 4 – Acquisition
The Learning House, Inc.
On November 1, 2018, we completed the acquisition of 100% of the outstanding stock of The Learning House, Inc. (“Learning
House”) a diversified education services provider. Headquartered in Louisville, KY, Learning House provides online program
management services including graduate and undergraduate programs; short courses, boot camps, and other skills training and
credentialing for students and professionals; pathway services for international students; professional development services for
teachers; and learning solutions for corporate clients. The combination of Learning House and Wiley Education Services creates a
leading provider of tech-enabled education services for colleges and universities. The results of operations of Learning House are
included in our Solutions segment.
The fair value of the consideration transferred was approximately $201.3 million which included $200.7 million of cash and $0.6
million of warrants, inclusive of purchase price adjustments which were finalized in the fourth quarter of fiscal year 2019. We
financed the payment of the cash consideration through borrowings under our revolving credit agreement ("RCA"). The warrants
were classified as equity and allow the holder to purchase 400,000 shares of our Class A Common Stock at an exercise price of
$90.00, subject to adjustments. The term of the warrants is three years, expiring on November 1, 2021. The fair value of the warrants
was determined using the Black-Scholes option pricing model. The fair value of the cash consideration transferred, net of $10.3
million of cash acquired was approximately $190.4 million.
The transaction was accounted for using the acquisition method of accounting. We recorded the preliminary fair value of the assets
acquired and liabilities assumed on the acquisition date, all of which are included in the Solutions segment. None of the goodwill will
be deductible for tax purposes. The allocation of the consideration transferred to the assets acquired and the liabilities assumed is
preliminary and could be revised as a result of additional information obtained due to the finalization of the third-party valuation
69
report, tax related matters and contingencies, but such amounts will be finalized within the measurement period, which will not
exceed one year from the acquisition date. The following table summarizes the consideration transferred to acquire Learning House
and the preliminary allocation of the purchase price among the assets acquired and the liabilities assumed.
Total consideration transferred
Assets:
Current Assets
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets
Total Current Assets
Technology, Property and Equipment, net
Intangible Assets, net
Goodwill
Other Non-Current Assets
Total Assets
Liabilities:
Current Liabilities
Accounts payable
Contract liability (Deferred revenue)
Accrued employment costs
Other accrued liabilities
Total Current Liabilities
Deferred Income Tax Liabilities
Other Long-Term Liabilities
Total Liabilities
Preliminary
Allocation as of
April 30, 2019
$
201,274
10,293
8,621
1,439
20,353
343
109,548
110,805
5,025
246,074
1,542
959
4,925
9,422
16,848
26,769
1,184
44,801
$
$
The following table summarizes the identifiable intangible assets acquired and their weighted-average useful life at the date of
acquisition.
Customer Relationships
Course Content
Total
Estimated
Fair Value
$
$
103,850
5,698
109,548
Weighted-Average
Useful Life
(in Years)
15
4
Learning House’s revenue and operating loss included in our Solutions segment results for the year ended April 30, 2019 was $31.5
million and $8.0 million, respectively.
Pro forma financial information related to this acquisition has not been provided as it is not material to our consolidated results of
operations.
Atypon Systems, Inc.
On September 30, 2016, we acquired the net assets of Atypon, a Silicon Valley-based publishing-software company, for
approximately $121 million in cash, net of cash acquired. We finalized our purchase accounting for Atypon on July 31, 2017, and
there were no material changes in the purchase accounting allocation compared to April 30, 2017. We recorded the fair value of the
assets acquired and liabilities assumed on the acquisition date, which included $48 million of intangible assets. Goodwill of $70
million was recorded, which is deductible for tax purposes.
70
Atypon's revenue included in our Research segment results for the years ended April 30, 2019, 2018 and 2017 were $36.0 million,
$32.9 million and $19.1 million, respectively. Atypon's operating loss included in our Research segment results for the years ended
April 30, 2019, 2018 and 2017 were $3.9 million, $2.7 million and $3.5 million, respectively.
Note 5 – Reconciliation of Weighted Average Shares Outstanding
A reconciliation of the shares used in the computation of earnings per share for the years ended April 30 follows:
Weighted average shares outstanding
Less: Unvested restricted shares
Shares used for basic earnings per share
Dilutive effect of stock options and other stock awards
Shares used for diluted earnings per share
2019
2018
2017
57,240
(48)
57,192
648
57,840
57,181
(138)
57,043
845
57,888
57,531
(194)
57,337
862
58,199
Since their inclusion in the calculation of diluted earnings per share would have been anti-dilutive, options to purchase 260,984,
244,590 and 301,527 shares of Class A Common Stock have been excluded for the years ended April 30, 2019, 2018 and 2017,
respectively. In addition, there were no restricted shares excluded for the year ended April 30, 2019. For the years ended April 30,
2018 and 2017, restricted shares of 26,740 and none, respectively, have been excluded as their inclusion would have been anti-
dilutive.
Warrants to purchase 242,402 shares of Class A Common Stock have not been included for the year ended April 30, 2019. There were
no warrants issued during the years ended April 30, 2018 and 2017.
Note 6 – Accumulated Other Comprehensive Loss
Changes in Accumulated Other Comprehensive Loss by component, net of tax, for the years ended April 30, 2019, 2018, and 2017
were as follows:
Balance at April 30, 2016
Other comprehensive (loss) income before reclassifications
Amounts reclassified from Accumulated Other Comprehensive Loss
Total other comprehensive (loss) income
Balance at April 30, 2017
Other comprehensive income (loss) before reclassifications
Amounts reclassified from Accumulated Other Comprehensive Loss
Total other comprehensive income (loss)
Balance at April 30, 2018
Other comprehensive (loss) income before reclassifications
Amounts reclassified from Accumulated Other Comprehensive Loss
Total other comprehensive loss
Balance at April 30, 2019
Foreign
Currency
Translation
$
Unamortized
Retirement
Costs
(179,405) $
(18,458)
7,361
(11,097)
(190,502) $
(4,979)
4,455
(524)
(191,026) $
(9,422)
4,391
(5,031)
(196,057) $
(267,920) $
(51,292)
—
(51,292)
(319,212) $
67,639
—
67,639
(251,573) $
(60,534)
—
(60,534)
(312,107) $
$
$
$
Interest
Rate Swaps Total
(361) $ (447,686)
(67,015)
2,735
7,414
53
2,788
(59,601)
2,427 $ (507,287)
64,399
1,739
(1,147)
3,308
67,707
592
3,019 $ (439,580)
(68,835)
1,121
(323)
(4,714)
(69,158)
(3,593)
(574) $ (508,738)
For the years ended April 30, 2019 and 2018, pre-tax actuarial losses included in Unamortized Retirement Costs of approximately
$5.5 million and $5.9 million, respectively, were amortized from Accumulated Other Comprehensive Loss and recognized as pension
expense in Operating and Administrative Expenses and Interest and Other Income (Expense) on the Consolidated Statements of
Income.
Note 7 – Restructuring and Related Charges
In the years ended April 30, 2019, 2018 and 2017, we recorded pre-tax restructuring and related charges of $3.1 million, $28.6
million, and $13.4 million, respectively, which are reflected in the Restructuring and Related Charges line item on the Consolidated
Statements of Income and described in more detail below:
71
Restructuring and Reinvestment Program:
Beginning in the year ended April 30, 2013, we initiated a global program (the “Restructuring and Reinvestment Program”) to
restructure and realign our cost base with current and anticipated future market conditions. We are targeting a majority of the expected
cost savings achieved to improve margins and earnings, while the remainder will be reinvested in high-growth digital business
opportunities.
The following tables summarize the pre-tax restructuring charges related to this program:
Charges by Segment:
Research
Publishing
Solutions
Corporate Expenses
Total Restructuring and Related Charges
Charges (Credits) by Activity:
Severance
Consulting and Contract Termination Costs
Other Activities
Total Restructuring and Related Charges
2019
2018
2017
Total Charges
Incurred to Date
$
$
$
$
1,131 $
650
878
459
3,118 $
5,257 $
6,443
3,695
13,171
28,566 $
1,456 $
526
1,136
3,118 $
27,213 $
1,815
(462)
28,566 $
1,949 $
1,596
1,787
8,023
13,355 $
8,386 $
148
4,821
13,355 $
26,544
39,581
7,125
96,378
169,628
116,259
21,155
32,214
169,628
Other Activities for the year ended April 30, 2019 reflect lease impairment related costs. The credits in Other Activities for the year
ended April 30, 2018 mainly reflect changes in estimates for previously accrued restructuring charges related to facility lease reserves.
Other Activities for the year ended April 30, 2017 reflect facility relocation and lease impairment related costs.
The following table summarizes the activity for the Restructuring and Reinvestment Program liability for the year ended April 30,
2019:
Foreign Translation &
Severance
Consulting and Contract Termination Costs
Other Activities
Total
Payments
April 30, 2018 Charges
17,279 $
$
—
2,772
20,051 $
1,456 $
526
1,136
3,118 $
$
(13,388) $
(223)
(1,608)
(15,219) $
Other Adjustments April 30, 2019
4,887
303
2,544
7,734
(460) $
—
244
(216) $
The charges above are net of changes in estimates for previously accrued restructuring charges. The restructuring liability for accrued
severance costs of $4.9 million is reflected in Accrued Employment Costs on the Consolidated Statements of Financial Position. The
liability for Consulting and Contract Termination Costs is reflected in Other Accrued Liabilities. Approximately $1.1 million and $1.4
million of the Other Activities are included in Other Accrued Liabilities and Other Long-Term Liabilities, respectively on the
Consolidated Statements of Financial Position, and mainly relate to facility relocation and lease impairment related costs. We
currently do not anticipate any further material charges related to the Restructuring and Reinvestment Program.
The amount included in Other Long-Term Liabilities that relates to Other Activities is expected to be paid starting in 2021 until 2022.
Note 8 – Inventories
Inventories, net at April 30 were as follows:
Finished Goods
Work-in-Process
Paper and Other Materials
Inventory Value of Estimated Sales Returns
LIFO Reserve
Total Inventories
72
2019
2018
33,736 $
2,094
373
36,203
3,739
(4,360)
35,582 $
36,503
2,139
550
39,192
4,626
(4,329)
39,489
$
$
See Note 2, “Summary of Significant Accounting Policies, Recently Issued and Recently Adopted Accounting Standards,” under the
caption “Sales Return Reserves,” for a discussion of the Inventory Value of Estimated Sales Returns. Finished Goods are net of a
reserve for inventory obsolescence of $15.8 million and $18.2 million as of April 30, 2019 and 2018, respectively.
Note 9 – Product Development Assets
Product development assets consisted of the following at April 30:
Book Composition Costs
Software Costs
Content Development Costs
Total
2019
2018
19,197 $
38,048
5,225
62,470 $
24,887
52,078
1,849
78,814
$
$
Product development assets include $4.3 million and $4.1 million of work-in-process as of April 30, 2019 and 2018, respectively,
mainly for book composition costs.
Product development assets are net of accumulated amortization of $236.5 million and $238.1 million as of April 30, 2019 and 2018,
respectively.
Note 10 – Technology, Property and Equipment
Technology, property and equipment, net consisted of the following at April 30:
Capitalized Software
Computer Hardware
Buildings and Leasehold Improvements
Furniture, Fixtures, and Warehouse Equipment
Land and Land Improvements
Accumulated Depreciation and Amortization
Total
2019
2018
440,437 $
68,718
118,685
57,471
3,390
688,701
(399,680)
289,021 $
390,774
57,493
121,381
60,869
3,678
634,195
(344,261)
289,934
$
$
The following table details our depreciation and amortization expense for technology, property and equipment, net for the years ended
April 30:
Capitalized Software Amortization Expense
Depreciation and Amortization Expense, Excluding Capitalized Software
$
50,095 $
19,323
45,449 $
18,878
Total Depreciation and Amortization Expense for Technology, Property and Equipment
$
69,418 $
64,327 $
48,343
18,340
66,683
2019
2018
2017
Technology, property and equipment includes $2.3 million and zero of work-in-process as of April 30, 2019 and 2018, respectively,
mainly for capitalized software.
The net book value of capitalized software costs was $200.2 million and $198.0 million as of April 30, 2019 and 2018, respectively.
73
Note 11 – Goodwill and Intangible Assets
Goodwill
The following table summarizes the activity in goodwill by segment as of April 30:
Research
Publishing
Solutions
Total
2018 (1)
463,419
283,851
272,531
1,019,801
$
$
Acquisition (2)
$
— $
—
110,805
110,805 $
$
Foreign
Translation
Adjustment
(24,908) $
(706)
(9,326)
(34,940) $
2019
438,511
283,145
374,010
1,095,666
(1) The April 30, 2018 goodwill balances were revised for the Publishing segment which decreased and the Solutions segment which
increased to reflect foreign translation adjustments of $11.6 million.
(2) Refer to Note 4, “Acquisition,” in the Notes to Consolidated Financial Statements for more information related to the acquisition
of Learning House on November 1, 2018.
Prior to fiscal year 2019, we reviewed goodwill for impairment on a reporting unit basis annually during the third quarter of each year,
using a measurement date of January 31, and whenever events or changes in circumstances indicate the carrying value of goodwill
may not be recoverable. While we are permitted to conduct a qualitative assessment to determine whether it is necessary to perform a
two-step quantitative goodwill impairment test, for our annual goodwill impairment test in the third quarter of 2018 and 2017 we
performed a quantitative test for all of our reporting units.
As discussed below, during the fourth quarter of 2018, we voluntarily changed our annual impairment assessment date from January
31 to February 1 for all of our reporting units and our indefinite-lived intangible assets. For our annual goodwill impairment test in the
fourth quarter of 2019 we performed a quantitative test for all of our reporting units and in the fourth quarter of 2018 we performed a
qualitative assessment for all of our reporting units.
The goodwill impairment test involves a two-step process. In step one, we compare the fair value of each of our reporting units to its
carrying value, including the goodwill allocated to the reporting unit. If the fair value of the reporting unit exceeds its carrying value,
there is no indication of impairment and no further testing is required. If the fair value of the reporting unit is less than the carrying
value, we must perform step two of the impairment test to measure the amount of impairment loss, if any. In step two, the reporting
unit’s fair value is allocated to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a
hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired
in a business combination. If the implied fair value of the reporting unit’s goodwill is less than the carrying value, the difference is
recorded as an impairment loss.
2019 Annual Impairment Test as of February 1, 2019
During the fourth quarter of 2019, we completed step one of our annual goodwill impairment test for our reporting units. We
concluded that the fair values of these reporting units were above their carrying values and, therefore, there was no indication of
impairment.
We estimated the fair value of these reporting units using a weighting of fair values derived from an income and a market approach.
Under the income approach, we determined the fair value of a reporting unit based on the present value of estimated future cash flows.
Cash flow projections are based on management’s estimates of revenue growth rates and operating margins, taking into consideration
industry and market conditions. The discount rate used is based on a weighted average cost of capital adjusted for the relevant risk
associated with the characteristics of the business and the projected cash flows. The market approach estimates fair value based on
market multiples of current and forward 12-month operating performance results, as applicable, derived from comparable publicly
traded companies with similar operating and investment characteristics as the reporting unit.
As noted above, the fair value determined under step one of the goodwill impairment test completed in the fourth quarter of 2019
exceeded the carrying value for each reporting unit. Therefore, there was no impairment of goodwill. However, if the fair value
decreases in future periods, we may fail step one of the goodwill impairment test and be required to perform step two. In performing
step two, the fair value would have to be allocated to all of the assets and liabilities of the reporting unit. Therefore, any potential
goodwill impairment charge would be dependent upon the estimated fair value of the reporting unit at that time and the outcome of
step two of the impairment test. The fair values of the assets and liabilities of the reporting unit, including the intangible assets, could
74
vary depending on various factors.
The future occurrence of a potential indicator of impairment, such as a decrease in expected net earnings, adverse equity market
conditions, a decline in current market multiples, a decline in our common stock price, a significant adverse change in legal factors or
business climates, an adverse action or assessment by a regulator, unanticipated competition, strategic decisions made in response to
economic or competitive conditions, or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting
unit will be sold or disposed of, could require an interim assessment for some or all of the reporting units before the next required
annual assessment.
We also review our indefinite-lived intangible assets for impairment annually, which consists of brands and trademarks and certain
acquired publishing rights. During the fourth quarter of 2019, we completed our annual impairment test related to the indefinite lived
intangible assets. We concluded that the fair values of these indefinite-lived intangible assets were above their carrying values and,
therefore, there was no indication of impairment. We also concluded that one of our indefinite-lived trademarks had an excess of
estimated fair value over its carrying value of approximately 7% as of the 2019 annual impairment test.
Change in Annual Impairment Assessment Date
During the fourth quarter of 2018, we voluntarily changed our annual impairment assessment date from January 31 to February 1 for
all of our reporting units and our indefinite-lived intangible assets. This change was made to improve alignment of impairment testing
procedures with year-end financial reporting, our annual business planning and budgeting process and the multi-year strategic
forecast, which begins in the fourth quarter of each year. As a result, the goodwill and indefinite-lived intangible asset impairment
testing will reflect the result of inputs from each of the businesses in the development of the budget and forecast process, including the
impact of seasonality of our financial results. Accordingly, management considers this accounting change preferable. This change
does not accelerate, delay, avoid, or cause an impairment charge, nor does this change result in adjustments to previously issued
financial statements.
In connection with the change in the date of the annual goodwill impairment test, we completed a qualitative assessment of the
goodwill by reporting unit as of February 1, 2018 and concluded that it was more likely than not that the fair value of each of the
reporting units exceeded its carrying amount. In addition, we also completed a qualitative assessment of our indefinite-lived intangible
assets as of February 1, 2018 and concluded that it was more likely than not that the fair value of each of the indefinite-lived
intangible assets exceeded its carrying amount.
Intangibles
Intangible assets, net as of April 30 were as follows:
2019
2018
Accumulated
Amortization
Accumulated
Impairment Net
Cost
Cost
Accumulated
Amortization
Accumulated
Impairment Net
Intangible Assets with
Determinable Lives, net
Content and Publishing Rights (1) $ 806,628 $
Customer Relationships (1)
310,977
32,802
Brands and Trademarks
Covenants not to Compete
1,681
Total
1,152,088
Intangible Assets with Indefinite
(417,456) $
(65,147)
(19,809)
(1,236)
(503,648)
Lives
— $389,172 $ 824,146 $
— 245,830 212,020
32,111
— 12,993
—
1,499
445
— 648,440 1,069,776
(387,386) $
(50,291)
(16,011)
(844)
(454,532)
—$436,760
— 161,729
— 16,100
—
655
— 615,244
Brands and Trademarks
Content and Publishing Rights
Total
Total Intangible Assets, Net
134,509
86,223
220,732
$1,372,820 $
—
—
—
(503,648) $
— 86,223
(3,600) 130,909 142,189
94,238
(3,600) 217,132 236,427
(3,600) $865,572 $1,306,203 $
—
—
—
(454,532) $
(3,600) 138,589
— 94,238
(3,600) 232,827
(3,600)$848,071
(1) As of April 30, 2019, amounts include intangible assets acquired as part of the acquisition of Learning House on November 1, 2018.
Refer to Note 4, “Acquisition,” in the Notes to Consolidated Financial Statements for more information related to the acquisition of
Learning House.
Based on the current amount of intangible assets subject to amortization and assuming current foreign exchange rates, the estimated
amortization expense for the following years are as follows:
75
Fiscal Year
2020
2021
2022
2023
2024
Thereafter
Total
Amount
50,419
48,517
44,115
40,305
37,929
427,155
648,440
$
$
In conjunction with a business review performed in the Publishing segment associated with the restructuring activities in the first
quarter of the year ended April 30, 2018, we identified an indefinite-lived brand with forecasted cash flows that did not exceed its
carrying value. As a result, an impairment charge of $3.6 million was recorded in the first quarter of the year ended April 30, 2018 to
reduce the carrying value of the brand to its fair value of $1.2 million, which will now be amortized over an estimated useful life of 5
years. This impairment charge was included in Operating and Administrative Expenses on the Consolidated Statements of Income.
Note 12 – Income Taxes
The provisions for income taxes for the years ended April 30 were as follows:
Current Provision
U.S. – Federal
International
State and Local
Total Current Provision
Deferred Provision (Benefit)
U.S. – Federal
International
State and Local
Total Deferred (Benefit) Provision
Total Provision
2019
2018
2017
$
$
$
$
$
2,384 $
52,518
2,536
57,438 $
(2,216) $
46,112
961
44,857 $
335 $
(7,630)
(5,454)
(12,749) $
44,689 $
(26,062) $
2,420
530
(23,112) $
21,745 $
912
105,228
100
106,240
(13,852)
(15,330)
415
(28,767)
77,473
International and United States pretax income for the years ended April 30 were as follows:
International
United States
Total
2019
2018
$
$
204,326 $
8,626
212,952 $
219,178 $
(5,247)
213,931 $
2017
192,910
(1,794)
191,116
Our effective income tax rate as a percentage of pretax income differed from the U.S. federal statutory rate as shown below:
U.S. Federal Statutory Rate
German Tax Litigation Expense
Cost (Benefit) of Higher (Lower) Taxes on Non-U.S. Income
State Income Taxes, net of U.S. Federal Tax Benefit
Deferred Tax (Benefit) from U.S. Tax Reform Rate Change
Deferred Tax Benefit from U.K. Statutory Tax Rate Change
Tax Credits and Related Benefits
Tax Adjustments and Other
Effective Income Tax Rate
2019
2018
2017
21.0%
—
0.9
(1.3)
0.1
—
(0.8)
1.1
21.0%
30.4%
—
(8.4)
0.4
(11.7)
—
(1.7)
1.2
10.2%
35.0%
25.7
(12.7)
0.1
—
(1.3)
(6.2)
(0.1)
40.5%
A substantial portion of our 2019 income was earned outside the U.S. in jurisdictions with different statutory income tax rates than our
U.S. statutory rate including: U.K. (57%), Germany (24%), and Australia (7%).
On December 22, 2017, the U.S. government enacted comprehensive Federal tax legislation originally known as the Tax Cuts and
Jobs Act of 2017 (the “Tax Act”). In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax
Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allowed us to record provisional amounts related to the
76
effect of the Tax Act during a measurement period not to extend beyond one year of the enactment date. We completed our analysis
during the year ended April 30, 2019 within the measurement period in accordance with SAB 118.
The effective tax rate for the year ended April 30, 2019 was greater than the year ended April 30, 2018 due to the net deferred tax
benefit from the Tax Act in the year ended April 30, 2018. Excluding the effect of the Tax Act, the rate was 21.9% for the year ended
April 30, 2018, compared to 21.0% for the year ended April 30, 2019.
The effective tax rate was equal to the U.S. statutory rate for the year ended April 30, 2019. The increase from higher taxes on non-
U.S. income and various other items was offset by a state tax benefit from more favorable apportionment factors which reduced our
deferred tax liabilities, net of federal benefit.
German Tax Litigation Expense: In the year ended April 30, 2017, the German Federal Fiscal Court affirmed a lower court decision
disallowing deductions related to a stepped-up basis in certain assets. As a result, we incurred an income tax charge of approximately
$49 million ($0.85 per share).
Deferred Tax Benefit from U.K. Statutory Tax Rate Change: In fiscal year 2016, the U.K. reduced its statutory rate to 19% beginning
April 1, 2017, and 18% beginning April 1, 2020, and in fiscal year 2017, the U.K. further reduced its statutory rate beginning on April
1, 2020, from 18% to 17%. This resulted in a non-cash deferred tax benefit from the re-measurement of our applicable U.K. deferred
tax balances of $2.6 million ($0.04 per share) in the year ended April 30, 2017.
Tax Adjustments and Other: In each of the years ended April 30, 2019 and April 30, 2018, we recorded a tax benefit of $0.3 million
and $0.6 million, respectively related to the expiration of the statute of limitations or favorable resolutions of federal, state, and foreign
tax matters with tax authorities.
The Tax Act
On December 22, 2017, the U.S. government enacted comprehensive tax legislation. The Tax Act significantly revised the U.S.
corporate income tax system by, among other changes, the following:
lowering the U.S. federal corporate income tax rate to 21% with a potentially lower rate for certain foreign derived income;
accelerating deductions for certain business assets;
establishing a dividend received deduction, generally eliminating federal income taxes on cash repatriation from foreign
subsidiaries;
requiring companies to pay a one-time transition tax on post-1986 unrepatriated cumulative non-U.S. earnings and profits
(“E&P”) of foreign subsidiaries;
eliminating certain deductions such as the domestic production deduction;
establishing limitations on the deductibility of certain expenses including interest and executive compensation; and
creating new taxes on certain foreign earnings.
Deferred tax balances – In the year ended April 30, 2018 we remeasured our U.S. deferred tax assets and liabilities based on the
federal rate at which they are expected to reverse in the future, generally 21% for reversals anticipated to occur after April 30, 2019. In
the prior period, the provisional amount recorded related to the re-measurement of our net deferred tax liability was an estimated net
benefit of $25.0 million. During the year ended April 30, 2019, in accordance with SAB 118, we completed the analysis and recorded
a minimal $0.2 million expense.
Foreign tax effects – In connection with the transition from a global tax system, the Tax Act established a mandatory deemed
repatriation tax. The tax was computed using our post-1986 E&P that was previously deferred from U.S. income taxes. The tax was
based on the amount of foreign earnings held in cash equivalents and certain net assets, which were taxed at 15.5%, and those held in
other assets, which were taxed at 8.0%. In accordance with the Tax Act including certain rules applicable to non-calendar year
taxpayers, we recorded a provisional amount of $14.2 million in the year ended April 30, 2018. Since April 30, 2018, we no longer
assert that we intend to permanently reinvest earnings outside the U.S.
The Tax Act reduced the Federal statutory tax rate from 35% to 21% effective January 1, 2018. As a result, our U.S. federal statutory
tax rate was 21.0% for the year ended April 30, 2019 and a blended rate of 30.4% for the year ended April 30, 2018.
The Tax Act created new taxes, effective for us on May 1, 2018, including a provision designed to tax global low taxed income
(“GILTI”) and a provision establishing new minimum taxes, such as the base erosion anti-abuse tax (“BEAT”). We have evaluated
these provisions and determined there is no material impact to our effective tax rate.
The Tax Act also created a new benefit, effective for us on May 1, 2018, for Foreign Derived Intangible Income (“FDII”), providing a
deduction intended to result in a reduced federal income tax rate of approximately 13.125% on certain foreign derived eligible income.
77
For the year ended April 30, 2019, we recorded a tax benefit of $1.2 million.
Accounting for Uncertainty in Income Taxes:
As of April 30, 2019 and April 30, 2018, the total amount of unrecognized tax benefits were $7.7 million and $6.8 million,
respectively, of which $0.7 million and $0.6 million represented accruals for interest and penalties recorded as additional tax expense
in accordance with our accounting policy. Within the income tax provision for the years ended April 30, 2019 and 2018, we recorded
net interest expense on reserves for unrecognized and recognized tax benefits of $0.3 million and $0.2 million, respectively. As of
April 30, 2019, and April 30, 2018, the total amounts of unrecognized tax benefits that would reduce our income tax provision, if
recognized, were approximately $7.7 million and $6.8 million, respectively. We do not expect any significant changes to the
unrecognized tax benefits within the next twelve months.
A reconciliation of the unrecognized tax benefits included within the Other Long-Term Liabilities line item on the Consolidated
Statements of Financial Position follows:
Balance at May 1
Additions for Current Year Tax Positions
Additions for Prior Year Tax Positions
Reductions for Prior Year Tax Positions
Foreign Translation Adjustment
Payments and Settlements
Reductions for Lapse of Statute of Limitations
Balance at April 30
Tax Audits:
2019
2018
6,833 $
1,473
414
(578)
(42)
(136)
(305)
7,659 $
6,124
1,372
69
(38)
45
(124)
(615)
6,833
$
$
We file income tax returns in the U.S. and various states and non-U.S. tax jurisdictions. Our major taxing jurisdictions include the
United States, the United Kingdom, and Germany. Except for one immaterial item, we are no longer subject to income tax
examinations for years prior to fiscal year 2014 in the major jurisdictions in which we are subject to tax. Our last completed U.S.
federal tax audit was for fiscal years 2011 through 2013, which resulted in minimal adjustments related to temporary differences.
Deferred Taxes:
Deferred taxes result from temporary differences in the recognition of revenue and expense for tax and financial reporting purposes.
We believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net
deferred tax assets. The significant components of deferred tax assets and liabilities at April 30 were as follows:
Net Operating Losses
Reserve for Sales Returns and Doubtful Accounts
Accrued Employee Compensation
Foreign and Federal Credits
Other Accrued Expenses
Retirement and Post-Employment Benefits
Total Gross Deferred Tax Assets
Less Valuation Allowance
Total Deferred Tax Assets
Prepaid Expenses and Other Current Assets
Unremitted Foreign Earnings
Intangible and Fixed Assets
Total Deferred Tax Liabilities
Net Deferred Tax Liabilities
Reported As
Deferred Tax Assets
Deferred Tax Liabilities
Net Deferred Tax Liabilities
78
2019
2018
$
$
$
$
$
$
14,491
2,923
17,528
34,401
6,262
40,653
116,258
(21,179)
95,079
(744)
(1,985)
(226,898)
(229,627)
(134,548)
$
$
$
$
$
$
8,976
2,506
20,096
31,109
4,632
39,160
106,479
(8,811)
97,668
(3,203)
(1,985)
(231,869)
(237,057)
(139,389)
$
$
9,227
(143,775)
(134,548)
$
$
4,129
(143,518)
(139,389)
The decrease in net deferred tax liabilities is attributable to a foreign exchange driven decrease in our deferred tax liability primarily
related to intangible and fixed assets. Our increase in deferred tax liabilities relating to our acquisition of Learning House was offset
by the amortization of our deferred tax liabilities related to intangibles and fixed assets, primarily from prior acquisitions. Our
increase in deferred tax assets, primarily from foreign and federal tax credits as well as net operating losses, was offset by an increase
in our valuation allowance related to those assets. We have concluded that after valuation allowances, it is more likely than not that we
will realize substantially all of the net deferred tax assets at April 30, 2019. In assessing the need for a valuation allowance, we take
into account related deferred tax liabilities and estimated future reversals of existing temporary differences, future taxable earnings
and tax planning strategies to determine which deferred tax assets are more likely than not to be realized in the future. Changes to tax
laws, statutory tax rates and future taxable earnings can have an impact on our valuation allowances.
A $21.2 million valuation allowance has been provided based on the uncertainty of utilizing the tax benefits related to our deferred tax
assets for foreign tax credits, state, and, to a small extent, Federal net operating loss carry forwards. As of April 30, 2019, we have
apportioned state net operating loss carryforwards totaling $99 million, with a tax effected value of $6 million net of federal benefits,
expiring in various amounts over 1 to 20 years.
On June 18, 2019, U.S. Treasury published certain proposed and temporary regulations which would, among other changes, eliminate
the dividend received deduction with respect to certain income recognized by us with respect to the transition tax imposed by the Tax
Act. Although we are still reviewing the regulations, if applied, such regulations would not materially impact our consolidated
financial position or results of operations, as the decrease in our foreign tax credit carryforward would most likely be offset by a
decrease in our valuation allowance.
Since April 30, 2018, we no longer intend to permanently reinvest earnings outside the U.S. We have a $2.0 million liability related to
the estimated taxes that would be incurred upon repatriating certain non-U.S. earnings.
Note 13 – Debt and Available Credit Facilities
As of April 30, 2019 and 2018, our debt of $478.8 million and $360.0 million, respectively, consisted of amounts due under our
revolving credit facilities.
We have a revolving credit agreement (“RCA”) with a syndicated bank group led by Bank of America. The RCA consists of a $1.1
billion five-year senior revolving credit facility payable March 1, 2021. Under the RCA, which can be drawn in multiple currencies,
we have the option of borrowing at the following floating interest rates: (i) at a rate based on the London Interbank Offered Rate
(“LIBOR”) plus an applicable margin ranging from 0.98% to 1.50%, depending on our consolidated leverage ratio, as defined, or (ii)
for U.S. dollar-denominated loans only, at the lender’s base rate plus an applicable margin ranging from zero to 0.45%, depending on
our consolidated leverage ratio. The lender’s base rate is defined as the highest of (i) the U.S. federal funds effective rate plus a 0.50%
margin, (ii) the Eurocurrency rate, as defined, plus a 1.00% margin, or (iii) the Bank of America prime lending rate. In addition, we
pay a facility fee ranging from 0.15% to 0.25% depending on our consolidated leverage ratio. We also have the option to request an
additional credit limit increase of up to $350 million in minimum increments of $50 million, subject to the approval of the lenders.
The RCA contains certain restrictive covenants related to our consolidated leverage ratio and interest coverage ratio, which we were in
compliance with as of April 30, 2019 and 2018. Due to the fact that there are no principal payments due until the end of the agreement
in the year ended April 30, 2021, we have classified our entire debt obligation as long-term as of April 30, 2019 and 2018.
We have other lines of credit aggregating $2.7 million at various interest rates. There were no outstanding borrowings under these
credit lines at April 30, 2019 and 2018.
Our total available lines of credit as of April 30, 2019, were approximately $1.1 billion, of which approximately $0.6 billion was
unused. The weighted average interest rates on total debt outstanding during the years ended April 30, 2019 and 2018 were 2.69% and
2.44%, respectively. As of April 30, 2019 and 2018, the weighted average interest rates for total debt were 2.88% and 2.58%,
respectively. Based on estimates of interest rates currently available to us for loans with similar terms and maturities, the fair value of
our debt approximates its carrying value.
On May 30, 2019, we entered into a credit agreement that amended and restated our existing RCA. See Note 21, Subsequent Events,
for further details.
Note 14 – Derivative Instruments and Activities
From time-to-time, we enter into forward exchange and interest rate swap contracts as a hedge against foreign currency asset and
liability commitments, changes in interest rates, and anticipated transaction exposures, including intercompany purchases. All
derivatives are recognized as assets or liabilities and measured at fair value. Derivatives that are not determined to be effective hedges
79
are adjusted to fair value with a corresponding adjustment to earnings. We do not use financial instruments for trading or speculative
purposes.
Interest Rate Contracts:
We had $478.8 million of variable rate loans outstanding at April 30, 2019, which approximated fair value.
As of April 30, 2019 and 2018, the interest rate swap agreements we maintained were designated as fully effective cash flow hedges
as defined under Accounting Standards Codification 815 “Derivatives and Hedging” ("ASC 815"). As a result, there was no impact on
our Consolidated Statements of Income from changes in the fair value of the interest rate swaps, as they were fully offset by changes
in the interest expense on the underlying variable rate debt instruments. Under ASC 815, derivative instruments that are designated as
cash flow hedges have changes in their fair value recorded initially within Accumulated Other Comprehensive Loss on the
Consolidated Statements of Financial Position. As interest expense is recognized based on the variable rate loan agreements, the
corresponding deferred gain or loss on the interest rate swaps is reclassified from Accumulated Other Comprehensive Loss to Interest
Expense on the Consolidated Statements of Income. It is management’s intention that the notional amount of interest rate swaps be
less than the variable rate loans outstanding during the life of the derivatives.
On April 4, 2016, we entered into a forward starting interest rate swap agreement, which fixed a portion of the variable interest due on
a variable rate debt renewal on May 16, 2016. Under the terms of the agreement, we will pay a fixed rate of 0.92% and receive a
variable rate of interest based on one-month LIBOR (as defined) from the counterparty which is reset every month for a three-year
period starting May 16, 2016, ending May 15, 2019. As of April 30, 2019, the notional amount of the interest rate swap was $350.0
million.
We record the fair value of our interest rate swaps on a recurring basis using Level 2 inputs of quoted prices for similar assets or
liabilities in active markets. The fair value of the interest rate swaps as of April 30, 2019 and 2018, was a deferred gain of $0.5 million
and $5.1 million, respectively. Based on the maturity dates of the contracts, the entire deferred gain as of April 30, 2019 was recorded
within Prepaid Expenses and Other Current Assets and as of April 30, 2018, was recorded within Other Non-Current Assets.
The pre-tax (gains) losses that were reclassified from Accumulated Other Comprehensive Loss to Interest Expense for the years ended
April 30, 2019, 2018, and 2017 were $(4.7) million, $(1.5) million, and $1.1 million, respectively. Based on the amount in
Accumulated Other Comprehensive Loss at April 30, 2019, approximately $0.2 million, net of tax, of unrecognized gains would be
reclassified into net income in the next twelve months.
Foreign Currency Contracts:
We may enter into forward exchange contracts to manage our exposure on certain foreign currency denominated assets and liabilities.
The forward exchange contracts are marked to market through Foreign Exchange Transaction (Losses) Gains on the Consolidated
Statements of Income and carried at their fair value on the Consolidated Statements of Financial Position. Foreign currency
denominated assets and liabilities are remeasured at spot rates in effect on the balance sheet date, with the effects of changes in spot
rates reported in Foreign Exchange Transaction (Losses) Gains on the Consolidated Statements of Income.
As of April 30, 2019 and 2018, we did not maintain any open forward contracts. In addition, we did not maintain any open forward
contracts during the years ended April 30, 2019 and 2018.
As of April 30, 2017, we did not maintain any open forward contracts, but we did have open forward contracts during the year ended
April 30, 2017. There were two open forward exchange contracts with notional amounts of 31 million euros and 274 million pounds
sterling to manage foreign currency exposures on intercompany loans. These contracts matured in May 2016 and February 2017,
respectively. For the year ended April 30, 2017, the gains recognized on forward contracts were $59.0 million.
Note 15 – Commitment and Contingencies
The following schedule shows the composition of net rent expense for operating leases:
Minimum Rental
Less: Sublease Rentals
Total
2019
2018
2017
$
$
29,066 $
(719)
28,347 $
31,451 $
(708)
30,743 $
35,464
(626)
34,838
80
At April 30, 2019, estimated future minimum annual rental commitments under non-cancelable real and personal property leases, were
as follows:
Fiscal Year
Amount
2020
2021
2022
2023
2024
Thereafter
Total
$
$
30,887
27,326
23,183
19,257
18,576
129,382
248,611
Rent expense associated with operating leases that include scheduled rent increases and tenant incentives, such as rent holidays or
leasehold improvement allowances, are recorded on a straight-line basis over the term of the lease.
We are involved in routine litigation in the ordinary course of our business. A provision for litigation is accrued when information
available to us indicates that it is probable a liability has been incurred and the amount of loss can be reasonably estimated. Significant
judgment may be required to determine both the probability and estimates of loss. When the amount of the loss can only be estimated
within a range, the most likely outcome within that range is accrued. If no amount within the range is a better estimate than any other
amount, the minimum amount within the range is accrued. When uncertainties exist related to the probable outcome of litigation
and/or the amount or range of loss, we do not record a liability, but disclose facts related to the nature of the contingency and possible
losses if management considers the information to be material. Reserves for legal defense costs are recognized when incurred. The
accruals for loss contingencies and legal costs are reviewed regularly and may be adjusted to reflect updated information on the status
of litigation and advice of legal counsel. In the opinion of management, the ultimate resolution of all pending litigation as of April 30,
2019, will not have a material effect upon our consolidated financial condition or results of operations.
Note 16 – Retirement Plans
We have retirement plans that cover substantially all employees. The plans generally provide for employee retirement between the
ages 60 and 65, and benefits based on length of service and compensation, as defined.
Our Board of Directors approved plan amendments that froze the following retirement plans:
Retirement Plan for the Employees of John Wiley & Sons, Canada was frozen effective December 31, 2015;
Retirement Plan for the Employees of John Wiley & Sons, Ltd., a U.K. plan was frozen effective April 30, 2015 and;
U.S. Employees’ Retirement Plan, Supplemental Benefit Plan, and Supplemental Executive Retirement Plan, were frozen
effective June 30, 2013.
We maintain the Supplemental Executive Retirement Plan for certain officers and senior management which provides for the payment
of supplemental retirement benefits after the termination of employment for 10 years or in a lifetime annuity. Under certain
circumstances, including a change of control as defined, the payment of such amounts could be accelerated on a present value basis.
Future accrued benefits to this plan have been discontinued as noted above.
The components of net pension expense (income) for the defined benefit plans and the weighted average assumptions were as follows:
2019
2018
2017
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Service Cost
Interest Cost
Expected Return on Plan Assets
Net Amortization of Prior Service Cost
Recognized Net Actuarial Loss
Curtailment/Settlement Loss
Net Pension Expense (Income)
$
$
— $
11,704
(13,472)
(154)
2,035
—
113 $
912 $
12,943
(25,551)
57
3,746
—
(7,893) $
960 $
— $
11,666
13,876
(13,154) (26,385)
57
3,832
19
(7,641) $
(154)
2,289
-
647 $
— $
12,398
(14,053)
(154)
2,622
8,842
9,655 $
Non-U.S.
967
14,449
(21,173)
54
2,553
—
(3,150)
Discount Rate
Rate of Compensation Increase
Expected Return on Plan Assets
4.3%
N/A
6.8%
2.6%
3.0%
6.5%
4.1%
N/A
6.8%
2.6%
3.0%
6.5%
4.0%
N/A
6.8%
3.5%
3.0%
6.7%
81
We adopted ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension
Cost and Net Periodic Postretirement Benefit Cost,” on May 1, 2018. Refer to Note 2, "Summary of Significant Accounting Policies,
Recently Issued and Recently Adopted Accounting Standards," for more information. The guidance requires that the service cost
component of net pension and postretirement benefit costs be reported in the same line item as other compensation costs arising from
services rendered by the pertinent employees during the period. Such amounts are reflected in Operating and Administrative Expenses
on our Consolidated Statements of Income. The guidance requires that the other components of net benefit costs be reported separately
from the service cost component and below operating income. Such amounts are reflected in Interest Income and Other on our
Consolidated Statements of Income. We were required to retrospectively adopt this guidance.
We announced a voluntary, limited-time opportunity for terminated vested employees who are participants in the U.S. Employees’
Retirement Plan of John Wiley & Sons, Inc. (the “Pension Plan”) to request early payment of their entire Pension Plan benefit in the
form of a single lump sum payment. Eligible participants who wished to receive the lump sum payment were required to make an
election by August 29, 2016. Approximately 780 eligible participants made the election to receive the lump sum totaling $28.3 million
which was paid from pension plan assets in October 2016. Settlement accounting rules were applied, which resulted in a plan
remeasurement and recognition of a pro-rata portion of unamortized net actuarial loss of $8.8 million which was recorded in Operating
and Administrative Expenses on the Consolidated Statements of Income in the year ended April 30, 2017.
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the retirement plans with
accumulated benefit obligations in excess of plan assets were $794.2 million, $762.8 million and $621.9 million, respectively, as of
April 30, 2019, and $820.4 million, $787.6 million, and $624.4 million, respectively, as of April 30, 2018.
The Recognized Net Actuarial Loss for each fiscal year is calculated using the “corridor method,” which reflects the amortization of
the net loss at the beginning of the fiscal year in excess of 10% of the greater of the market value of plan assets or the projected benefit
obligation. The amortization period is based on the average expected life of plan participants.
We recognize the overfunded or underfunded status of defined benefit postretirement plans, measured as the difference between the
fair value of plan assets and the projected benefit obligation, on the Consolidated Statements of Financial Position. The change in the
funded status of the plan is recognized in Accumulated Other Comprehensive Loss on the Consolidated Statements of Financial
Position. Plan assets and obligations are measured at fair value as of our balance sheet date.
The amounts in Accumulated Other Comprehensive Loss that are expected to be recognized as components of net periodic benefit
cost during the next fiscal year are as follows:
Actuarial Loss
Prior Service Cost
Total
U.S.
Non-U.S.
Total
$
$
2,390 $
(154)
2,236 $
4,091 $
82
4,173 $
6,481
(72)
6,409
82
The following table sets forth the changes in and the status of our defined benefit plans’ assets and benefit obligations:
CHANGE IN PLAN ASSETS
Fair Value of Plan Assets, Beginning of Year
Actual Return on Plan Assets
Employer Contributions
Employee Contributions
Settlements
Benefits Paid
Foreign Currency Rate Changes
Fair Value, End of Year
CHANGE IN PROJECTED BENEFIT OBLIGATION
Benefit Obligation, Beginning of Year
Service Cost
Interest Cost
Actuarial Gains (Losses)
Benefits Paid
Foreign Currency Rate Changes
Settlements and Other
Benefit Obligation, End of Year
Underfunded Status, End of Year
AMOUNTS RECOGNIZED ON THE STATEMENT OF FINANCIAL
POSITION
Current Pension Liability
Noncurrent Pension Liability
Net Amount Recognized in Statement of Financial Position
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER
COMPREHENSIVE LOSS (BEFORE TAX) CONSIST OF
Net Actuarial (Losses)
Prior Service Cost Gains (Losses)
Total Accumulated Other Comprehensive Loss
Change in Accumulated Other Comprehensive Loss
WEIGHTED AVERAGE ASSUMPTIONS USED IN DETERMINING
ASSETS AND LIABILITIES
Discount Rate
Rate of Compensation Increase
Accumulated Benefit Obligations
Pension plan assets/investments:
$
$
$
$
$
$
$
$
$
$
2019
2018
U.S.
Non-U.S.
U.S.
Non-U.S.
204,983 $
9,705
14,753
—
—
(15,813)
—
213,628 $
(279,644) $
—
(11,704)
(9,662)
15,813
—
—
(285,197) $
(71,569) $
419,448 $
24,891
11,872
—
—
(16,282)
(31,680)
408,249 $
200,001 $ 390,133
2,780
15,352
8,385
5,020
—
—
(239)
-
(15,909)
(15,390)
34,298
—
204,983 $ 419,448
(540,686) $
(912)
(12,943)
(11,013)
16,282
41,143
(886)
(509,015) $
(100,766) $
(290,785) $ (519,588)
(960)
—
(13,876)
(11,666)
23,528
7,417
15,909
15,390
(45,938)
—
239
-
(279,644) $ (540,686)
(74,661) $ (121,238)
(5,188)
(66,381)
(71,569) $
(816)
(99,950)
(100,766) $
(4,818)
(780)
(69,843) (120,458)
(74,661) $ (121,238)
(94,028) $
2,408
(91,620) $
(11,546) $
(177,157) $
(1,154)
(178,311) $
5,446 $
2,562
(82,636) $ (183,316)
(441)
(80,074) $ (183,757)
(11,708)
11,749 $
4.1%
N/A
(285,197) $
2.4%
3.0%
(477,561) $
4.3%
N/A
2.6%
3.0%
(279,644) $ (507,932)
The investment guidelines for the defined benefit pension plans are established based upon an evaluation of market conditions, plan
liabilities, cash requirements for benefit payments, and tolerance for risk. Investment guidelines include the use of actively and
passively managed securities. The investment objective is to ensure that funds are available to meet the plans benefit obligations when
they are due. The investment strategy is to invest in high quality and diversified equity and debt securities to achieve our long-term
expectation. The plans’ risk management practices provide guidance to the investment managers, including guidelines for asset
concentration, credit rating and liquidity. Asset allocation favors a balanced portfolio, with a global aggregated target allocation of
approximately 50% equity securities and 50% fixed income securities and cash. Due to volatility in the market, the target allocation is
not always desirable and asset allocations will fluctuate between acceptable ranges of plus or minus 5%. We regularly review the
investment allocations and periodically rebalance investments to the target allocations. We categorize our pension assets into three
levels based upon the assumptions (inputs) used to price the assets. Level 1 provides the most reliable measure of fair value, whereas
Level 3 generally requires significant management judgment. The three levels are defined as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets.
Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets in active
markets or quoted prices for identical assets in inactive markets.
Level 3: Unobservable inputs reflecting assumptions about the inputs used in pricing the asset.
83
We did not maintain any level 3 assets during the years ended April 30, 2019 and 2018. In accordance with ASU 2015-07, “Fair Value
Measurement (“Topic 820”), certain investments that are measured at fair value using the net asset value (“NAV”) per share (or its
equivalent) practical expedient do not have to be classified in the fair value hierarchy. We adopted ASU 2015-07 in the year ended
April 30, 2018 and it was applied retrospectively to all periods presented. The fair value amounts presented in the following tables are
intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefit plan assets. The
following tables set forth, by level within the fair value hierarchy, pension plan assets at their fair value as of April 30:
Level 1
2019
Level 2
Total
Level 1
2018
Level 2
Total
U.S. Plan Assets
Investments measured at NAV:
Global Equity Securities: Limited Partnership
Fixed Income Securities: Commingled Trust Funds
Other: Real Estate Commingled Trust Fund
Total Assets at NAV
Non-U.S. Plan Assets
Equity Securities:
U.S. Equities
Non-U.S. Equities
$
Balanced Managed Funds
Fixed Income Securities: Commingled Funds
Other:
Real Estate/Other
Cash and Cash Equivalents
Total Non-U.S. Plan Assets
Total Plan Assets
$
$
$
$
109,490
104,138
—
213,628
$
$
95,933
100,295
8,755
204,983
— $
—
—
855
—
1,396
2,251 $
2,251 $
39,652 $
117,575
48,550
199,720
501
—
405,998 $
405,998 $
39,652 $
117,575
48,550
200,575
501
1,396
408,249 $
621,877 $
— $
—
—
—
31,203 $
96,387
91,743
197,804
—
1,762
1,762 $
1,762 $
549
—
417,686 $
417,686 $
31,203
96,387
91,743
197,804
549
1,762
419,448
624,431
Expected employer contributions to the defined benefit pension plans in the year ended April 30, 2020 will be approximately $17.0
million, including $11.7 million of minimum amounts required for our non-U.S. plans. From time to time, we may elect to make
voluntary contributions to our defined benefit plans to improve their funded status. Included in our defined benefit pension
contributions for the year ended April 30, 2019 was a discretionary contribution of $10.0 million to the U.S. Employees' Retirement
Plan of John Wiley & Sons, Inc.
Benefit payments to retirees from all defined benefit plans are expected to be the following in the fiscal year indicated:
Fiscal Year
U.S.
Non-U.S.
Total
2020
2021
2022
2023
2024
2025 – 2029
Total
$
$
16,287
14,741
14,894
15,259
15,436
76,053
152,670
$
$
8,868
9,610
11,019
11,433
12,097
71,732
124,759
$
$
25,155
24,351
25,913
26,692
27,533
147,785
277,429
We provide contributory life insurance and health care benefits, subject to certain dollar limitations, for substantially all of our eligible
retired U.S. employees. The retiree health benefit is no longer available for any employee who retires after December 31, 2017. This
resulted in a curtailment gain of $2.5 million which was recognized in the Operating and Administrative Expenses line item in our
Consolidated Statement of Income in the year ended April 30, 2017. The cost of such benefits is expensed over the years the employee
renders service and is not funded in advance. The accumulated post-retirement benefit obligation recognized on the Consolidated
Statements of Financial Position as of April 30, 2019 and 2018, was $1.6 million and $1.8 million, respectively. Annual (credits)
expenses for these plans for the years ended April 30, 2019, 2018, and 2017 were $(0.1) million, $(0.1) million and $(0.2) million,
respectively.
We have defined contribution savings plans. Our contribution is based on employee contributions and the level of our match. We may
make discretionary contributions to all employees as a group. The expense recorded for these plans was approximately $13.1 million,
$14.4 million, and $15.5 million in the years ended April 30, 2019, 2018, and 2017 respectively.
84
Note 17 – Stock-Based Compensation
All equity compensation plans have been approved by shareholders. Under the 2014 Key Employee Stock Plan, (“the Plan”), qualified
employees are eligible to receive awards that may include stock options, performance-based stock awards, and other restricted stock
awards. Under the Plan, a maximum number of 6.5 million shares of our Class A stock may be issued. As of April 30, 2019, there
were approximately 4,355,399 securities remaining available for future issuance under the Plan. We issue treasury shares to fund
awards issued under the Plan.
Stock Option Activity:
Under the terms of our stock option plan, the exercise price of stock options granted may not be less than 100% of the fair market
value of the stock at the date of grant. Options are exercisable over a maximum period of 10 years from the date of grant. For the years
ended April 30, 2015 and prior, options generally vest 50% on the fourth and fifth anniversary date after the award is granted. For the
year ended April 30, 2016, options vest 25% per year on April 30. We did not grant any stock option awards in the years ended April
30, 2019, 2018 and 2017. As of April 30, 2019, all outstanding options have vested allowing the participant the right to exercise their
awards.
The following table provides the estimated weighted average fair value for options granted in the year ended April 30, 2016 using the
Black-Scholes option-pricing model and the significant weighted average assumptions used in their determination. The expected life
represents an estimate of the period of time stock options will be outstanding based on the historical exercise behavior of option
recipients. The risk-free interest rate is based on the corresponding U.S. Treasury yield curve in effect at the time of the grant. The
expected volatility is based on the historical volatility of our Common Stock price over the estimated life of the option, while the
dividend yield is based on the expected dividend payments to be made by us.
Fair Value of Options on Grant Date
Weighted Average assumptions:
Expected Life of Options (years)
Risk-Free Interest Rate
Expected Volatility
Expected Dividend Yield
Fair Value of Common Stock on Grant Date
2016
$
14.77
7.2
2.1%
29.7%
2.1%
55.99
$
A summary of the activity and status of our stock option plans follows:
2019
2018
2017
Number
of
Options
(in 000’s)
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Term
(in years)
Aggregate
Intrinsic
Value
(in
millions)
Outstanding at Beginning of Year
Granted
Exercised
Expired or Forfeited
Outstanding at End of Year
Exercisable at End of Year
Vested and Expected to Vest in the
611 $
— $
(229) $
(10) $
372 $
372 $
48.88
—
47.21
56.97
49.70
49.70
Future at April 30
372 $
49.70
2.8 $
2.8 $
2.8 $
0.8
0.8
0.8
Number
of
Options
(in 000’s)
Weighted
Average
Exercise
Price
Number
of
Options
(in 000’s)
Weighted
Average
Exercise
Price
1,429 $
— $
(788) $
(30) $
611 $
530 $
47.39
—
45.97
54.24
48.88
47.43
1,966 $
— $
(469) $
(68) $
1,429 $
1,064 $
46.62
—
43.74
49.91
47.39
46.04
599 $
48.90
1,249 $
45.88
The intrinsic value is the difference between our common stock price and the option grant price. The total intrinsic value of options
exercised during the years ended April 30, 2019, 2018, and 2017 was $4.4 million, $10.4 million, and $20.5 million, respectively. The
total grant date fair value of stock options vested during the years ended April 30, 2019 and 2018 was $4.8 and $13.4 million,
respectively.
As of April 30, 2019, there is no unrecognized share-based compensation expense related to stock options.
85
The following table summarizes information about stock options outstanding and exercisable at April 30, 2019:
Range of Exercise Prices
$35.04
$39.53 to $40.02
$48.06 to $49.55
$55.99 to $59.70
Total/Average
Options Outstanding
Options Exercisable
Weighted
Average
Remaining
Term
(in years)
Weighted
Average
Exercise Price
Number
of Options
(in 000’s)
Weighted
Average
Exercise
Price
0.2 $
2.3 $
2.3 $
3.6 $
2.8 $
35.04
39.71
48.69
57.87
49.70
11 $
101 $
106 $
154 $
372 $
35.04
39.71
48.69
57.87
49.70
Number
of Options
(in 000’s)
11
101
106
154
372
Performance-Based and Other Restricted Stock Activity:
Under the terms of our long-term incentive plans, performance-based restricted unit awards are payable in restricted shares of our
Class A Common Stock upon the achievement of certain three-year financial performance-based targets. During each three-year
period, we adjust compensation expense based upon our best estimate of expected performance. For the years ended April 30, 2015
and prior, restricted performance shares vest 50% on the first and second anniversary date after the award is earned. For the years
ended April 30, 2016 and 2017, restricted performance shares vest 50% on June 30 following the end of the three-year performance
cycle and 50% on April 30 of the following year. Beginning in the year ended April 30, 2018, restricted performance share units vest
100% on June 30 following the end of the three-year performance cycle.
We may also grant individual restricted unit awards payable in restricted shares of our Class A Common Stock to key employees in
connection with their employment. For the years ended April 30, 2015 and prior, the restricted shares generally vest 50% at the end of
the fourth and fifth years following the date of the grant. Starting with the year ended April 30, 2016 grants, restricted shares vest
ratably 25% per year.
Under certain circumstances relating to a change of control or termination, as defined, the restrictions would lapse, and shares would
vest earlier.
Activity for performance-based and other restricted stock awards during the years ended April 30, 2019, 2018, and 2017 was as
follows (shares in thousands):
Nonvested Shares at Beginning of Year
Granted
Change in Shares Due to Performance
Vested and Issued
Forfeited
Nonvested Shares at End of Year
2019
2018
2017
Weighted
Average
Grant Date
Value
Restricted
Shares
Restricted
Shares
Restricted
Shares
861 $
415 $
(19) $
(357) $
(144) $
756 $
53.22
62.63
44.17
54.95
55.37
57.38
913
525
(107)
(318)
(152)
861
915
509
(67)
(267)
(177)
913
As of April 30, 2019, there was $28.1 million of unrecognized share-based compensation cost related to performance-based and other
restricted stock awards, which is expected to be recognized over a period up to 4 years, or 2.2 years on a weighted average basis.
Compensation expense for restricted stock awards is measured using the closing market price of our Class A Common Stock at the
date of grant. The total grant date value of shares vested during the years ended April 30, 2019, 2018, and 2017 was $19.6 million,
$15.7 million, and $12.1 million, respectively.
President and CEO New Hire Equity Awards
On October 17, 2017, we announced Brian A. Napack as the new President and Chief Executive Officer of Wiley effective December
4, 2017 (the "Commencement Date"). Upon the Commencement Date, Mr. Napack also became a member of our Board of Directors
86
(the "Board"). In connection with his appointment, Wiley and Mr. Napack entered into an employment offer letter (the "Employment
Agreement").
The Employment Agreement provides that beginning with the year ended April 30, 2018–2020 performance cycle, eligibility to
participate in annual grants under our Executive Long-Term Incentive Program (ELTIP). Targeted long-term incentive for this cycle is
equal to 300% of base salary, or $2.7 million. Sixty percent of the ELTIP value will be delivered in the form of target performance
share units and forty percent in restricted share units. The grant date fair value for restricted share units was $59.15 per share and
included 20,611 restricted share units, which vest 25% each year starting on April 30, 2018 to April 30, 2021. In addition, there was a
performance share unit award with a target of 30,916 units and a grant date fair value of $59.15. The performance metrics are based on
cumulative EBITDA for the year ended April 30, 2018-2020 and cumulative normalized free cash flow for the year ended April 30,
2018–2020.
The awards are described in further detail in Mr. Napack’s Employment Agreement filed with the SEC as Exhibit 10.1 to our Current
Report on Form 8-K filed on October 17, 2017.
In addition, the Employment Agreement provides for a sign-on grant of restricted share units, with a grant value of $4.0 million,
converted to shares using our Class A closing stock price as of the Commencement Date, and vesting in two equal installments on the
first and second anniversaries of the employment date. The grant date fair value for this award was $59.15 per share and included
67,625 units at the date of grant. Grants are subject to forfeiture in the case of voluntary termination prior to vesting and accelerated
vesting in the case of earlier termination of employment without Cause, due to death or Disability or Constructive Discharge, or upon
a Change in Control (as such terms are defined in the Employment Agreement).
The awards are described in further detail in Mr. Napack’s Employment Agreement filed with the SEC as Exhibit 10.1 to our Current
Report on Form 8-K filed on October 17, 2017.
Director Stock Awards:
Under the terms of our 2018 Director Stock Plan (the “Director Plan”), each non-employee director, other than the Chairman of the
Board, receives an annual award of restricted shares of our Class A Common Stock equal in value to 100% of the annual director
stock retainer fee, based on the stock price at the close of the New York Stock Exchange on the date of grant. Such restricted shares
will vest on the earliest of (i) the day before the next Annual Meeting following the grant, (ii) the non-employee director’s death or
disability (as determined by the Governance Committee), or (iii) a change in control (as defined in the 2014 Key Employee Stock
Plan). The granted shares may not be sold or transferred during the time the non-employee director remains a director. There were
18,991 restricted shares awarded under the Director Plan for the year ended April 30, 2019, and 19,900, and 20,243 shares awarded
under the Director Plan for the years ended April 30, 2018, and 2017, respectively.
Note 18 – Capital Stock and Changes in Capital Accounts
Each share of our 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.
During the year ended April 30, 2017, our Board of Directors approved an additional share repurchase program of four million shares
of Class A or B Common Stock. We repurchased in the year ended April 30, 2019 1,191,496 Class A shares at an average price of
$50.35 per share. In the year ended April 30, 2018, we repurchased 713,177 shares at an average price of $55.65 per share. In the year
ended April 30, 2017, we repurchased 953,188 shares, which included 952,667 Class A shares and 521 Class B shares at an average
price of $52.80 per share. As of April 30, 2019, we had authorization from our Board of Directors to purchase up to 1,888,975
additional shares.
87
The following is a summary of changes during the years ended April 30, in shares of our common stock and common stock in treasury
(shares in thousands).
Changes in Common Stock A:
Number of shares, beginning of year
Common stock class conversions and other
Number of shares issued, end of year
Changes in Common Stock A in treasury:
Number of shares held, beginning of year
Purchase of treasury shares
Restricted shares issued under stock-based compensation plans - non-PSU Awards
Restricted shares issued under stock-based compensation plans - PSU Awards
Stock grants of fully vested Class A shares - common stock
Restricted shares, forfeited
Restricted shares issued from exercise of stock options
Shares withheld for taxes
Other
Number of shares held, end of year
Number of Common Stock A outstanding, end of year
Changes in Common Stock B:
Number of shares, beginning of year
Common stock class conversions and other
Number of shares issued, end of year
Changes in Common Stock B in treasury:
Number of shares held, beginning of year
Shares repurchased
Number of shares held, end of year
Number of Common Stock B outstanding, end of year
2019
2018
2017
70,111
16
70,127
70,086
25
70,111
21,853
1,192
(210)
(110)
—
9
(229)
130
(1)
22,634
47,493
22,097
713
(153)
(126)
(20)
15
(788)
116
(1)
21,853
48,258
69,798
288
70,086
21,709
953
(74)
(186)
(24)
8
(469)
97
83
22,097
47,989
2019
2018
2017
13,071
(16)
13,055
13,096
(25)
13,071
13,392
(296)
13,096
3,918
—
3,918
9,137
3,918
—
3,918
9,153
3,917
1
3,918
9,178
The following table summarizes the cash dividends paid during the year ended April 30, 2019:
Date of Declaration by
Board of Directors
Quarterly Cash
Dividend
Total
Dividend
June 21, 2018
$0.33 per common share $19.0 million
September 26, 2018
$0.33 per common share $18.9 million
December 19, 2018
$0.33 per common share $18.9 million
March 20, 2019
$0.33 per common share $18.6 million
Note 19 – Segment Information
Class of Common
Stock
Class A and
Class B
Class A and
Class B
Class A and
Class B
Class A and
Class B
Dividend Paid Date
Shareholders of
Record as of Date
July 18, 2018
October 24, 2018
January 16, 2019
April 17, 2019
July 3, 2018
October 9, 2018
January 2, 2019
April 2, 2019
Our segment reporting structure consists of three reportable segments, which are listed below and a Corporate category as follows:
Research;
Publishing; and
Solutions
88
Segment information is as follows:
Revenue:
Research
Publishing
Solutions
Total Revenue
Contribution to Profit (1):
Research
Publishing
Solutions
Total Contribution to Profit
Corporate Expenses
Operating Income
For the Years Ended April 30,
2017
2018
2019
$
937,313 $
574,192
288,564
853,489
633,449
231,592
$ 1,800,069 $ 1,796,103 $ 1,718,530
934,395 $
617,648
244,060
$
$
$
258,875 $
118,901
14,967
392,743 $
(168,754)
223,989 $
271,326 $
121,639
22,099
415,064 $
(183,603)
231,461 $
250,648
124,531
14,822
390,001
(178,531)
211,470
(1) Due to the retrospective adoption of ASU 2017-07, total net benefits (costs) of $8.1 million and $(5.3) million related to the non-
service components of defined benefit and other post-employment benefit plans were reclassified from Operating and Administrative
Expenses to Interest Income and Other for the years ended April 30, 2018 and 2017, respectively. Refer to Note 2, "Summary of
Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," for more information. The impact of
the reclassification on Contribution to Profit by segment for the year ended April 30, 2018 was $4.2 million in Research, $2.3 million
in Publishing, and $1.6 million in Corporate expenses. The impact of the reclassification on Contribution to Profit by segment for the
year ended April 30, 2017 was $1.6 million in Research, $1.2 million in Publishing, and $(8.1) million in Corporate expenses.
See Note 3, “Revenue Recognition, Contracts with Customers,” for revenue from contracts with customers disaggregated by segment
and product type for the years ended April 30, 2019, 2018 and 2017.
Total Assets
Research
Publishing
Solutions
Corporate
Total
Product Development Spending and Additions to Technology, Property
and Equipment
Research
Publishing
Solutions
Corporate
Total
Depreciation and Amortization
Research
Publishing
Solutions
Corporate
Total
For the Years Ended April 30,
2018
2017
2019
1,152,973 $
643,549
751,854
388,626
2,937,002 $
1,238,178 $
575,033
563,489
462,751
2,839,451 $
1,133,846
582,339
575,068
314,964
2,606,217
(6,457) $
(19,712)
(9,001)
(66,423)
(101,593) $
(7,538) $
(23,666)
(16,786)
(102,738)
(150,728) $
37,088 $
33,892
34,300
55,875
161,155 $
33,655 $
39,495
27,703
53,136
153,989 $
(154,189)
(29,420)
(21,210)
(98,608)
(303,427)
29,330
43,831
26,792
56,608
156,561
$
$
$
$
$
$
89
Revenue from external customers is based on the location of the customer and Technology, Property and Equipment, Net by
geographic area were as follows:
United States
United Kingdom
Germany
Japan
Australia
China
Canada
France
India
Other Countries
Total
$
$
2019
Revenue, net
2018
913,852 $
147,406
98,404
81,572
78,270
53,076
55,568
51,826
41,637
274,492
1,800,069 $ 1,796,103 $
932,927 $
150,242
97,505
77,145
77,453
55,024
50,882
51,441
36,472
270,978
Technology, Property and Equipment, Net
2017
2019
2018
2017
786,574 $
189,479
75,090
62,674
66,309
39,653
50,740
44,760
34,306
368,945
1,718,530 $
252,459 $
18,331
8,423
87
1,440
688
2,659
403
1,299
3,232
289,021 $
249,542 $
20,955
9,259
72
1,454
229
3,635
635
1,437
2,716
289,934 $
208,572
21,368
8,770
75
591
270
1,232
335
245
1,600
243,058
Note 20 – Supplementary Quarterly Financial Information - Results By Quarter (Unaudited)
Amounts in millions, except per share data
Revenue, net
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year ended April 30,
$
$
$
$
$
$
$
$
2019
2018
410.9 $
448.6
449.4
491.2
411.4
451.7
455.7
477.3
1,800.1 $ 1,796.1
283.1 $
316.0
305.5
340.7
285.5
319.6
319.3
340.7
1,245.3 $ 1,265.1
12.6
80.8
65.4
72.7
231.5
9.2
60.0
68.8
54.2
192.2
36.1 $
57.5
50.3
80.1
224.0 $
26.3 $
43.8
34.9
63.3
168.3 $
2018
2019
Basic
Diluted
Basic
Diluted
$
$
0.46 $
0.76
0.61
1.11
2.94 $
0.45 $
0.76
0.61
1.10
2.91 $
0.16 $
1.06
1.21
0.95
3.37 $
0.16
1.04
1.19
0.93
3.32
90
Gross Profit (1)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year ended April 30,
Operating Income (2)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year ended April 30,
Net Income
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year ended April 30,
Earnings Per Share (3)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year ended April 30,
(1) In connection with the acquisition of Learning House, we changed our accounting policy for certain advertising and marketing costs
incurred by our Education Services business to fulfill performance obligations from contracts with educational institutions. Under
the new accounting policy, these costs are included in Cost of Sales whereas they were previously included in Operating and
Administrative Expenses on the Consolidated Statements of Income. This change in accounting policy was applied retrospectively.
This reclassification had no impact on Revenue, net, Operating Income, Net Income, or Earnings per Share. Refer to “Change in
Accounting Policy” in Note 2, "Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting
Standards," for more information on the accounting policy change and Note 4, “Acquisition,” for more information related to the
acquisition of Learning House.
(2) Due to the retrospective adoption of ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation
of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,”, we reclassified total net benefits related to the non-
service components of defined benefit and other post-employment benefit plans from Operating and Administrative Expenses to
Interest and Other Income (Expense) on the Consolidated Statements of Income. Refer to Note 2, “Summary of Significant
Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards,” for more information.
(3) The sum of the quarterly earnings per share amounts may not agree to the respective annual amounts due to rounding.
Note 21 – Subsequent Events
Amended and Restated Credit Agreement:
On May 30, 2019, we entered into a credit agreement that amended and restated our existing RCA. The credit agreement provides for
senior unsecured credit facilities comprised of a (i) five-year revolving credit facility in an aggregate principal amount up to $1.25
billion, and (ii) a five-year term loan A facility consisting of $250 million. The agreement contains certain customary affirmative and
negative covenants, including a financial covenant in the form of a consolidated net leverage ratio and consolidated interest coverage
ratio. We incurred approximately $4.0 million of costs related to this agreement.
Acquisitions:
On May 31, 2019, we completed the acquisition of certain assets of Knewton, Inc. (“Knewton”), included in our Publishing segment.
Knewton is a provider of affordable courseware and adaptive learning technology for an undisclosed amount.
On July 1, 2019, we completed the acquisition of Zyante Inc. ("Zyante"), a leading provider of computer science and STEM education
courseware. Under the terms of the agreement, Zyante shareholders received $56 million in cash. Zyante will be included in our
Education Publishing segment.
Dividend:
On June 28, 2019, our Board of Directors declared a quarterly dividend of $0.34 per share, or approximately $19.2 million, on our
Class A and Class B Common Stock. The dividend is payable on July 24, 2019 to shareholders of record on July 10, 2019.
91
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Disclosure Controls and Procedures: The Company's Chief Executive Officer and Chief Financial Officer, together with the Chief
Accounting Officer and other members of the Company's management, have conducted an evaluation of the Company's disclosure
controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")
as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer
have concluded that the Company's disclosure controls and procedures were effective to ensure that information required to be
disclosed by the Company in reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported
within the time periods specified by the Securities and Exchange Commission's rules and forms and (ii) accumulated and
communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting: Our Management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the
supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on that evaluation, our management concluded that our internal control over financial reporting is effective as of April 30, 2019.
KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this
Annual Report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of our internal
control over financial reporting.
Changes in Internal Control over Financial Reporting: During fiscal year 2019, we closed on the acquisition of Learning House and
we excluded Learning House from the scope of management’s report on internal control over financial reporting for the year ended
April 30, 2019. We are in the process of integrating Learning House to our overall internal control over financial reporting and will
include them in scope for the year ending April 30, 2020. This process may result in additions or changes to our internal control over
financial reporting. Learning House represented approximately 1% of total consolidated assets and approximately 2% of total
consolidated revenues of the Company as of and for the year ended April 30, 2019.
We are in the process of implementing a new global ERP that will enhance our business and financial processes and standardize our
information systems. As previously disclosed, we have completed the implementation of record-to-report, purchase-to-pay and several
other business processes within all locations through fiscal year 2017. We completed the implementation of order-to-cash for certain
businesses in May 2018 and may continue to roll out additional processes and functionality of the ERP in phases in the foreseeable
future.
As with any new information system we implement, this application, along with the internal controls over financial reporting included
in this process, will require testing for effectiveness. In connection with this ERP implementation, we are updating our internal
controls over financial reporting, as necessary, to accommodate modifications to our business processes and accounting procedures.
We do not believe that the ERP implementation will have an adverse effect on our internal control over financial reporting.
Except as described above, there were no changes in our internal control over financial reporting in the fourth quarter of fiscal year
2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None
92
PART III
Item 10. Directors, Executive Officers and Corporate Governance
For information with respect to Executive Officers of the Company, see “Information About Our Executive Officers” as set forth in
Part I of this Annual Report on Form 10-K.
The name, age, and background of each of the directors nominated for election are contained under the caption “Election of Directors”
in the Proxy Statement for our 2019 Annual Meeting of Shareholders (“2019 Proxy Statement”) and are incorporated herein by
reference.
Information on the audit committee financial experts is contained in the 2019 Proxy Statement under the caption “Report of the Audit
Committee” and is incorporated herein by reference.
Information on the Audit Committee Charter is contained in the 2019 Proxy Statement under the caption “Committees of the Board of
Directors and Certain Other Information concerning the Board.”
Information with respect to the Company's Corporate Governance principles is publicly available on the Company's Corporate
Governance website at https://www.wiley.com/en-us/corporategovernance.
Item 11. Executive Compensation
Information on compensation of the directors and executive officers is contained in the 2019 Proxy Statement under the captions
“Directors' Compensation” and “Executive Compensation,” respectively, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information on the beneficial ownership reporting for the directors and executive officers is contained under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance" within the "Beneficial Ownership of Directors and Management" section of the 2019
Proxy Statement and is incorporated herein by reference. Information on the beneficial ownership reporting for all other shareholders
that own 5% of more of the Company's Class A or Class B Common Stock is contained under the caption "Voting Securities, Record
Date, Principal Holders" in the 2019 Proxy Statement and is incorporated herein by reference.
The following table summarizes the Company's equity compensation plan information as of April 30, 2019:
Plan Category
Equity compensation plans approved by shareholders
Number of
Securities to be
Issued Upon Exercise
of Outstanding Options,
Warrants and Rights (1)
1,128,823
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
49.70
$
Number of
Securities Remaining
Available for Future
Issuance Under Equity
Compensation Plans (2)
4,355,399
(1) This amount includes the following awards issued under the 2014 Key Employee Stock Plan:
372,404 shares issuable upon the exercise of outstanding stock options with a weighted average exercise price of $49.70
756,419 non-vested performance-based and other restricted stock awards. Since these awards have no exercise price, they are
not included in the weighted average exercise price calculation.
(2) Per the terms of the 2014 Key Employee Stock Plan (“Plan”), a total of 6,500,000 shares shall be authorized for awards granted
under the Plan, less one (1) share for every one (1) share that was subject to an option or stock appreciation right granted after
April 30, 2014 under the 2009 Key Employee Stock Plan and 1.76 Shares for every one (1) share that was subject to an award
other than an option or stock appreciation right granted after April 30, 2014 under the 2009 Key Employee Stock Plan. Any
shares that are subject to options or stock appreciation rights shall be counted against this limit as one (1) share for every one (1)
share granted, and any shares that are subject to awards other than options or stock appreciation rights shall be counted against
this limit as 1.76 Shares for every one (1) share granted. After the Effective Date of the Plan, no awards may be granted under the
2009 Key Employee Stock Plan.
All of the Company's equity compensation plans are approved by shareholders.
93
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information on related party transactions and the policies and procedures for reviewing and approving related party transactions are
contained under the caption “Transactions with Related Persons” within the “Board and Committee Oversight of Risk” section of the
2019 Proxy Statement and are incorporated herein by reference.
Information on director independence is contained under the caption “Director Independence” within the “Board of Directors and
Corporate Governance” section of the 2019 Proxy Statement.
Item 14. Principal Accounting Fees and Services
Information required by this item is contained in the 2019 Proxy Statement under the caption “Report of the Audit Committee” and is
incorporated herein by reference.
94
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Documents filed as a part of this Annual Report on Form 10-K:
(1) Financial Statements
See Index to Consolidated Financial Statements and Schedule of this Annual Report on Form 10-K.
(2) Financial Statement Schedule
See Schedule II — Valuation and Qualifying Accounts and Reserves — Years Ended April 30, 2019, 2018 and 2017 of this Annual
Report on Form 10-K. The other schedules are omitted as they are not applicable, or the amounts involved are not material.
(3) Exhibits
(a)
(b)
3.1
3.2
3.3
3.4
3.5
10.1
10.2
10.3*
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14*
See Index to Consolidated Financial Statements and Schedule of this Annual Report on Form 10-K and are filed as part
of this report.
Exhibits
Restated Certificate of Incorporation (incorporated by reference to the Company's Report on Form 10-K for the year
ended April 30, 1992).
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, 1996).
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).
Certificate of Amendment of the Certificate of Incorporation dated as of September 1999 (incorporated by reference to
the Company's Report on Form 10-Q for the quarterly period ended October 31, 1999).
Amended and Restated By-Laws dated as of September 2007 (incorporated by reference to the Company's Report on
Form 10-K for the year ended April 30, 2018).
Amended and Restated Credit Agreement dated May 30, 2019, among the Company and Bank of America, N.A., as
Administrative Agent, Swing Line Lender, and L/C Issuer, and the lenders and other agents party thereto (incorporated
by reference to the Company's Report on Form 8-K filed on June 5, 2019).
Agreement of the Lease dated as of July 14, 2014 between Hub Properties Trust as Landlord, an independent third party
and John Wiley and Sons, Inc as Tenant (incorporated by reference to the Company's Report on Form 10-Q for the
quarterly period ended July 31, 2014).
2018 Director Stock Plan
2014 Executive Annual Incentive Plan (incorporated by reference to the Company's Report on Form 10-Q for the
quarterly period ended October 31, 2014).
Amended 2014 Key Employee Stock Plan (incorporated by reference to the Company's Report on Form 10-Q for the
quarterly period ended October 31, 2014).
Supplemental Executive Retirement Plan as Amended and Restated effective as of January 1, 2009 (incorporated by
reference to the Company's Report on Form 10-K for the year ended April 30, 2010).
Amendments A and B to the Supplemental Executive Retirement Plan as Amended and Restated Effective January 1,
2009 (incorporated by reference to the Company's Report on Form 10-Q for the quarterly period ended July 31, 2010).
Resolution amending the Supplemental Executive Retirement Plan to Cease Accruals and Freeze Participation effective
June 30, 2013 (incorporated by reference to the Company’s Report on Form 10-K for the year ended April 30, 2013)
Supplemental Benefit Plan Amended and Restated as of January 1, 2009, including amendments through August 1, 2010
(incorporated by reference to the Company's Report on Form 10-Q for the quarterly period ended January 31, 2011).
Resolution amending the Supplemental Benefit (Retirement) Plan to Cease Accruals and Freeze Participation effective
June 30, 2013 (incorporated by reference to the Company’s Report on Form 10-K for the year ended April 30, 2013).
Deferred Compensation Plan as Amended and Restated Effective as of January 1, 2008 (incorporated by reference to the
Company's Report on Form 10-K for the year ended April 30, 2010).
Resolution amending the Deferred Compensation Plan effective July 1, 2013 (incorporated by reference to the
Company’s Report on Form 10-K for the year ended April 30, 2013).
Deferred Compensation Plan for Directors' 2005 & After Compensation (incorporated by reference to the Report on
Form 8-K, filed December 21, 2005).
Form of the Fiscal Year 2020 Qualified Executive Long Term Incentive Plan
95
10.15*
10.16*
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30*
10.31
10.32
21*
23*
31.1*
31.2*
32.1*
32.2*
Form of the Fiscal Year 2020 Qualified Executive Annual Incentive Plan
Form of the Fiscal Year 2020 Executive Annual Strategic Milestones Incentive Plan
Form of the Fiscal Year 2019 Qualified Executive Long Term Incentive Plan (incorporated by reference to the
Company’s Report on Form 10-K for the year ended April 30, 2018).
Form of the Fiscal Year 2019 Qualified Executive Annual Incentive Plan (incorporated by reference to the Company’s
Report on Form 10-K for the year ended April 30, 2018).
Form of the Fiscal Year 2019 Executive Annual Strategic Milestones Incentive Plan (incorporated by reference to the
Company’s Report on Form 10-K for the year ended April 30, 2018).
Form of the Fiscal Year 2018 Qualified Executive Long Term Incentive Plan (incorporated by reference to the
Company’s Report on Form 10-K for the year ended April 30, 2017).
Form of the Fiscal Year 2018 Qualified Executive Annual Incentive Plan (incorporated by reference to the Company’s
Report on Form 10-K for the year ended April 30, 2017).
Form of the Fiscal Year 2018 Executive Annual Strategic Milestones Incentive Plan (incorporated by reference to the
Company’s Report on Form 10-K for the year ended April 30, 2017).
Senior Executive Employment Agreement to Arbitrate dated as of April 29, 2003 (incorporated by reference to the
Company's Report on Form 10-K for the year ended April 30, 2003).
Senior Executive Non-competition and Non-Disclosure Agreement dated as of April 29, 2003 (incorporated by reference
to the Company's Report on Form 10-K for the year ended April 30, 2003).
Senior Executive Employment Agreement dated as of April 15, 2015 between Mark Allin and the Company
(incorporated by reference to the Company's Report on Form 8-K dated as of April 15, 2015).
Separation and Release Agreement, effective June 9, 2017, between Mark Allin, former President and Chief Executive
Officer and the Company (incorporated by reference to the Company’s Report on Form 10-Q for the period ended July
31, 2017).
Senior executive Employment Agreement dated as of May 20, 2013 between John A. Kritzmacher and the Company
(incorporated by reference to the Company's Report on Form 8-K dated as of June 4, 2013).
Addendum to the Employment Agreement, effective June 26, 2017, between John A. Kritzmacher, and the Company
(incorporated by reference to the Company’s Report on Form 10-Q for the period ended July 31, 2017).
Senior executive Employment Agreement letter dated as of March 15, 2004, between Gary M. Rinck and the Company
(incorporated by reference to the Company's Report on Form 10-K for the year ended April 30, 2011).
Employment Letter dated September 26, 2016 between Judy Verses, Executive Vice President, and the Company.
Employment Letter dated October 12, 2017 between Brian A. Napack, President and Chief Executive Officer, and the
Company (incorporated by reference to the Company’s Report on Form 10-Q for the period ended October 31, 2017).
Employment Letter dated February 5, 2019 between Matthew Kissner, Group Executive, and the Company (incorporated
by reference to the Company’s Report on Form 8-K filed on February 7, 2019).
List of Subsidiaries of the Company.
Consent of KPMG LLP.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
101.INS** XBRL Instance Document
101.SCH** XBRL Taxonomy Extension Schema Document
101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF** XBRL Taxonomy Extension Definition Linkbase Document
101.LAB** XBRL Taxonomy Extension Label Linkbase Document
101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith
** Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or
prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the
Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections
Item 16. Form 10-K Summary
None.
96
(2) Financial Statement Schedule
Schedule II
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 2019, 2018, AND 2017
(Dollars in thousands)
Description
Year Ended April 30, 2019
Allowance for Sales Returns (1)
Allowance for Doubtful Accounts
Allowance for Inventory Obsolescence
Valuation Allowance on Deferred Tax Assets
Year Ended April 30, 2018
Allowance for Sales Returns (1)
Allowance for Doubtful Accounts
Allowance for Inventory Obsolescence
Valuation Allowance on Deferred Tax Assets
Year Ended April 30, 2017
Allowance for Sales Returns (1)
Allowance for Doubtful Accounts
Allowance for Inventory Obsolescence
Valuation Allowance on Deferred Tax Assets
Balance at
Beginning
of Period
Charged to
Expenses
Deductions
From Reserves
and Other(2)
Balance at
End of Period
$
$
$
$
$
$
$
$
$
$
$
$
18,628 $
10,107 $
18,193 $
8,811 $
24,300 $
7,186 $
21,096 $
1,300 $
19,861 $
7,254 $
21,968 $
— $
37,483 $
5,279 $
7,328 $
51 $
38,711 $
5,439 $
9,182 $
7,511 $
53,482 $
2,913 $
9,538 $
1,300 $
37,569 $
1,079 $
9,696 $
(12,317) $
44,383 $
2,518 $
12,085 $
— $
49,043 $
2,981 $
10,410 $
—
18,542
14,307
15,825
21,179
18,628
10,107
18,193
8,811
24,300
7,186
21,096
1,300
(1) Allowance for Sales Returns represents anticipated returns net of a recovery of inventory and royalty costs. The provision is
reported as a reduction of gross sales to arrive at revenue and the reserve balance is reported as a reduction of Accounts
Receivable, net (in the years ended April 30, 2018 and 2017) with a corresponding increase in Inventories, net and a reduction in
Accrued Royalties for the years ended April 30, 2019, 2018 and 2017. Due to the adoption of the new revenue standard, the sales
return reserve as of April 30, 2019 is recorded in Contract Liability (Deferred Revenue). In prior periods, it was recorded as a
reduction to Accounts Receivable, net. See Note 3, “Revenue Recognition, Contracts with Customers,” of the Notes to
Consolidated Financial Statements for more information.
(2) Deductions From Reserves and Other for the years ended April 30, 2019, 2018 and 2017 include foreign exchange translation
adjustments. Included in Allowance for Doubtful Accounts are accounts written off, less recoveries. Included in Allowance for
Inventory Obsolescence are items removed from inventory. Included in Valuation Allowance on Deferred Tax Assets are foreign
tax credits generated and valuation allowances needed in connection with the Tax Act.
97
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
Dated: July 1, 2019
JOHN WILEY & SONS, INC.
(Company)
By:/s/ Brian A. Napack
Brian A. Napack
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated.
Signatures
/s/ Brian A. Napack
Brian A. Napack
President and Chief Executive Officer and
Director
Titles
/s/ John A. Kritzmacher
John A. Kritzmacher
Chief Financial Officer and
Executive Vice President, Operations
/s/ Christopher F. Caridi
Christopher F. Caridi
Senior Vice President, Corporate Controller and
Chief Accounting Officer
/s/ Jesse C. Wiley
Jesse C. Wiley
/s/ Beth A. Birnbaum
Beth A. Birnbaum
/s/ William J. Pesce
William J. Pesce
/s/ William B. Plummer
William B. Plummer
/s/ Mari J. Baker
Mari J. Baker
/s/ David C. Dobson
David C. Dobson
Chairman of the Board
Director
Director
Director
Director
Director
/s/ Raymond W. McDaniel, Jr.
Raymond W. McDaniel, Jr.
Director
/s/ George D. Bell
George D. Bell
/s/ Laurie A. Leshin
Laurie A. Leshin
/s/ William Pence
William Pence
Director
Director
Director
98
Dated
July 1, 2019
July 1, 2019
July 1, 2019
July 1, 2019
July 1, 2019
July 1, 2019
July 1, 2019
July 1, 2019
July 1, 2019
July 1, 2019
July 1, 2019
July 1, 2019
July 1, 2019
SUBSIDIARIES OF JOHN WILEY & SONS, INC. (1)
As of April 30, 2019
Jurisdiction In Which Incorporated
Exhibit 21
John Wiley & Sons International Rights, Inc.
Wiley edu, LLC
Wiley Periodicals LLC
Inscape Publishing LLC
Profiles International, LLC
Atypon Systems LLC
Wiley Global Technology (Private) Limited
Wiley India Private Ltd.
Wiley APAC Services LLP
WWL LLC
John Wiley & Sons Rus LLC
Wiley International LLC
Wiley Europe Investment Holdings, Ltd.
Wiley Europe Ltd.
Wiley Heyden Ltd.
E-Learning SAS
John Wiley & Sons, Ltd.
Atypon Systems Ltd UK
John Wiley & Sons Singapore Pte. Ltd.
John Wiley & Sons Commercial Service (Beijing) Co., Ltd.
J Wiley Ltd.
John Wiley & Sons GmbH
Wiley-VCH Verlag GmbH & Co. KGaA
CrossKnowledge Group Limited
Wiley Distribution Services Ltd.
Blackwell Science (Overseas Holdings)
John Wiley & Sons A/S
Wiley Publishing Japan KK
Wiley Japan KK
Wiley Publishing Australia Pty Ltd.
John Wiley and Sons Australia, Ltd.
John Wiley & Sons Canada Limited
John Wiley & Sons (HK) Limited
Wiley HK2 Limited
Delaware
Delaware
Delaware
Delaware
Texas
Delaware
Sri Lanka
India
India
Delaware
Russia
Delaware
United Kingdom
United Kingdom
United Kingdom
France
United Kingdom
United Kingdom
Singapore
China
United Kingdom
Germany
Germany
United Kingdom
United Kingdom
United Kingdom
Denmark
Japan
Japan
Australia
Australia
Canada
Hong Kong
Hong Kong
(1) The names of other subsidiaries that would not constitute a significant subsidiary in the aggregate have been omitted.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23
The Board of Directors
John Wiley & Sons, Inc.:
We consent to the incorporation by reference in the registration statements (Nos. 33-62605, 333-93691, 333-123359, and 333-167697)
on Form S-8 of John Wiley & Sons, Inc. of our reports dated July 1, 2019, with respect to the consolidated statements of financial
position of John Wiley & Sons, Inc. as of April 30, 2019 and 2018, the related consolidated statements of income, comprehensive
income, shareholders’ equity, and cash flows for each of the years in the three-year period ended April 30, 2019, and the related notes
and financial statement schedule, and the effectiveness of internal control over financial reporting as of April 30, 2019, which reports
appear in the April 30, 2019 annual report on Form 10-K of John Wiley & Sons, Inc.
Our report dated July 1, 2019, on the consolidated financial statements refers to a change in the method of accounting for certain
advertising and marketing costs. Our report on the consolidated financial statements also refers to a change in the method of
accounting for revenue recognition effective May 1, 2018 due to the adoption of Accounting Standards Codification Topic 606,
Revenue from Contracts with Customers.
Our report dated July 1, 2019, on the effectiveness of internal control over financial reporting contains an explanatory paragraph that
states the Company acquired Learning House during fiscal year 2019, and management excluded from its assessment of the
effectiveness of the Company’s internal control over financial reporting as of April 30, 2019.
/s/ KPMG LLP
New York, New York
July 1, 2019
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Brian A. Napack, certify that:
1.
I have reviewed this annual report on Form 10-K of John Wiley & Sons, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
By:
/s/ Brian A. Napack
Brian A. Napack
President and Chief Executive Officer
Dated: July 1, 2019
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, John A. Kritzmacher, certify that:
1.
I have reviewed this annual report on Form 10-K of John Wiley & Sons, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting
By:
/s/ John A. Kritzmacher
John A. Kritzmacher
Chief Financial Officer and Executive Vice President,
Operations
Dated: July 1, 2019
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of John Wiley & Sons, Inc. (the “Company”) on Form 10-K for the year ended April 30, 2019
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian A. Napack, President and Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that based on my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
By:
/s/ Brian A. Napack
Brian A. Napack
President and Chief Executive Officer
Dated: July 1, 2019
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of John Wiley & Sons, Inc. (the “Company”) on Form 10-K for the year ended April 30, 2019
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John A. Kritzmacher, Chief Financial
Officer and Executive Vice President, Operations of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
By:
/s/ John A. Kritzmacher
John A. Kritzmacher
Chief Financial Officer and Executive Vice President,
Operations
Dated: July 1, 2019