SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1997, COMMISSION FILE NO. 0-6311
WAVERLY, INC.
Incorporated in the State of Maryland
I. R. S. Employer Identification No. 52-0523730
351 West Camden Street, Baltimore, Maryland 21201
Telephone Number: (410) 528-4000
Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
As of September 30, 1997, there were 8,942,670 shares of the Registrant's Common
Stock outstanding.
<PAGE>
PAGE NO. 2
WAVERLY, INC.
PART I. Financial Information
Item 1. Financial Statements
Index:
PAGE NO.
Unaudited Condensed Consolidated Statements of Income 3
Unaudited Condensed Consolidated Balance Sheets 4
Unaudited Condensed Consolidated Statements of Cash Flows 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Report of Independent Accountants 9
Management's Discussion and Analysis of Financial Condition and
Results of Operations:
Results of Operations 10
Liquidity and Capital Resources 14
Part II. OTHER INFORMATION 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit 3(II) - By-laws as amended and restated through April 29, 1991 17
Exhibit 11 - Computation of Earnings Per Share 27
Exhibit 15 - Letter re: unaudited interim financial information 28
Exhibit 27 - Financial Data Schedule 29
Exhibit 99 - Press release dated November 5, 1997 30
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PAGE NO. 3
WAVERLY, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS OF DOLLARS - EXCEPT PER SHARE AMOUNTS)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES $ 38,430 100.0% $ 39,589 100.0% $124,125 100.0% $120,855 100.0%
Costs and expenses
Cost of sales 23,325 60.7 24,095 60.9 74,293 59.9 73,060 60.5
Selling and distribution 10,002 26.0 9,485 24.0 30,085 24.2 29,362 24.3
General and administrative 2,071 5.4 3,022 7.6 8,061 6.5 9,383 7.8
Depreciation and amortization 1,687 4.4 1,572 4.0 5,153 4.2 4,312 3.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 37,085 96.5 38,174 96.4 117,592 94.8 116,117 96.2
INCOME FROM OPERATIONS 1,345 3.5 1,415 3.6 6,533 5.2 4,738 3.8
Other income (expense)
Investment income (38) (0.1) 143 0.4 175 0.1 355 0.3
Interest expense (175) (0.5) (292) (0.7) (506) (0.4) (744) (0.6)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (213) (0.6) (149) (0.3) (331) (0.3) (389) (0.3)
INCOME BEFORE INCOME TAXES AND
EARNINGS OF AFFILIATED ENTITIES 1,132 2.9 1,266 3.3 6,202 4.9 4,349 3.5
Income tax expense (417) (1.1) (397) (1.0) (2,325) (1.9) (1,587) (1.3)
Equity in the earnings (losses) of
affiliated entities (44) (0.1) 286 0.7 (49) 0.0 813 0.7
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 671 1.7 $ 1,155 3.0 $ 3,828 3.0 $ 3,575 2.9
====================================================================================================================================
Earnings per common share and common share equivalents:
NET INCOME $ 0.07 $ 0.12 $ 0.41 $ 0.38
====================================================================================================================================
Cash dividends declared per share $ 0.070 $ 0.065 $ 0.205 $ 0.190
====================================================================================================================================
Average number of common and common
equivalent shares outstanding 9,429,863 9,362,437 9,371,904 9,330,772
====================================================================================================================================
<FN>
SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>
<PAGE>
PAGE NO. 4
WAVERLY, INC.
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1997 1996 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,899 $ 5,327 $ 1,534
Accounts receivable, less allowance for doubtful
accounts ($1,375, $1,493 and $1,119 respectively) 43,658 40,385 41,738
Inventories 28,442 30,910 32,108
Other current assets 3,915 1,172 2,831
Current deferred income taxes 2,950 2,909 2,785
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 80,864 80,703 80,996
NET PROPERTY AND EQUIPMENT 7,200 7,840 8,237
OTHER NONCURRENT ASSETS 38,542 38,054 38,181
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 126,606 $126,597 $127,414
=========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit borrowings $ 13,881 $ 1,366 $ 14,393
Current portion of long-term debt 1,200 2,400 3,711
Accounts payable 15,299 15,232 14,425
Accrued expenses 3,320 5,299 3,613
Royalties payable 5,834 10,541 5,518
Unearned subscription revenues 14,684 17,791 13,512
Income taxes payable 1,159 1,361 3,311
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 55,377 53,990 58,483
LONG TERM DEBT 1,222 2,595 1,276
UNFUNDED PENSION OBLIGATION 3,064 3,369 3,386
POSTRETIREMENT BENEFIT OBLIGATION 11,671 11,719 11,814
OTHER LIABILITIES 497 920 750
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 71,831 72,593 75,709
- ---------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock-500,000 shares authorized; none issued
Common stock-$2 par value; 12,000,000 shares
authorized, 8,942,670, 8,923,138 and ,8,919,938 shares
issued and outstanding, respectively 17,885 17,846 17,840
Additional paid-in capital 12,761 12,574 12,414
Retained earnings 25,059 23,063 20,870
Foreign currency translation adjustment (930) 521 581
- ---------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 54,775 54,004 51,705
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 126,606 $126,597 $127,414
=========================================================================================================
<FN>
SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>
<PAGE>
PAGE NO. 5
WAVERLY, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<CAPTION>
- ----------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 3,828 $ 3,575
Adjustments to reconcile net income to
net cash used in operating activities
(Gain)loss on disposal of property and equipment 116 --
Postretirement benefit obligation 261 456
(Equity)losses in the earnings of affiliated entities 49 (813)
Depreciation and amortization 5,153 4,312
Deferred income taxes (855) (1,315)
Net periodic pension expense(credit) (37) 395
Other 60 64
Change in assets and liabilities adjusting
for the effect of acquisitions
Accounts receivable (2,801) (4,008)
Inventories 1,549 (873)
Prepaid expenses (1,872) (1,778)
Accounts payable (231) (1,667)
Accrued expenses (2,186) (3,061)
Income taxes payable (120) 202
Royalties payable (4,535) (3,973)
Unearned subscription revenues (3,100) (1,665)
Other long-term liabilities (732) (705)
- -----------------------------------------------------------------------------------------
NET CASH USED IN OPERATIONS (5,453) (10,854)
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,865) (1,001)
Capitalized electronic product development costs (1,534) (1,672)
Acquisition of publishing properties (3,531) (211)
Decrease in investments in affiliated entities 340 283
- -----------------------------------------------------------------------------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (6,590) (2,601)
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under short-term lines of credit 12,812 14,193
Repayment of long-term debt (2,397) (2,483)
Common stock dividends paid (1,830) (1,690)
Proceeds from exercise of stock options 161 485
- -----------------------------------------------------------------------------------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 8,746 10,505
- -----------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (3,297) (2,950)
Effect of exchange rates on cash and cash equivalents (131) (96)
CASH AND CASH EQUIVALENTS AT JANUARY 1, 5,327 4,580
- -----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30, $ 1,899 $ 1,534
=========================================================================================
<FN>
SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>
<PAGE>
PAGE NO. 6
WAVERLY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT EARNINGS PER SHARE)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Waverly and its subsidiaries (the Company) are worldwide publishers of print and
electronic media in the fields of medicine, allied health, and related
disciplines. Products are distributed worldwide and the Company has operating
offices in the United States and foreign locations.
The condensed consolidated balance sheets as of September 30, 1997 and September
30, 1996, the condensed consolidated statements of operations for the three and
nine month periods ended September 30, 1997 and September 30, 1996, and the
condensed consolidated statements of cash flows for the nine month periods ended
September 30, 1997 and September 30, 1996 have been prepared by the Company,
without audit.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position at
September 30, 1997 and the results of operations and changes in cash flows for
all periods presented have been made.
This financial information should be read in conjunction with the Company's
annual report on Form 10-K. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. The results of
operations for the periods ended September 30, 1997, are not necessarily
indicative of the operating results for the full year.
2. NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128 regarding earnings per share which
requires the Company to present basic and diluted earnings per share in the
financial statements. The Company must adopt the requirements of this standard
in its financial statements for the year ending December 31, 1997. Adoption of
this standard is not expected to have a material impact on the Company's
earnings per share.
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (SFAS 130) and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS 131)
were issued in June 1997. The disclosures required by these statements must be
reported by the Company in 1998. The Company is reviewing the financial
statement impact of SFAS 130 and SFAS 131 and will adopt them by the required
dates.
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PAGE NO. 7
WAVERLY, INC.
3. RECLASSIFICATIONS
Certain amounts in the prior period consolidated financial statements have been
reclassified to conform to the current period presentation.
4. (A) INVENTORIES
Inventories consist of the following:
- -------------------------------------------------------------------
(unaudited) (unaudited)
September 30, December 31, September 30,
1997 1996 1996
- -------------------------------------------------------------------
Finished goods $21,760 $24,318 $23,459
Work-in-process 6,328 6,116 8,156
Raw materials 354 476 493
- -------------------------------------------------------------------
$28,442 $30,910 $32,108
===================================================================
4. (B) PROPERTY AND EQUIPMENT
- ----------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(in thousands) 1997 1996 1996
- ----------------------------------------------------------------------------
Land $ 693 $ 792 $ 799
Buildings 2,227 2,393 2,439
Office equipment, computers,
and related software 11,736 11,356 11,332
- ----------------------------------------------------------------------------
Total, at cost 14,656 14,541 14,570
Less: accumulated depreciation (7,456) (6,701) (6,333)
- ----------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT $ 7,200 $ 7,840 $ 8,237
============================================================================
<PAGE>
PAGE NO. 8
WAVERLY, INC.
<TABLE>
4. (C) OTHER NONCURRENT ASSETS
<CAPTION>
- ---------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(in thousands of dollars) 1997 1996 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Publication agreements $ 22,772 $ 21,386 $ 21,431
Goodwill 11,476 10,961 10,797
Other intangible assets 3,397 2,417 2,417
- ---------------------------------------------------------------------------------------
Subtotal 37,645 34,764 34,645
Accumulated amortization (13,621) (10,852) (9,956)
- ---------------------------------------------------------------------------------------
24,024 23,912 24,689
Prepaid pension 5,993 5,825 5,860
Noncurrent deferred income taxes 1,087 662 644
Equity investment in affiliated entities 2,765 3,065 2,626
Electronic product development assets
(net of accumulated amortization of
$4,892, $3,506 and $2,792,
respectively) 4,526 4,439 4,210
Other 147 151 152
- ---------------------------------------------------------------------------------------
TOTAL OTHER NONCURRENT ASSETS $ 38,542 $ 38,054 $ 38,181
=======================================================================================
</TABLE>
5. SUBSEQUENT EVENT
On November 5, 1997 the Company announced that its Board of Directors has
initiated a process to explore the sale of the Company. The Company has retained
Morgan Stanley & Co., Inc. to assist in seeking prospective buyers. It is
currently contemplated that a final decision with respect to any sale
transaction will be made in early 1998.
<PAGE>
PAGE NO. 9
WAVERLY, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF WAVERLY, INC.
We have reviewed the condensed consolidated balance sheets of Waverly, Inc. and
subsidiaries as of September 30, 1997, and the related condensed consolidated
statements of income and cash flows for the three and nine month periods ended
as of September 30, 1997 and 1996. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets as of December 31, 1996, and the
related consolidated statements of income, retained earnings and cash flows for
the year then ended (not presented herein), and in our report dated January 31,
1997 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1996, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
Coopers & Lybrand L.L.P.
Baltimore, Maryland
October 24, 1997
<PAGE>
PAGE NO. 10
WAVERLY, INC.
PART I. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH
THE THREE MONTHS ENDED SEPTEMBER 30, 1996
NET REVENUES were $38.4 million for the three months ended September 30, 1997
compared with $39.6 million for the three months ended September 30, 1996, a
decrease of 2.9%. Without the impact of foreign currency fluctuations, revenues
were flat compared to the three months ended September 30, 1996. Book publishing
revenues decreased by 11.6%, with domestic revenues 8.2% lower than the prior
year and international revenues 14.8% (3.3% lower without currency impact) lower
than the prior year. Domestic book publishing revenues were lower in 1997
because of having received heavy wholesaler stocking orders in the second
quarter of 1997. The weakening of the German deutsche mark against the dollar
and slower sales in Southeast Asia and Europe accounted for the majority of the
reduction in international revenue compared to the prior year.
Periodical publishing revenues increased 9% over the prior year. This increase
was due to higher advertising-related revenue and higher subscription prices.
Professional Learning Systems Division (PLS) revenues increased 17% over the
prior year principally from increased volume generated from the de'Medici line,
an interactive training system.
COST OF SALES was $23.3 million (60.7% of net sales) for the three months ended
September 30, 1997 compared to $24.1 million (60.9% of net sales) for the same
period last year, a decrease of 3.2 %. Book publishing cost margin was 57.5%
this period compared to 58.2% in the prior year. Periodical publishing cost
margin was 71.6% this period compared to 69.2% in the prior year. The increase
in periodical publishing is due to startup costs related to a new 5 year
contract to publish five journals for the American Heart Association starting
January 1, 1998. PLS cost margin was 34.0% this year compared to 30.7% last
year.
SELLING AND DISTRIBUTION expenses were $10.0 million for the three months ended
September 30, 1997 compared to $9.5 million for the same period last year, an
increase of 5%. As a percentage of sales, expenses were 26.0% this year compared
to 24.0% for the same period last year. The increase as a percent of sales is
due to lower revenues in international markets and startup expenses for new
periodicals.
GENERAL AND ADMINISTRATIVE expenses were $2.1 million for the three months ended
September 30, 1997 compared to $3.0 million for the same period last year. As a
percentage of sales,
<PAGE>
PAGE NO. 11
WAVERLY, INC.
expenses were 5.4% this year compared with 7.6% last year. Lower employee
benefit costs and incentive compensation expenses in 1997 are the reasons for
the year to year change.
DEPRECIATION AND AMORTIZATION expenses were $1.7 million for the three months
ended September 30, 1997 compared to $1.6 million for the same period last year.
Amortization of increased electronic product development assets is the reason
for the year-to-year change.
OTHER INCOME (EXPENSE) was ($213,000) this year compared to ($149,000) for the
same period last year. Currency exchange losses recognized in the third quarter
of 1997 by the Company's German affiliate are the primary reason for the year to
year change.
INCOME TAXES were $417,000 in 1997 (37% of pretax income) compared with $397,000
(31% of pretax income) in 1996.
EQUITY IN EARNINGS (LOSSES) OF AFFILIATED ENTITIES was ($44,000) this year
compared with $286,000 in the prior year period. Lower 1997 earnings from the
South American and Australian joint ventures and losses incurred by the
Company's new joint venture in France are the principal reasons for the year to
year change.
NET INCOME was $671,000 ($ 0.07 per share) in the current period compared to
$1,155,000 ($0.12 per share) in the prior year period, a decrease of 42%. The
decrease in earnings is attributed to a decline in international revenues,
especially in Southeast Asia and Europe, a greater portion of stocking orders
recorded in the second quarter of this year, and significant startup expenses
incurred for major new periodical contracts that are expected to enhance
earnings significantly in 1998.
<PAGE>
PAGE NO. 12
WAVERLY, INC.
RESULTS OF OPERATIONS: NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH
THE NINE MONTHS ENDED SEPTEMBER 30, 1996
NET REVENUES for the nine months ended September 30, 1997 were $124.1 million
compared with $120.9 million for the comparable period last year, an increase of
3%. Domestic book publishing revenues increased 5.2%, while international
revenues declined by 10.9% over last year. The increase in domestic revenues is
derived from strong backlist sales as well as the inclusion of the January 1997
acquisition of U. S. based English language titles of Igaku-Shoin Medical
Publishers, Ltd. The sluggish international market and the impact of the
deutsche mark exchange rate are the primary reasons for the decline in
international book revenues. Periodical revenues were 11.4% higher due primarily
to a sharp increase in the volume of advertising related revenue. Professional
Learning Systems revenue advanced 17.7% due to the introduction of new product
releases and increased volume in the de'Medici line, an interactive training
system.
COST OF SALES was $74.3 million (59.9% of net sales) for the current period
compared to $73.1 million (60.5% of net sales) for the prior year period. Book
publishing cost margin was 57.8% this period compared to 59.0% in the prior
year. Periodical publishing cost margin was 68.0% this period compared to 67.7%
in the prior year. PLS cost margin was 33.4% this year compared to 33.7% in the
prior year.
SELLING AND DISTRIBUTION expenses were $30.1 million (24.2 % of net sales) for
the nine months ended September 30, 1997 compared with $29.4 million (24.3% of
net sales) for the prior year period. In 1997 expenses have been generally at
the same level as 1996 for all operating divisions within the Company.
GENERAL AND ADMINISTRATIVE expenses were $8.1 million (6.5% of net sales) for
the current period compared to $9.4 million (7.8% of net sales) for the prior
period. Costs have not increased proportionately with the revenue growth. Lower
employee benefits is the primary reason for the year to year change.
DEPRECIATION AND AMORTIZATION expenses were $5.2 million for the first nine
months of 1997 compared to $4.3 million for the same period last year.
Amortization for a greater number of electronic products is the reason for the
year-to-year increase.
<PAGE>
PAGE NO. 13
WAVERLY, INC.
OTHER INCOME (EXPENSE) was ($331,000) for the nine months ended September 30,
1997 compared with ($389,000) for the comparable period last year. Interest
expense was $238,000 lower this year due to the need for less short term
borrowing than in 1996.
EQUITY IN EARNINGS (LOSSES) OF AFFILIATED ENTITIES was ($49,000) for the current
period compared with $813,000 for the same period last year. Lower earnings from
the Japanese affiliate due to the lower currency value of the yen, losses from
the Company's French joint venture, and a one-time refurbishment charge incurred
by the Company's German affiliate are the principal reasons. In addition, in
1996 the Company recorded earnings of $126,000 from it's South American
affiliate, while in 1997 the Company has not recorded any income.
NET INCOME was $3.8 million ($0.41 per share) for the nine months ended
September 30, 1997 compared to $3.6 million ($0.38 per share) for the nine
months ended September 30, 1996, an increase of 7.1%. The increase in earnings
is attributed to a marked improvement in domestic book publishing aided by the
January 1997 acquisition of titles from Igaku-Shoin Medical Publishers, Ltd.
(our partner in Japan) and the sustained momentum in periodical publishing.
These gains were mitigated by the erosion of earnings from the international
markets.
<PAGE>
PAGE NO. 14
WAVERLY, INC.
LIQUIDITY AND CAPITAL RESOURCES
Total assets were $126.6 million at September 30, 1997 compared to $126.6
million at December 31, 1996 and $127.4 million at September 30, 1996. Working
capital ratio is 1.5 to 1 at September 30, 1997, 1.5 to 1 at December 31, 1997,
and 1.4 to 1 at September 30, 1996.
At September 30, 1997, the Company carried a net borrowing position [defined as
cash less short term and long term borrowings] of $14.4 million compared with a
net borrowing position of $17.8 million at September 30, 1996, and $1.0 million
at December 31, 1996. The increase in net borrowing since the start of the year
is due to the normal seasonal use of cash to pay semiannual author and society
royalties and society editorial allowances. In addition, the Company acquired
the U.S. based English language titles and certain assets of Igaku-Shoin Medical
Publishers, Ltd. for $2.3 million in January 1997. The year to year improvement
is due to profitable operations and reduced inventory levels.
The Company's long term debt, net of the current portion, is $1.2 million (2% of
shareholders' equity) at September 30, 1997, compared with $2.6 million (5% of
shareholders' equity) at December 31, 1996. The Company currently pays a
dividend of $0.07 per share per quarter, equal to an annual rate of $0.28 per
share.
In 1997, the Company expects to fund capital expenditures for existing
operations and payment of dividends from internally generated cash flows. The
seasonal trend in subscription renewals and domestic book publishing cause
certain fluctuations in the Company's cash position during the year and impact
the use of credit lines. The Company expects to have minimal line-of-credit
borrowings at December 31, 1997.
SIGNIFICANT EVENT
On November 5, 1997, the Company announced that its Board of Directors has
initiated a process to explore the sale of the Company. The Company has retained
Morgan Stanley & Co., Inc.to assist in seeking prospective buyers. It is
currently contemplated that a final decision with respect to any sale
transaction will be made in early 1998.
<PAGE>
PAGE NO. 15
WAVERLY, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
No change
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits required by Item 601 of Regulation
S-K are filed herewith:
Exhibit 3(II) - By-laws as amended and restated through
April 29, 1991
Exhibit 11 - Computation of Earnings Per Share
Exhibit 15 - Letter from Coopers & Lybrand L.L.P.,
independent accountants, re unaudited
financial information.
Exhibit 27 - Financial Data Schedule
Exhibit 99 - Press release dated November 5, 1997
(b) The reports on Form 8K for the quarter ended September
30, 1997:
None
ALL OTHER ITEMS ARE OMITTED BECAUSE THEY ARE NOT APPLICABLE OR THE ANSWERS ARE
NONE.
<PAGE>
PAGE NO. 16
WAVERLY, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
statement is being signed by a duly authorized officer of the Registrant and in
the capacity as the principal financial officer.
WAVERLY, INC.
Date: November 14, 1997 /s/E. Philip Hanlon
-------------------
E. Philip Hanlon
Vice President, Finance
<PAGE>
PAGE NO. 17
WAVERLY, INC.
EXHIBIT 3(II)
BY-LAWS
OF
WAVERLY, INC.
ARTICLE I.
Stockholders
Section 1. Annual Meetings; Quorum. The annual meeting of the
stockholders of the Corporation shall be held at such hour and place and on such
date within the period beginning on April 20th and ending on May 20th of each
year as may be fixed by the Board of Directors. Not less than ten nor more than
ninety days written or printed notice stating the place, day and hour of each
annual meeting shall be given in the manner provided in Section 1 of Article X
hereof. The business to be transacted at the annual meetings shall include the
election of directors, consideration and action upon the reports of officers and
directors and any other business within the power of the Corporation. All annual
meetings shall be general meetings. A majority of the outstanding shares of
common stock shall constitute a quorum for the transaction of business.
Section 2. Special Meetings called by Chairman of the Board, the
President, or Board of Directors. At any time in the interval between annual
meetings, special meetings of stockholders may be called by the Chairman of the
Board, the President, or by a majority of the Board of Directors, upon ten days
written or printed notice, stating the place, day and hour, of such meeting and
the business proposed to be transacted thereat. Such notice shall be given in
the manner provided in Section 1 of Article X. No business shall be transacted
at any special meeting except that named in the notice.
Section 3. Special Meeting called by Stockholders. It shall be the duty
of the President or Secretary to call forthwith a special meeting of the
stockholders upon the request in writing by the holders of twenty-five percent
or more of all shares outstanding and entitled to vote at such meeting. Such
request shall state the purpose or purposes of such meeting and the matters
proposed to be acted on thereat.
Section 4. Removal of Directors. At any special meeting of the
stockholders called in the manner provided for by this Article, the
stockholders, by a vote of not less than 80% of all shares of stock outstanding
and entitled to vote for the election of directors, may remove any director or
directors from office and may elect a successor or successors to fill any
resulting vacancies for the remainder of the unexpired term or terms.
<PAGE>
PAGE NO. 18
WAVERLY, INC.
Section 5. Voting; Proxies; Record Date. At all meetings of
stockholders, any stockholder shall be entitled to vote by proxy. Such proxy
shall be in writing and signed by the stockholder or by his duly authorized
attorney in fact. It shall be dated but need not be sealed, witnessed or
acknowledged. The Board of Directors may fix the record date for the
determination of stockholders entitled to vote in the manner provided in Section
4 of Article IX.
Section 6. Quorum. If at any annual or special meeting of stockholders
a quorum shall fail to attend, a majority in interest attending in person or by
proxy may adjourn the meeting from time to time, to date not more than 120 days
after the original record date, and thereupon any business may be transacted
which might have been transacted at the meeting originally called had the same
been held at the time so called.
Section 7. Filing Proxies. At all meetings of stockholders, the
proxies shall be filed with and be verified by the Secretary of the Corporation,
or if the meeting shall so decide, by the Secretary of the meeting.
Section 8. Place of Meetings. All meetings of stockholders, shall be
held at the principal office of the Corporation in the State of Maryland or at
such other place within the United States as may be fixed by the Board of
Directors and designated in the Notice.
ARTICLE II.
Directors
Section 1. Powers. The Board of Directors shall have the control and
management of the affairs, business and properties of the Corporation. They
shall have and exercise in the name of the Corporation and on behalf of the
Corporation all the rights and privileges legally exercisable by the
Corporation, except as otherwise provided by law, by the Charter or by these
By-Laws. A director need not be a stockholder.
Section 2. Number; Term of Office; Removal. The number of directors of
the Corporation shall be the number stated in the Charter; provided, however,
that such number may be increased or decreased from time to time by vote of the
Board of Directors to a number not exceeding eighteen (18). The Board of
Directors shall be divided into three classes, Class A, Class B and Class C, the
members of each class to have three-year terms. Those directors elected at the
annual meeting of stockholders on April 29, 1991, shall have the
classifications and shall serve for the terms set forth in the
amendments to the Corporation's Charter approved at said meeting, and thereafter
the terms of one class of directors shall expire at each annual meeting and
their successors shall be elected to terms of three years each. A director may
be removed from office as provided in Article I, Section 4 of these Bylaws. Any
increase or decrease in the number of directors shall be apportioned among the
classes so as to maintain the number of
<PAGE>
PAGE NO. 19
WAVERLY, INC.
directors in each class as nearly equal as practicable, and in no case shall a
decrease in the number of directors shorten the term of any incumbent director.
Section 3. Vacancies. Any vacancy on the Board of Directors caused by
the removal of a director may be filled by the stockholders in the manner
provided in Article I, Section 4 of these Bylaws. Any vacancy occurring for any
reason other than a removal or an increase in the number of directors may be
filled by the affirmative vote of at least 80% of the directors remaining in
office who have been in office for at least two years, or since the date of the
1991 annual meeting, even if such number is less than a quorum. A vacancy
occurring by reason of an increase in the number of directors may be filled by
the affirmative vote of 80% of the entire Board of Directors who have been in
office for at least two years or since the date of the 1991 annual meeting. Any
successor to fill a vacancy shall serve the unexpired term of the director whose
absence has caused the vacancy.
Section 4. Organization Meetings; Regular Meetings. The Board shall
meet for the election of officers and any other business as soon as practicable
after the adjournment of the annual meeting of stockholders. No notice of the
organization meeting shall be required if it is held at the same place, and
immediately following the annual meeting of stockholders. Other regular meetings
of the Board of Directors may be held at such intervals as the Board may from
time to time prescribe, provided notice shall be given of the establishment of,
and any change in the schedule of regular meetings.
Section 5. Special Meetings. Special meetings of the Board may be
called by the President, or by a majority of the directors. If notice is given
by personal delivery, by telephone or by wire, twenty-four hours notice, or such
shorter period as a majority of the Board shall approve, shall suffice; if
notice is given by mail, four days notice shall be required.
Section 6. Quorum. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, but such number may be
decreased or increased at any time or from time to time by vote of a majority of
the entire Board to any number not less than two directors or not less than
one-third of the directors, whichever is greater.
Section 7. Place of Meetings. Regular or special meetings of the Board
may be held within or without the State of Maryland, as the Board may from time
to time determine. The time and place of meeting may be fixed by the party
making the call.
Section 8. Rules and Regulations. The Board of Directors may adopt such
rules and regulations for the conduct of their meetings and the management of
the affairs of the Corporation as they may deem proper and not inconsistent with
the laws of the State of Maryland or these By-Laws or the Charter.
<PAGE>
PAGE NO. 20
WAVERLY, INC.
Section 9. Compensation. The directors, as such, may receive a stated
salary for their services or a fixed sum and expenses of attendance may be
allowed for attendance and each stated salary or attendance fee shall be
determined by resolution of the Board unless the stockholders have adopted a
resolution relating thereto, provided that nothing herein contained shall be
construed to preclude a director from serving in any other capacity and
receiving compensation therefor.
Section 10. Informal Action by Directors. Any action required or
permitted to be taken at any meeting of the Board may be taken without a meeting
if a written consent to such action is signed by all members of the Board and
such consent is filed with the minutes of the Board.
Section 11. Eligibility. With the exception of any Director who had
already reached his 70th birthday on January 1, 1990, the normal retirement date
for any director shall be the annual meeting for the election of directors
following his or her seventieth birthday.
ARTICLE III.
Committees
Section 1. Executive Committee. The Board of Directors may appoint from
among its members an Executive Committee of not less than two nor more than
seventeen members, one of whom shall be the President, and shall designate one
of such members as Chairman. The Board may also designate one or more of its
members as alternates to serve as a member or members of the Executive Committee
in the absence of a regular member or members. The Board of Directors reserves
to itself alone the power to declare dividends, issue stock, recommend to
stockholders any action requiring their approval, change the membership of the
Executive Committee or fill vacancies therein, amend the By-Laws, or affirm any
merger or share exchange that does not require stockholder approval. Subject to
the foregoing limitations, the Executive Committee shall possess and exercise
all other powers of the Board of Directors during the intervals between
meetings.
Section 2. Other Committees. The Board of Directors may also appoint
from among its own members such other committees as the Board may determine,
which shall in each case consist of not less than two directors, and which shall
have such powers and duties as shall from time to time be prescribed by the
Board.
Section 3. Rules of Procedure. A majority of the members of any
committee may fix its rules of procedure. All action by any committee shall be
reported to the Board of Directors at a meeting succeeding such action.
<PAGE>
PAGE NO. 21
WAVERLY, INC.
Section 4. Directors Emeriti. Any Director who has served as such for
twenty years or more may, upon his resignation or retirement, be designated by
the Board of Directors as a Director Emeritus. All Directors Emeriti shall
receive notice of all meetings of the Board, shall have the privilege of
attending all its meetings and the right to participate in its deliberations,
but shall have no vote on any question.
ARTICLE IV.
Officers
Section 1. In General. The officers of the Corporation shall consist of
a President, a Secretary, a Treasurer and whenever deemed advisable by the
Board, a Chairman of the Board, a Controller, one or more Vice Presidents,
Assistant Secretaries and Assistant Treasurers, or any of said last mentioned
officers. All of said officers shall be chosen by the Board of Directors, and
except officers holding contracts for fixed terms, shall hold office only during
the pleasure of the Board or until their successors are chosen and qualify. The
Chairman of the Board and the President shall be chosen from among the
Directors. Any two offices, except those of President and Vice President, may be
held by the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, when such instrument is required to be
executed, acknowledged or verified by any two or more officers. The Board of
Directors may from time to time appoint such other agents and employees, with
such powers and duties as they may deem proper.
Section 2. Chairman of the Board. The Chairman of the Board, if one is
elected, shall have the responsibility for the implementation of the policies of
the Board of Directors, for planning and recommending the policies and
procedures of the Corporation, and for such other duties as the Board of
Directors shall prescribe. He shall submit a report of the operation of the
Corporation for the year and of the state of its affairs as of the last day of
the last month of the preceding fiscal year to the shareholders at or before
their annual meeting and shall from time to time report to them all matters
within his knowledge which the interest of the Corporation may require to be
brought to their notice. He shall preside over the meetings of the Board and of
the stockholders at which he is present.
Section 3. President. In the absence of a Chairman of the Board, the President
shall preside at all meetings of the Board and the stockholders. He shall have
the general management and direction of the Corporation's business
in all departments and he shall perform such other duties
<PAGE>
PAGE NO. 22
WAVERLY, INC.
as the Board of Directors may direct. The President's duties shall be construed
to cover the authority to endorse stock certificates and to sign other documents
representing investments and if necessary to sell or otherwise dispose of the
same.
Section 4. Executive Vice President and Other Vice Presidents. The
Executive Vice President, if there be one, shall have all the powers and perform
all the duties of the President in case of his absence or inability to act. The
Board of Directors shall designate the order of succession of other Vice
Presidents in case both the President and Executive Vice President are absent or
unable to act. They shall perform such other duties as the Board of Directors
may direct.
Section 5. Treasurer. The Treasurer shall have general supervision over
the finances of the Corporation and its contracts. He shall perform such other
duties as may be assigned to him by the Board of Directors. He shall furnish
Bond, if required by the Board of Directors (which may be a blanket bond) with
such surety and in such penalty for the faithful performance of his duties as
the Board of Directors may from time to time require, the cost of such Bond to
be defrayed by the Corporation.
Section 6. Secretary. The Secretary shall keep the minutes of the
meetings of the stockholders and of the Board of Directors; and shall attend to
the giving and serving of all notices of the Corporation required by law or
these By-Laws. He shall maintain at all times in the principal office of the
Corporation at least one copy of the By-Laws with all amendments to date, and
shall make the same, together with the minutes of the meetings of the
stockholders, the annual statement of the affairs of the Corporation and any
voting trust agreement on file at the office of the Corporation, available for
inspection by any officer, director or shareholder during the usual business
hours. He shall perform such other duties as may be assigned to him by the Board
of Directors.
Section 7. Comptroller, Assistant Treasurer and Assistant Secretaries. The
Comptroller, Assistant Treasurer, and Assistant Secretaries shall perform such
duties as may from time to time be assigned to them by the Board of Directors or
the President.
Section 8. Substitutes. The Board of Directors may from time to time in
the absence of any one of said officers, or at any other time, designate any
other person or persons, on behalf of the Corporation, to sign any contracts,
deed, notes, or other instruments in the place and stead of any of said
officers, temporarily or for any particular purpose; and any instruments so
signed in accordance with a resolution of the Board shall be the valid act of
this Corporation as fully as if executed by any regular officer.
Section 9. Divisions and Divisional Titles. The Board of Directors
shall have the power and authority to designate any one or more segments of its
business as "Divisions" and to confer upon selected employees
divisional titles, including but not limited to the titles of President,
<PAGE>
PAGE NO. 23
WAVERLY, INC.
Vice President or General Manager. The compensation of such divisional officers
shall be fixed by the Board, and they shall serve at its pleasure, provided that
the Board may delegate to the Executive Committee or the President the authority
to fix the conditions of office and compensation of divisional officers other
than those who are also corporate officers. Divisional officers shall not be
deemed officers of the Corporation unless specifically elected as such by the
Board.
ARTICLE V.
Resignation.
Any director or officer may resign his office at any time. Such
resignation shall be made in writing and shall take effect from the time of its
receipt by the Corporation, unless some time be fixed in the resignation, and
then from that date. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE VI.
Commercial Paper, Etc.
All bills, notes, checks, drafts and commercial paper of all kinds to
be executed by the Corporation as maker, acceptor, endorser, otherwise, and all
assignments and transfers of stock, contracts or written obligations of the
Corporation, and all negotiable instruments shall be made in the name of the
Corporation, and shall be signed by the President, the Treasurer or such other
person or persons as the Board of Directors may from time to time designate.
ARTICLE VII.
Fiscal Year.
The fiscal year of the Corporation shall cover such period of twelve
months as the Board of Directors may determine. In the absence of any such
determination the accounts of the Corporation shall be kept on a calendar year
basis.
<PAGE>
PAGE NO. 24
WAVERLY, INC.
ARTICLE VIII.
Seal.
The seal of the Corporation shall be a disc inscribed with the name
of the Corporation, and the State of Maryland and the word "SEAL". The Secretary
or Treasurer or any Assistant Secretary or any Assistant Treasurer, shall have
the right and power to attest to the Corporate Seal.
ARTICLE IX.
Miscellaneous Provisions - Stock.
Section 1. Issue. All certificates of stock shall be signed by the
Chairman of the Board or by the President or any Vice President, and
countersigned by the Treasurer or Assistant Treasurer or Secretary or Assistant
Secretary, and sealed with the seal of the Corporation. These signatures of the
Corporation's Officers and its Corporate Seal appearing on stock certificates
may be facsimiles if each such certificate is authenticated by the manual
signature of an Officer of a duly authorized Transfer Agent.
Section 2. Transfers. No transfers of stock shall be recognized for
binding upon the Corporation until recorded on the books of the Corporation upon
surrender and cancellation of certificates for a like number of shares.
Section 3. Form of Certificates; Procedure. The Board of Directors
shall have power and authority to determine the form of stock certificate
(except insofar as prescribed by law), and to make all such rules and
regulations, as they deem expedient concerning the issue, transfer and
registration of said certificates, and to appoint one or more transfer agents
and/or registrars to countersign and register the same.
Section 4. Record Dates for Dividends and Stockholder's Meetings. The
Board of Directors may fix the time, not exceeding twenty days preceding the
date of any meeting of stockholders, any dividend payment date or any date for
the allotment of rights, during which the books of the Corporation shall be
closed against transfers of stock, or the Board of Directors may fix a date not
exceeding sixty days preceding the date of any meeting of stockholders, and
dividend payment date or any date for the allotment of rights, as a record date
for the determination of the stockholders entitled to notice of and to vote at
such meeting, or entitled to receive such dividends or rights, as the case may
be, and only stockholders of record on such date shall be entitled to notice of
and to vote at such meeting or to receive such dividends or rights, as the case
may be. In the case of a meeting of stockholders the record date shall be fixed
not less than ten days prior to the date of the meeting.
<PAGE>
PAGE NO. 25
WAVERLY, INC.
Section 5. Lost Certificates. In case any certificate of stock is lost,
mutilated, or destroyed, the Board of Directors may issue a new certificate in
place thereof, upon indemnity to the Corporation against loss and upon such
other terms and conditions as the Board of Directors may deem advisable.
Section 6. Inapplicability of Maryland Control Share Statute. The
acquisition of shares of voting stock of the Company by any existing or future
shareholders or their affiliates or associates shall be exempt from all of the
provisions of Subtitle 7 (entitled "Voting Rights of Certain Control Shares") of
Title 3 of the Maryland General Corporation Law, as amended.
ARTICLE X.
Notice.
Section 1. Notice to Stockholders. Whenever by law or these By-Laws,
notice is required to be given to any stockholder, such notice may be given to
each stockholder by leaving the same with him at his residence or usual place of
business, or by mailing it, postage prepaid, and addressed to him at his address
as it appears on the books of the Corporation. Such leaving or mailing of notice
shall be deemed the time of giving such notice.
Section 2. Notice to Directors and Officers. Whenever by law or these
By-Laws notice is required to be given to any Director or Officer, such notice
may be given in any one of the following ways: by personal notice to such
Director or Officer, by telephone communication with such Director or Officer
personally, by wire, addressed to such Director or officer at his then address
or at his address as it appears on the books of the Corporation, or by
depositing the same in writing in the post office or in a letter box in a
postpaid, sealed wrapper addressed to such Director or Officer at his then
address or at his address as it appears on the books of the Corporation; and the
time when such notice shall be mailed or consigned to a telegraph company for
delivery shall be deemed to be the time of the giving of such notice.
Section 3. Waiver of Notice. Notice to any stockholder or director of
the time, place and/or purpose of any meeting of stockholders or directors
required by these By-Laws may be dispensed with if such stockholder shall either
attend in person or by proxy, or if such director shall attend in person, or if
such absent stockholder or director shall, in writing filed with the records of
the meeting either before or after the holding thereof, waive such notice.
<PAGE>
PAGE NO. 26
WAVERLY, INC.
ARTICLE XI.
Voting of Stock in other Corporations.
Any stock in other corporations, which may from time to time be held by
the Corporation, may be represented and voted at any meeting of stockholders of
such other corporations by the President or a Vice President or by proxy or
proxies appointed by the President or a Vice President, or otherwise pursuant to
authorization thereunto given by a resolution of the Board of Directors adopted
by a vote of a majority of the Directors.
ARTICLE XII.
Amendments.
These Bylaws may be altered, repealed or suspended by a majority of the
entire Board of Directors at any regular meeting of the Board or at any special
meeting called for that purpose. They may also be altered, repealed or suspended
by a vote of not less than 80% of all shares of stock outstanding and entitled
to vote. The directors shall have no power to alter, repeal or suspend this
Article.
As amended through
April 29, 1991
<PAGE>
PAGE NO. 27
WAVERLY, INC.
<TABLE>
EXHIBIT 11
-----------
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS OF DOLLARS - EXCEPT PER SHARE AMOUNTS)
<CAPTION>
- -------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- -------------------------------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Earnings: $ 671 $1,155 $3,828 $3,575
Primary earnings $ 671 $1,155 $3,828 $3,575
- -------------------------------------------------------------------------------------
Fully diluted earnings $ 671 $1,155 $3,828 $3,575
- -------------------------------------------------------------------------------------
Weighted average shares outstanding 8,939 8,909 8,932 8,896
Dilutive common stock equivalents for
primary earnings per share 491 453 440 435
- -------------------------------------------------------------------------------------
Weighted average shares and common
equivalent shares outstanding
for primary earnings per share 9,430 9,362 9,372 9,331
Additional equivalent shares
assuming full dilution 3 68 53 86
- -------------------------------------------------------------------------------------
Weighted average shares and common
equivalent shares for fully
diluted earnings per share 9,433 9,430 9,425 9,417
- -------------------------------------------------------------------------------------
Earnings per share
Primary $ 0.07 $ 0.12 $ 0.41 $ 0.38
=====================================================================================
Fully diluted (1) $ 0.07 $ 0.12 $ 0.41 $ 0.38
=====================================================================================
<FN>
(1) Not presented on the Condensed Consolidated Statements of Income because
fully diluted earnings per share had a differential less than 3% of
primary earnings per share.
</FN>
</TABLE>
PAGE NO. 28
WAVERLY, INC.
EXHIBIT 15
----------
October 24, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Waverly, Inc. has incorporated by reference our report dated
October 24, 1997 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectus constituting part of its Registration
Statements on Forms S-8 (File Nos. 33-41925 and 33-61705). We are also aware of
our responsibilities under the Securities Act of 1933.
Very truly yours,
/s/Coopers & Lybrand L.L.P.
- ---------------------------
Coopers & Lybrand L.L.P.
Baltimore, Maryland
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1899
<SECURITIES> 0
<RECEIVABLES> 45033
<ALLOWANCES> (1375)
<INVENTORY> 28442
<CURRENT-ASSETS> 80864
<PP&E> 11736
<DEPRECIATION> (7456)
<TOTAL-ASSETS> 126606
<CURRENT-LIABILITIES> 55377
<BONDS> 0
0
0
<COMMON> 17885
<OTHER-SE> 36890
<TOTAL-LIABILITY-AND-EQUITY> 126606
<SALES> 124125
<TOTAL-REVENUES> 124300
<CGS> 74293
<TOTAL-COSTS> 117592
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 506
<INCOME-PRETAX> 6153
<INCOME-TAX> 2325
<INCOME-CONTINUING> 3828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3828
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
PAGE NO. 30
WAVERLY, INC.
EXHIBIT 99
----------
WAVERLY, INC.
351 West Camden Street
Baltimore, Maryland 21201
(410)528-4000
PRESS RELEASE
FOR IMMEDIATE RELEASE:
CONTACT: GEORGE S. WILLS/RICHARD RABICOFF
WILLS & ASSOCIATES, INC.
410-539-4733
WAVERLY TO SEEK ACQUISITION PROPOSALS
BALTIMORE, MD -- NOVEMBER 5, 1997. Waverly, Inc., a leading international
publisher in medicine and science, announced today that its Board of Directors
has initiated a process to explore the sale of the Company. Waverly has retained
Morgan Stanley & Co. Incorporated to assist it in seeking prospective buyers.
A critical element that the Board will consider in its evaluation of acquisition
proposals will be the commitment of potential acquirers to the Company's
employees and to maintaining a substantial operating presence in the city of
Baltimore.
"Waverly's Board of Directors believes that now is an appropriate time for such
a sale," said William M. Passano, Jr., Chairman. "We have consistently had
strong financial performance and are building a significant international
presence. As the trend toward consolidation in the publishing industry
continues, we have concluded that the best way to grow and compete successfully
is to have substantial resources on a global scale. Acquisition by a larger,
well-managed company will enable Waverly to maximize its potential and better
serve our customers worldwide. We believe that this strategy will greatly
benefit our shareholders and employees alike."
It is currently contemplated that a final decision with respect to any sale
transaction will be made in early 1998.
Waverly's common stock is traded on NASDAQ under the symbol WAVR.
<PAGE>
PAGE NO. 29
WAVERLY, INC.
Founded in 1890, Waverly also has offices in Philadelphia, Dallas, Europe, the
Far East and South America and employs over 600 people worldwide. The Company's
products - books, periodicals, and electronic media in the fields of medicine,
allied health and related disciplines - reach customers throughout the world.
