FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: April, 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the transition period from to
Commission file number 1-11507
JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5593032
- -------------------------------------- -----------------------------------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
605 Third Avenue, New York, NY 10158-0012
- -------------------------------------- -----------------------------------
Address of principal executive offices Zip Code
Registrant's telephone number including (212) 850-6000
area code -----------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
Class A Common Stock, par value New York Stock Exchange
$1.00 per share
Class B Common Stock, par value New York Stock Exchange
$1.00 per share
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K
The number of shares outstanding of the Registrant's Class A and Class B
Common Stock, par value $1.00 per share as of May 31, 1997, was 12,746,220 and
3,166,058 respectively, and the aggregate market value of such shares of Common
Stock held by non-affiliates of the Registrant as of such date was $389,905,158
based upon the closing market price of the Class A and Class B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Definitive proxy Statement to be filed with the Commission
on or about August 8, 1997 for the Annual Meeting of Shareholders to be held on
September 18, 1997, (the "1997 Proxy Statement") is, to the extent noted below,
incorporated by reference in Part III.
<PAGE>
PART I
Item 1. Business
The Company is a New York corporation incorporated on January 15, 1904.
(As used herein the term "Company" means John Wiley & Sons, Inc., and its
subsidiaries and affiliated companies, unless the context indicates otherwise).
The Company operates in one business segment, namely publishing, which
develops, publishes, and markets products in print and electronic formats
including textbooks, professional and reference works, consumer books, journals,
and other subscription-based products, for the educational, scientific,
technical, professional and trade markets in the United States and
internationally.
Textbooks are produced primarily for use in formal instruction in the
college and university markets, as well as the secondary school market in
Australia, while professional and reference books, encyclopedias, dictionaries,
and periodicals are intended primarily for practicing and research professionals
and for libraries. Some of these, as well as nonfiction consumer publications,
are also marketed to the general public. In addition, the Company markets and
distributes books from other publishers. The Company also develops and markets
electronic versions of certain of its print products, as well as computer
software and electronic data bases for educational use and professional research
and training. Book publications are primarily in the areas of pure and applied
science, engineering, architecture, the social sciences, biomedicine,
accounting, law, computer science and business administration. Journal
publications are primarily in the scientific and technical, and biomedical
research areas.
In fiscal 1997, the Company acquired a 90% interest in the German based
VCH Publishing Group (VCH) for approximately $99 million in cash. VCH is a
leading scientific, technical, and professional publisher of journals and books
in such disciplines as chemistry, architecture, civil engineering and law.
The Company is on the Internet with a World Wide Web site located at
http://www.wiley.com.
Domestic Publishing Operations
Adopted textbooks (i.e., textbooks prescribed for course use) are sold
primarily to bookstores serving educational institutions in the United States
(i.e., college bookstores). The Company employs college sales representatives
who call upon faculty members responsible for selecting books to be used in
courses, and upon the college bookstores which serve such institutions and their
students. Approximately 2,200 domestic college bookstore accounts are active
customers. Textbook sales are generally made on a fully returnable basis.
The textbook business is seasonal with the majority of textbook sales
occurring during June through August and November through January. Significant
amounts of inventory are acquired prior to those periods in order to meet
customer delivery requirements. There is an active used textbook market which
negatively affects the sales of new textbooks.
<PAGE>
Professional and consumer book sales consist of sales to trade
bookstores serving the general public, to wholesalers who supply such
bookstores, to certain college bookstores for their non-textbook requirements,
to individual professional practitioners, and to research institutions, jobbers,
libraries (including public, professional, academic, and other special
libraries), industrial organizations, and governmental agencies. The Company
employs sales representatives who call upon independent bookstores, along with
national and regional chain bookstores, wholesalers and jobbers in the United
States. Trade sales to bookstores, wholesalers and jobbers are generally made on
a fully returnable basis.
Sales of professional and consumer books also result from direct mail
campaigns, telemarketing, on-line access, and advertising and reviews in
periodicals. The mailings and advertising are intended to promote sales through
bookstores and jobbers, as well as to solicit sales directly.
Journal subscriptions result primarily from direct mail and other
advertising and promotional campaigns, renewals which are solicited annually
either directly or by companies commonly referred to as independent subscription
agents, and memberships in the professional societies for those journals that
are sponsored by such societies.
The Company also receives licensing revenues from photocopies and
electronic uses and reproductions of journal articles and other materials.
Domestic publishing products, other than journals, are distributed from
a Company operated warehouse located in New Jersey. Journals are mailed to
subscribers directly from the independent printers.
International Publishing Operations
The Company's publications are sold throughout most of the world
through subsidiaries located in Europe, Canada, Australia, and Asia, or through
agents, or directly from New York. These subsidiaries market their own
indigenous publications, as well as publications produced by the domestic
operations and other subsidiaries and affiliates.
The Export Sales Department in New York markets the Company's
publications through agents as well as foreign sales representatives in
countries not served by a foreign subsidiary. John Wiley & Sons International
Rights, Inc. sells foreign reprint and translations rights. The Company
publishes, or licenses others to publish, its products which are distributed
throughout the world in 35 foreign languages.
Approximately 48% of the Company's fiscal 1997 revenues were derived from
non-U.S. markets.
<PAGE>
Publishing Procedures
The Company usually enters into agreements with authors which state the
terms and conditions under which the respective authors' materials will be
published and under which other related rights may be exercised, the name in
which the copyright will be registered, the basis for any royalties, and other
matters. The Company continues to add new titles, revise existing titles, and
discontinue the sale of others in the normal course of its business.
Most of the authors of the books and other products published are
compensated by royalties which vary with the nature of the product and its
anticipated sales potential. In general, royalties for textbooks and consumer
books are higher than royalties for research and reference works. The Company
makes advances against future royalties to authors of certain of its
publications.
Materials for publication are obtained from authors throughout most of
the world through the efforts of an editorial staff, outside editorial advisors,
and advisory boards. Most materials originate with their authors, but many are
prepared as a result of suggestions or solicitations by editors or advisors. The
Company's general practice is to revise its basic textbooks every three to five
years, if warranted, and to revise other titles as appropriate. Approximately
41% of the Company's fiscal 1997 domestic book publishing revenues were from
titles published or revised in that fiscal year. Subscription-based products,
other than journals, are updated more frequently on a regular schedule.
Most journals are owned by the Company, in which case they may or may
not be sponsored by a professional society. Some are owned by such societies and
published by the Company under an agreement. Societies which sponsor or own such
journals generally receive a royalty and/or other consideration which varies
with the nature of the relationship. The Company usually enters into agreements
with the editors of journals which state the duties of the editors, and the fees
and expenses for their services. Contributions of journal articles transfer
publication rights to the Company or professional society, as applicable.
Journal revenues represented approximately 36% of the Company's fiscal 1997
revenues.
The Company's publishing business is not dependent upon a single
customer, the loss of whom could have a material adverse effect. The book
publishing business has witnessed a significant growth in national and regional
bookstore chains in recent years, however, no one customer accounts for more
than 5% of total consolidated revenues. The journal subscription business is
primarily sourced through independent subscription agents who facilitate the
journal ordering process by consolidating the subscription orders/billings of
each subscriber with various publishers. Monies are collected in advance from
subscribers by the subscription agents and are remitted to the journal
publishers, including the Company, generally prior to the commencement of the
subscriptions. Although at fiscal year-end, the Company had minimal credit risk
exposure to these agents, future calendar year subscription receipts from these
agents are highly dependent on their financial position and liquidity.
Subscription agents account for approximately 25% of total consolidated revenues
and no one agent accounts for more than 6% of total consolidated revenues.
<PAGE>
The Company performs marketing and distribution services for other
publishers under agency arrangements. It also engages in co-publishing of titles
with foreign publishers and in publication of adaptations of works from other
publishers for particular markets.
Like most other publishers, the Company generally contracts with
independent printers and binderies for their services. The Company purchases its
paper from printers and from independent suppliers. Paper prices decreased
during fiscal 1997 compared with the increases experienced in prior years. The
Company believes that adequate printing and binding facilities, and sources of
paper and other required materials are available to it, and that it is not
dependent upon any single supplier.
The Company produces electronic versions of some of its products
including software, video, CD-ROM, and through on-line services. Approximately
450 products are available in electronic formats, of which 100 are primary
stand-alone products with the remainder representing supplemental products in
support of other print products. The Company believes that the demand for new
electronic technology products will increase. Accordingly, to properly service
its customers and to remain competitive, the Company anticipates it will be
necessary to increase its expenditures related to such new technologies over the
next several years, including distributing virtually all of the Company's
journals as full-text electronic files over the Internet.
Copyrights, Patents, Trademarks, and Environment
Substantially all of the Company's publications are protected by
copyright, either in its own name, in the name of the author of the work, or in
the name of the sponsoring professional society. Such copyrights protect the
Company's exclusive right to publish the work in the United States and in many
countries abroad for specified periods: in most cases the author's life plus 50
years, but in any event a minimum of 28 years for works published prior to 1978
and 35 years for works published thereafter.
The Company does not own any other material patents, franchises, or
concessions, but does have registered trademarks and service marks in connection
with its publishing businesses. The Company's operations are generally not
affected by environmental legislation.
Competition Within the Publishing Industry
The sectors of the publishing industry in which the Company is engaged
are highly competitive. The principal competitive criteria for the publishing
industry are believed to be product quality, suitability of format and subject
matter, author reputation, price, timely availability of both new titles and
revisions of existing texts and, for textbooks and certain trade books, timely
delivery of products to retail outlets. Recent years have seen a consolidation
trend within the publishing industry, including several publishing companies
having been acquired by larger publishers and other companies.
<PAGE>
Based upon currently available industry statistics, the Company
believes that of books published and sold in the United States, it accounts for
approximately 3% of the total sales of such university and college textbooks,
and approximately 3% of the total sales of such professional books.
The Company knows of no reliable industry statistics which would enable
it to determine its share of the various foreign markets in which its operates.
The Company believes that the percentage of its total book publishing sales in
markets outside the United States is higher than that of most of the United
States publishers. The Company also believes it is in the top rank of publishers
of scientific and technical journals worldwide, as well as the leading
commercial chemistry publisher at the research level, and one of the four
largest publishers of university and college textbooks for the "hardside"
disciplines, i.e. engineering, sciences and mathematics.
Employees
As of April 30, 1997, the Company employed approximately 2,170 persons
on a full-time basis worldwide, none of whom are unionized. Management considers
relations with its employees to be generally satisfactory.
Financial Information About Industry Segments
The note entitled - "Segment Information" of the Notes to Consolidated
Financial Statements listed in the attached index is incorporated herein by
reference.
Financial Information about Foreign and
Domestic Operations and Export Sales
The note entitled - "Segment Information" of the Notes to Consolidated
Financial Statements listed in the attached index is incorporated herein by
reference.
<PAGE>
Executive Officers
Set forth below as of April 30, 1997 are the names and ages of all
executive officers of the Company, the period during which they have been
officers, and the offices presently held by each of them.
Name and Age Officer Since Present Office
- -------------------------------------------------------------------------------
Bradford Wiley II 1993 Chairman of the Board since January
56 1993 and a Director (previously
Editor, College Division)
Charles R. Ellis 1988 President and Chief Executive Officer
61 since June 1990 and a Director
William J. Pesce 1989 Chief Operating Officer since May 1997
46 (previously Executive Vice President
and Group President, Educational &
International Publishing; Senior Vice
President, Educational & International
Publishing Group and Senior Vice
President, Educational Publishing Group)
Stephen A. Kippur 1986 Executive Vice President and Group
50 President, PRT since June 1996
(previously Senior Vice President,
Professional, Reference & Trade
Publishing Group)
Richard S. Rudick 1978 Senior Vice President, General Counsel
58 since June 1989
Robert D. Wilder 1986 Executive Vice President and Chief
48 Financial and Support Operations
Officer since June 1996 (previously
Senior Vice President, Chief Financial
Officer)
William Arlington 1990 Senior Vice President, Human Resources
48 since June 1996 (previously Vice
President, Human Resources)
Peter W. Clifford 1989 Senior Vice President, Finance,
51 Corporate Controller and Chief
Accounting Officer since June 1996
(previously Vice President, Finance
and Controller)
Deborah E. Wiley 1982 Senior Vice President, Corporate
51 Communications since June 1996 and a
Director (previously Vice President
and Director of Corporate
Communications)
Timothy B. King 1996 Senior Vice President, Planning and
56 Development since June 1996
(previously Vice President, Planning
and Development)
Each of the officers listed above will serve until the next organizational
meeting of the Board of Directors of the Company and until each of the
respective successors is duly elected and qualified. Deborah E. Wiley is the
sister of Bradford Wiley II. There is no other family relationship among any of
the aforementioned individuals.
<PAGE>
Item 2. Properties
The Company's publishing businesses occupy office, warehouse, and
distribution centers in various parts of the world, as listed below (excluding
those locations with less than 10,000 square feet of floor area, none of which
is considered material property).
Approximate Lease
Location Purpose Square Feet Expiration Date
- --------------------------------------------------------------------------------
Leased-Domestic:
New York Executive and 230,000 2003
Editorial Offices
New Jersey Distribution 170,000 2003
Center and Office
New Jersey Warehouse 132,000 2002
Colorado Office 17,000 2000
Owned-Foreign:
Germany Office and 66,000
Warehouse
Leased-Foreign:
Australia Office 16,000 1998
Warehouse 26,000 2000
Canada Office 14,000 2001
Warehouse 41,000 2001
England Office 49,000 2009
Warehouse 68,000 2012
Germany Office 23,000 1999
Singapore Office and Warehouse 53,000 1999
All of the buildings and the equipment owned or leased are believed to
be in good condition and are generally fully utilized. The Company considers its
facilities overall to be adequate for its present and near-term anticipated
needs.
<PAGE>
Item 3. Legal Proceedings
The Company is involved in routine litigation in the ordinary course of
its business. In the opinion of management, the ultimate resolution of all
pending litigation will not have a material effect upon the financial condition
or results of operations of the Company.
Item 4. Submission of Matters to a
Vote of Security Holders
No matters were submitted to the Company's security holders during the
last quarter of the fiscal year ended April 30, 1997.
PART II
Item 5. Market for the Company's Common
Equity and Related Stockholder Matters
The Quarterly Share Prices, Dividends and Related Stockholder Matters
listed in the attached index are incorporated herein by reference.
Item 6. Selected Financial Data
The Selected Financial Data listed in the attached index is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results
of Operations listed in the attached index is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data listed in the attached
index are incorporated herein by reference.
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers
The information regarding the Board of Directors on pages 4 to 11 of
the 1997 Proxy Statement is incorporated herein by reference, and information
regarding Executive Officers appears in Part I of this report.
Item 11. Executive Compensation
The information on pages 11 to 17 of the 1997 Proxy Statement is
incorporated herein by reference.
Item 12. Security Ownership of Certain
Beneficial Owners and Management
The information on pages 2, 3, 9, and 10 of the 1997 Proxy Statement is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information on page 5 of the 1997 Proxy Statement is incorporated
herein by reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules
(1) List of Financial Statements filed.
The financial statements listed in the attached index are
filed as part of this Report.
(2) List of Financial Statement Schedules filed.
The financial statement schedules listed in the attached
index are filed as part of this Report.
(b) Reports on Form 8-K.
No reports on form 8-K were filed during the quarter ended April 30,
1997.
(c) Exhibits
2.1 Purchase and Assignment Agreement dated May 7, 1996 among the Company
and VCH Publishing Limited Partnership (incorporated by reference to
the Company's Report on Form 8-K dated as of June 13, 1996).
2.2 Purchase and Assignment Agreement dated May 7, 1996 among the Company
and Gesellschaft Deutscher Chemiker e.V. and Deutsche Pharmazeutische
Gesellschaft e.V. (incorporated by reference to the Company's Report
on Form 8-K dated as of June 13, 1996).
3.1 Restated Certificate of Incorporation (incorporated by reference to
the Company's Report on Form 10-K for the year ended April 30, 1992).
3.2 Certificate of Amendment of the Certificate of Incorporation dated
October 13, 1995 (incorporated by reference to the Company's Report on
Form 10-K for the year ended April 30, 1996)
3.3 Restated By-Laws dated as of July 1994 (incorporated by reference to
the Company's Report on Form 10-K for the year ended April 30, 1995).
4.1 Form of agreement between the Company and certain employees
restricting transfer of Class B Common Stock (incorporated by
reference to the Company's Report on Form 10-Q for the quarterly
period ended January 31, 1986).
<PAGE>
10.1 Credit agreement dated as of November 15, 1996 among the Company, the
Banks from time to time parties hereto, and Morgan Guaranty Trust
Company of New York, as Agent (incorporated by reference to the
Company's report on Form 10-Q for the quarterly period ended October
31, 1996).
10.2 1991 Key Employee Stock Plan (incorporated by reference to the
Company's Definitive Proxy Statement dated August 8, 1991).
10.3 Amendment to 1991 Key Employee Stock plan dated as of September 19,
1996 (incorporated by reference to the Company's Definitive Proxy
Statement dated August 9, 1996).
10.4 1982 and 1987 Incentive Stock Option and Performance Stock Plans
(incorporated by reference to the Company's Definitive Proxy
Statements dated July 30, 1982 and August 10, 1987).
10.5 Amendment to 1982 Stock Option and Performance Stock Plan dated as of
September 19, 1985 (incorporated by reference to the Company's Report
on Form 8-K dated as of September 19, 1985).
10.6 Amendment to 1982 Incentive Stock Option and Performance Stock Plan
dated as of March 2, 1989 (incorporated by reference to the Company's
Report on Form 10-K for the year ended April 30, 1989).
10.7 Amendment to 1987 Incentive Stock Option and Performance Stock Plan
dated as of March 2, 1989 (incorporated by reference to the Company's
Report on Form 10-K for the year ended April 30, 1989).
10.8 1990 Director Stock Plan as Amended and Restated as of June 22, 1995
(incorporated by reference to the Company's Report on Form 10-K for
the year ended April 30, 1996).
10.9 1989 Supplemental Executive Retirement Plan (incorporated by reference
to the Company's Report on Form 10-K for the year ended April 30,
1989).
10.10 Agreement of Lease dated as of May 16, 1985 between Fisher 40th & 3rd
Company and Hawaiian Realty, Inc., Landlord, and the Company, Tenant
(incorporated by reference to the Company's Report on Form 10-K for
the year ended April 30, 1985).
10.11 Form of the Fiscal Year 1995 Executive Long-Term Incentive Plan
(incorporated by reference to the Company's Report on Form 10-K for
the year ended April 30, 1994).
10.12 Form of the Fiscal Year 1996 Executive Long-Term Incentive Plan
(incorporated by reference to the Company's Report on Form 10-K for
the year ended April 30, 1995).
<PAGE>
10.13 Form of the Fiscal Year 1997 Executive Long-Term Incentive Plan
(incorporated by reference to the Company's Report on Form 10-K for
the year ended April 30, 1996).
10.14 Form of the Fiscal Year 1997 Executive Annual Incentive Plan
(incorporated by reference to the Company's Report on Form 10-K for
the year ended April 30, 1996).
10.15 Senior Executive Employment Agreement amended as of March 29, 1995
between Charles R. Ellis and the Company (incorporated by reference to
the Company's Report on Form 10-K for the year ended April 30, 1995).
10.16 Restricted Stock Award Agreement dated as of June 23, 1994 between
Charles R. Ellis and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.17 Senior Executive Employment Agreement dated as of July 1, 1994 between
Stephen A. Kippur and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.18 Amendment No. 1 to Stephen A. Kippur's Senior Executive Employment
Agreement dated as of July 1, 1994 (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.19 Restricted Stock Award Agreement dated as of June 23, 1994 between
Stephen A. Kippur and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.20 Senior Executive Employment Agreement dated as of July 1, 1994 between
William J. Pesce and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.21 Amendment No. 1 to William J. Pesce's Senior Executive Employment
Agreement dated as of July 1, 1994 (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.22 Restricted Stock Award Agreement dated as of June 23, 1994 between
William J. Pesce and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.23 Senior Executive Employment Agreement dated as of July 1, 1994 between
Robert D. Wilder and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
<PAGE>
10.24 Amendment No. 1 to Robert D. Wilder's Senior Executive Employment
Agreement dated as of July 1, 1994 (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.25 Restricted Stock Award Agreement dated as of June 23, 1994 between
Robert D. Wilder and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.26 Employment agreement letter dated as of January 16, 1997 between
Richard S. Rudick and the Company.
22 List of Subsidiaries of the Company.
24 Consent of Independent Public Accountants (included in this report as
listed in the attached index).
27 Financial Data Schedule.
<PAGE>
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and information appearing on the
pages indicated are filed as part of this Report:
Page(s)
Report of Independent Public Accountants and
Consent of Independent Public Accountants...............................16
Consolidated Statements of Financial Position
as of April 30, 1997 and 1996...........................................17
Consolidated Statements of Income and Retained Earnings
for the years ended April 30, 1997, 1996 and 1995.......................18
Consolidated Statements of Cash Flows for the
years ended April 30, 1997, 1996 and 1995...............................19
Notes to Consolidated Financial Statements...........................20-28
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................29-31
Results by Quarter (Unaudited)..........................................32
Quarterly Share Prices, Dividends and Related Stockholder Matters.......32
Selected Financial Data.................................................33
Schedule II - Valuation and Qualifying Accounts.........................34
Other schedules are omitted because of absence of conditions under
which they apply or because the information required is included in the Notes to
the Consolidated Financial Statements.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and the Shareholders
of John Wiley & Sons, Inc.:
We have audited the accompanying consolidated statements of financial
position of John Wiley & Sons, Inc. (a New York corporation), and subsidiaries
as of April 30, 1997 and 1996, and the related consolidated statements of income
and retained earnings and cash flows for each of the three years in the period
ended April 30, 1997. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and the schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of John Wiley & Sons, Inc., and
subsidiaries as of April 30, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended April 30,
1997 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Consolidated Financial Statements and Schedules is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
June 11, 1997
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in the John Wiley & Sons, Inc. Form 10-K for the year
ended April 30, 1997, into the Company's previously filed Registration Statement
File Nos. 33-60268, 2-65296, 2-95104, 33-29372 and 33-62605.
ARTHUR ANDERSEN LLP
New York, New York
June 11, 1997
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
April 30
John Wiley & Sons, Inc. and Subsidiaries ----------------------
Dollars in Thousands 1997 1996
- --------------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $ 79,116 $ 55,284
Accounts receivable 61,841 60,276
Inventories 49,100 43,981
Deferred income tax benefits 7,143 7,677
Prepaid expenses 6,935 3,413
- --------------------------------------------------------------------------------
Total Current Assets 204,135 170,631
- --------------------------------------------------------------------------------
Product Development Assets 31,683 30,282
Property and Equipment 32,699 22,989
Intangible Assets 165,147 52,394
Deferred Income Tax Benefits 13,004 --
Other Assets 11,276 8,205
- --------------------------------------------------------------------------------
Total Assets $ 457,944 $284,501
================================================================================
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable $ 172 $ --
Accounts and royalties payable 30,988 36,952
Deferred subscription revenues 94,419 71,999
Accrued income taxes 3,825 5,068
Other accrued liabilities 34,948 25,097
- --------------------------------------------------------------------------------
Total Current Liabilities 164,352 139,116
- --------------------------------------------------------------------------------
Long-Term Debt 125,000 --
Other Long-Term Liabilities 24,907 14,994
Deferred Income Taxes 14,702 12,409
Shareholders' Equity
Common stock issued
Class A (16,569,066 and 16,412,343 shares) 16,569 16,412
Class B (4,037,082 and 4,086,482 shares) 4,037 4,086
Additional paid-in capital 34,332 31,615
Retained earnings 120,823 106,716
Cumulative translation adjustment 106 (3,086)
Unearned deferred compensation (3,254) (4,268)
- --------------------------------------------------------------------------------
172,613 151,475
Less Treasury shares at cost
(Class A-3,824,978 and 3,503,109;
Class B-871,024 and 871,024) (43,630) (33,493)
- --------------------------------------------------------------------------------
Total Shareholders' Equity 128,983 117,982
- --------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 457,944 $ 284,501
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
For the years ended April 30
John Wiley & Sons, Inc. and Subsidiaries -------------------------------------
Dollars In Thousands Except per share data 1997 1996 1995
- ------------------------------------------------------------------------------
Revenues $ 431,974 $ 362,704 $ 331,091
Costs and Expenses
Cost of sales 155,245 126,718 113,142
Operating and admin. expenses 233,771 198,494 186,984
Amortization of intangibles 8,161 4,537 4,086
- --------------------------------------------------------------------------------
Total Costs and Expenses 397,177 329,749 304,212
- --------------------------------------------------------------------------------
Operating Income 34,797 32,955 26,879
Interest Income and Other 2,281 6,211 1,768
Interest Expense (6,225) (368) (2,854)
- --------------------------------------------------------------------------------
Interest Income (Expense)-Net (3,944) 5,843 (1,086)
- --------------------------------------------------------------------------------
Income Before Taxes 30,853 38,798 25,793
Provision for Income Taxes 10,513 14,118 7,482
- --------------------------------------------------------------------------------
Net Income 20,340 24,680 18,311
- --------------------------------------------------------------------------------
Retained Earnings at Beginning of Year 106,716 87,541 74,024
Cash Dividends
Class A Common
($.40, $.35 and $.31 per share) 5,116 4,492 3,885
Class B Common
($.35, $.31 and $.275 per share) 1,117 1,013 909
- --------------------------------------------------------------------------------
Total Dividends 6,233 5,505 4,794
- --------------------------------------------------------------------------------
Retained Earnings at End of Year $ 120,823 $ 106,716 $ 87,541
================================================================================
Income Per Share
Primary and fully diluted $ 1.24 $ 1.49 $ 1.12
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
John Wiley & Sons, Inc. and Subsidiaries For the years ended April 30
--------------------------------------
Dollars In Thousands 1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net Income $ 20,340 $ 24,680 $ 18,311
Noncash Items
Amortization of intangibles 8,161 4,537 4,086
Amortization of composition costs 17,763 15,196 12,285
Depreciation of property and equipment 8,340 7,314 6,589
Reserves for returns, doubtful accounts and obsolescence 11,861 6,586 4,321
Deferred income taxes 3,243 7,873 2,094
Other 7,300 7,583 5,155
Changes in Operating Assets and Liabilities
Increase in receivables (178) (12,150) (8,337)
Decrease (increase) in inventories 1,791 (3,734) (3,962)
Increase (decrease) in accounts and royalties payable (12,109) 3,821 6,951
Increase in deferred subscription revenues 7,769 4,996 7,596
Net change in other operating assets and liabilities (10,372) 1,420 (3,198)
- -----------------------------------------------------------------------------------------------------
Cash Provided by Operating Activities 63,909 68,122 51,891
- -----------------------------------------------------------------------------------------------------
Investing Activities
Additions to product development assets (25,466) (26,483) (19,705)
Additions to property and equipment (8,868) (9,310) (7,876)
Acquisition of publishing assets (103,980) (3,968) (12,268)
- -----------------------------------------------------------------------------------------------------
Cash Used for Investing Activities (138,314) (39,761) (39,849)
- -----------------------------------------------------------------------------------------------------
Financing Activities
Purchase of treasury shares (10,506) (3,323) (212)
Additions to long-term debt 125,000 -- --
Repayment of long-term debt (10,542) -- (32,000)
Net borrowings (repayments) of short-term debt (1,270) (624) 522
Cash dividends (6,233) (5,505) (4,794)
Proceeds from issuance of stock on option exercises and othe 1,249 2,289 590
- -----------------------------------------------------------------------------------------------------
Cash Provided by (Used for) Financing Activities 97,698 (7,163) (35,894)
- -----------------------------------------------------------------------------------------------------
Effects of Exchange Rate Changes on Cash 539 (324) 805
- -----------------------------------------------------------------------------------------------------
Cash and Cash Equivalents
Increase (decrease) for year 23,832 20,874 (23,047)
Balance at beginning of year 55,284 34,410 57,457
- -----------------------------------------------------------------------------------------------------
Balance at end of year $ 79,116 $ 55,284 $ 34,410
=====================================================================================================
Cash Paid During the Year for
Interest $ 5,143 $ 647 $ 3,807
Income Taxes $ 3,966 $ 2,799 $ 6,886
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Notes to Consolidated Financial Statements
Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the
accounts of John Wiley & Sons, Inc., and its majority-owned subsidiaries ("the
Company"). All significant intercompany items have been eliminated.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Subscription Revenues: Subscription revenues are generally collected in advance.
These revenues are deferred and recognized as earned when the related issue is
shipped to the subscriber.Sales Returns and Doubtful Accounts: The Company
provides an estimated allowance for doubtful accounts and for future returns on
sales made during the year. The allowance for doubtful accounts and returns
(estimated returns net of inventory and royalty costs) is shown as a reduction
of receivables in the accompanying consolidated balance sheets and amounted to
$34.5 and $26.8 million at April 30, 1997 and 1996, respectively. Depreciation
and Amortization: Buildings, leasehold improvements and capital leases are
amortized over the lesser of the estimated useful lives of the assets up to 40
years, or the duration of the various leases, using the straight-line method.
Furniture and equipment is depreciated principally on the straight-line method
over estimated useful lives ranging from 3 to 10 years. Composition costs
representing the costs incurred to bring an edited manuscript to publication
including typesetting, proofreading, design and illustration, etc. are
capitalized and amortized over estimated useful lives representative of product
revenue patterns, generally 3 years.
Intangible Assets: Intangible assets consist of acquired publication rights,
which are principally amortized over periods ranging from 3 to 30 years based on
the projected revenues of rights acquired, noncompete agreements, which are
amortized over the term of such agreements, and goodwill and other intangibles,
which are amortized on a straight - line basis over periods ranging from 5 to 40
years. If facts and circumstances indicate that long-lived assets and/or
intangible assets may be permanently impaired, it is the Company's policy to
assess the carrying value and recoverability of such assets based on an analysis
of undiscounted future cash flows of the related operations. Any resulting
reduction in carrying value based on the estimated fair value would be charged
to operating results.
Foreign Exchange Contracts: The Company, from time to time, enters into forward
exchange contracts as a hedge against its overseas subsidiaries' non-functional
currency asset, liability, and commitment exposures. Such exposures include
overseas subsidiaries' anticipated annual journal subscription revenues, as well
as that portion of the revenues and related receivables on sales of book
products, that are denominated in U.S. dollars. Realized and unrealized gains
and losses are deferred and taken into income over the lives of the hedged items
if permitted by generally accepted accounting principles; otherwise the
contracts are marked to market with any gains and losses reflected in operating
expenses. At April 30, 1997, the Company had one contract to sell approximately
$6.9 million of pound) sterling expiring in May 1997, the market value of which
approximated the contract value. There were no open foreign exchange contracts
at April 30, 1996. No gains or losses were deferred at April 30, 1997, or 1996.
Stock-Based Compensation: Stock options and restricted stock grants are
accounted for in accordance with Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees". Accordingly, the Company recognizes
no compensation expense for fixed stock option grants since the exercise price
is equal to the fair value of the shares at date of grant. For restricted stock
grants, compensation cost is recognized generally ratably over the vesting
period based on the fair value of shares. In fiscal 1997, the Company adopted
the disclosure-only provision of Statement of Financial Accounting Standards No.
123 "Accounting for Stock-Based Compensation".
<PAGE>
Income Per Share: Income per share is determined by dividing income by the
weighted average number of common shares outstanding and common stock
equivalents resulting from the assumed exercise of outstanding dilutive stock
options and other stock awards less shares assumed to be repurchased with the
related proceeds at the average market price for the period for primary earnings
per share, and at the higher of the average or end of period market price for
fully diluted earnings per share.
Cash Equivalents: Cash equivalents consist primarily of highly liquid
investments with a maturity of three months or less and are stated at cost plus
accrued interest, which approximates market value.
New Accounting Standards: The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share" which becomes effective for the Company's fiscal 1998 consolidated
financial statements beginning in the third quarter. SFAS No. 128 will eliminate
the disclosure of primary earnings per share, which includes the dilutive effect
of stock options, warrants and other convertible securities ("Common Stock
Equivalents") and instead requires reporting of "basic" earnings per share,
which will exclude Common Stock Equivalents. Additionally, SFAS No. 128 changes
the methodology for fully diluted earnings per share. In the opinion of the
Company's management, the adoption of this new accounting standard will not have
a material effect on the reported earnings per share of the Company.
Acquisitions
In fiscal 1997, the Company acquired a 90% interest in the German-based VCH
Publishing Group ("VCH") through the purchase of 90% of the shares of VCH
Verlagsgesellschaft mbH for approximately $99 million in cash. VCH is a leading
scientific, technical and professional publisher of journals and books in such
disciplines as chemistry, architecture, civil engineering and law. The cost of
the acquisition has been allocated on the basis; of preliminary estimates of the
fair values of the assets acquired and the liabilities assumed. Final asset and
liability fair values may differ based on appraisals and tax bases; however it
is anticipated that any changes will not have a material effect in the aggregate
on the consolidated financial position of the Company. The excess of cost over
the preliminary estimate of the fair value of the tangible assets acquired
amounted to approximately $115 million relating to acquired publication rights,
which are being amortized on a straight-line basis over an average life of 30
years. In addition, during the year, the Company acquired various newsletters
including the publishing assets of Technical Insights, Inc., a publisher of
print and electronic newsletters in various areas of science and technology, for
purchase prices aggregating $4.7 million, which primarily relates to goodwill
and is being amortized on a straight-line basis over 10 years.
In fiscal 1996, the Company acquired Clinical Psychology Publishing Company
(CPPC), a publisher of journals and books in the fields of clinical and
educational psychology; Preservation Press, consisting of architectural heritage
books, technical preservation guides and children's architecture books; and
certain other smaller publishing properties. In addition, the Company became the
publisher of Cancer, the American Cancer Society's medical journal. The purchase
prices amounted to $4.0 million in cash plus assumed liabilities of $1.3
million. The excess of cost over the fair value of the tangible assets acquired
amounted to approximately $3.7 million, of which $.9 million related to acquired
publication rights, $.2 million related to noncompete agreements, and $2.6
million represented goodwill and other intangibles, which are being amortized
over 5 to 15 years.
In fiscal 1995, the Company acquired the publishing business of Executive
Enterprises, Inc., consisting of books, journals and newsletters for
environmental management, accounting, law and human resource professionals;
ValuSource, which produces specialized business valuation software for
accountants, entrepreneurs and corporations; the college engineering list of
Houghton Mifflin; the book publishing program of Oliver Wight Publications,
Inc., consisting of general management and manufacturing/quality titles; the
OS/2 computer-book list of Van Nostrand Reinhold, Inc., and other smaller
publishing lists, for purchase prices aggregating $12.3 million in cash plus
assumed liabilities of $2.9 million. The excess of cost over the fair value of
the tangible assets acquired amounted to approximately $13.5 million, of which
$6.7 million related to acquired publication rights, $.5 million related to
noncompete agreements, and $6.3 million represented goodwill and other
intangibles which are being amortized over 10 to 15 years.
<PAGE>
All acquisitions have been accounted for by the purchase method, and the
accompanying financial statements include their results of operations since
their respective dates of acquisition. The following pro forma information
presents the results of operations of the Company as if the VCH acquisition had
been consummated as of May 1, 1995. The pro forma financial information is not
necessarily indicative of the actual results that would have been obtained had
the acquisition been consummated as of May 1, 1995, nor is it necessarily
indicative of future results of operations. The pro forma effects for the other
acquisitions were not material.
Dollars in thousands, except per share data 1997 1996
- --------------------------------------------------------------------------------
Revenues $ 441,650 $ 424,570
Net Income $ 18,931 $ 17,520
Net Income Per Share $ 1.16 $ 1.06
Inventories
Inventories at April 30 were as follows:
Dollars in thousands 1997 1996
- -------------------------------------------------------------------
Finished Goods $ 40,859 $ 39,616
Work-in-Process 7,475 4,865
Paper, Cloth and Other 2,559 3,026
- -------------------------------------------------------------------
50,893 47,507
LIFO Reserve (1,793) (3,526)
- -------------------------------------------------------------------
Total $ 49,100 $ 43,981
- -------------------------------------------------------------------
Domestic book inventories aggregating $29.9 million and $32.2 million at
April 30, 1997 and 1996, respectively, are stated at cost or market, whichever
is lower, using the last-in, first-out method. All other inventories are stated
at cost or market, whichever is lower, using the first-in, first-out method.
Product Development Assets
Product development assets consisted of the following at April 30:
Dollars in thousands 1997 1996
- -------------------------------------------------------------------
Composition Costs $ 21,819 $ 21,505
Royalty Advances 9,864 8,777
- -------------------------------------------------------------------
Total $ 31,683 $ 30,282
- -------------------------------------------------------------------
Composition costs are net of accumulated amortization of $33,323 in 1997
and $27,199 in 1996.
Property and Equipment
Property and equipment consisted of the following at April 30:
Dollars in thousands 1997 1996
- -------------------------------------------------------------------
Land and Land Improvements $ 1,419 $ ----
Buildings and Leasehold
Improvements 18,345 12,045
Furniture and Equipment 55,622 45,765
- -------------------------------------------------------------------
75,386 57,810
Accumulated Depreciation (42,687) (34,821)
- -------------------------------------------------------------------
Total $ 32,699 $ 22,989
- -------------------------------------------------------------------
Intangible Assets
Intangible assets are stated at cost, net of accumulated amortization, and
consisted of the following at April 30:
Dollars in thousands 1997 1996
- -------------------------------------------------------------------
Acquired Publication Rights $ 122,240 $ 8,007
Goodwill and Other Intangibles 42,296 43,752
Noncompete Agreements 611 635
- -------------------------------------------------------------------
Total $ 165,147 $ 52,394
- -------------------------------------------------------------------
Other Accrued Liabilities
Included in other accrued liabilities was accrued compensation of
approximately $15.0 million and $13.5 million for 1997 and 1996, respectively.
<PAGE>
Income Taxes
The provision for income taxes was as follows:
Dollars in thousands 1997 1996 1995
- -------------------------------------------------------------------
Currently Payable
Federal $ 945 $ 1,122 $ 1,184
Foreign 5,295 4,142 3,675
State and local 1,026 1,000 314
- -------------------------------------------------------------------
Total Current Provision 7,266 6,264 5,173
- -------------------------------------------------------------------
Deferred Provision
Federal 2,496 5,270 1,716
Foreign 834 1,687 451
State and Local (83) 897 142
- -------------------------------------------------------------------
Total Deferred Provision 3,247 7,854 2,309
- -------------------------------------------------------------------
Total Provision $10,513 $ 14,118 $ 7,482
- -------------------------------------------------------------------
The Company's effective income tax rate as a percent of pretax income
differed from the U.S. federal statutory rate as shown below:
1997 1996 1995
- -------------------------------------------------------------------
U.S. Federal Statutory Rate 35.0% 35.0% 35.0%
State and Local Income Taxes
Net of Federal Income Tax Benefit 2.0 3.2 .8
Tax Benefit Derived from FSC Income (4.8) (3.1) (6.1)
Foreign Source Earnings Taxed at
Other than U.S. Statutory Rate .3 1.1 (1.0)
Nondeductible Amortization
of Intangibles .9 .7 1.1
Other-Net .7 (.5) (.8)
- -------------------------------------------------------------------
Effective Income Tax Rate 34.1% 36.4% 29.0%
- -------------------------------------------------------------------
Deferred taxes result from timing differences in the recognition of revenue
and expense for tax and financial reporting purposes. The components of the
provision for deferred taxes were as follows:
Dollars in thousands 1997 1996 1995
- -----------------------------------------------------------------------
Depreciation and Amortization $ (691) $ (3,684) $ 1,451
Accrued Expenses 264 6,100 1,197
Circulation Costs ---- 1,471 1,614
Provision for Sales Returns
and Doubtful Accounts (959) (1,391) (255)
Inventory 112 578 (1,150)
Retirement Benefits (87) (66) (224)
Divested Operations ---- (3,386) ----
Long-Term Liabilities 1,562 5,102 ----
Alternative Minimum Tax Credit
and Other Carryforwards 653 1,869 (722)
Net Operating Loss Carryforwards (1,150) ---- ----
Valuation Allowance 2,432 ---- ----
Other-Net 1,111 1,261 398
- -----------------------------------------------------------------------
Total Deferred Provision $ 3,247 $ 7,854 $ 2,309
- -----------------------------------------------------------------------
The significant components of deferred tax assets and liabilities were as
follows:
1997 1996
- --------------------------------------------------------------------------------
Dollars in thousands Current Long-Term Current Long-Term
- --------------------------------------------------------------------------------
Deferred Tax Assets
Net Operating Loss
Carryforwards $ ---- $25,703 $ ---- $ ----
Reserve for Sales Returns
and Doubtful Accounts 8,219 ---- 7,100 ----
Costs Capitalized for Taxes ---- 3,282 ---- 2,951
Retirement and Post-
Employment Benefits ---- 3,387 ---- 2,517
Amortization of Intangibles ---- 1,140 ---- ----
Other 52 ---- 1,871 ----
- --------------------------------------------------------------------------------
Total Deferred Tax Assets 8,271 33,512 8,971 5,468
Less: Valuation Allowance ---- (13,344) ---- ----
Net Deferred Tax Assets 8,271 20,168 8,971 5,468
- --------------------------------------------------------------------------------
Deferred Tax Liabilities
Inventory (1,128) ---- (1,294) ----
Depreciation and Amortization ---- (5,149) ---- (3,278)
Divested Operations ---- (44) ---- 248
Accrued Expenses ---- (6,230) ---- (5,664)
Long-Term Liabilities ---- (8,891) ---- (6,557)
Other ---- (1,552) ---- (2,626)
- --------------------------------------------------------------------------------
Total Deferred Tax Liabilities (1,128) (21,866) (1,294) (17,877)
- --------------------------------------------------------------------------------
Net Deferred Tax Assets (Liability) $ 7,143 $(1,698) $ 7,677 $(12,409)
- --------------------------------------------------------------------------------
Approximately $10.9 million of the valuation allowance relates to net
deferred tax assets recorded in connection with the VCH acquisition. Any amounts
realized in future years will reduce the intangible assets recorded at date of
acquisition.
At April 30, 1997, the Company had aggregate unused net operating loss
carryforwards of approximately $62.3 million which may be available to reduce
future taxable income primarily in foreign tax jurisdictions and generally have
no expiration date.
In fiscal 1996, the Company received approximately $6 million of net
federal, state and local tax refunds including interest on the favorable
resolution of amended tax return claims of prior years primarily relating to
timing differences. Net income for fiscal 1996 includes interest income related
thereto of $4.4 million, or $2.6 million after taxes, equal to $.16 per share.
In general, the Company plans to continue to invest the undistributed
earnings of its foreign subsidiaries in those businesses, and therefore no
provision is made for taxes which would be payable if such earnings were
distributed. At April 30, 1997, the undistributed earnings of foreign
subsidiaries approximated $32.3 million and, if remitted currently, would result
in additional taxes approximating $5.3 million.
<PAGE>
Notes Payable and Debt
Long-term debt consisted of the following at April 30:
Dollars in thousands 1997 1996
- --------------------------------------------------------------------------------
Term Loan Notes Payable Due
October 2000 Through 2003 $ 125,000 $ ----
The weighted average interest rate on the term-loan was 5.82% during 1997,
as well as at April 30, 1997.
In fiscal 1997, the Company entered into a seven year, $175 million credit
agreement expiring on October 31, 2003, with nine banks to obtain permanent
financing for the VCH acquisition and to replace its existing $50 million
revolving credit facility. The new credit agreement consists of a term loan of
$125 million and a new $50 million revolving credit facility. The Company has
the option of borrowing at the following floating interest rates: (i)
Eurodollars at a rate based on the London Interbank Offered Rate (LIBOR) plus an
applicable margin ranging from .15% to .30% depending on certain coverage ratios
or (ii) dollars at a rate based on the current certificate of deposit rate, plus
an applicable margin ranging from .275% to .425% depending on certain coverage
ratios or (iii) dollars at the higher of (a) the Federal Funds Rate plus .5% and
(b) the banks' prime rate. In addition, the Company pays a facility fee ranging
from .10% to .20% on the total facility depending on certain coverage ratios.
In the event of a change of control, as defined, the banks have the option
to terminate the agreement and require repayment of any amounts outstanding.
Amounts outstanding under the term loan have mandatory repayments as follows:
Dollars in thousands 1998 1999 2000 2001 2002
- --------------------------------------------------------------------------------
$ ---- $ ---- $ ---- $30,000 $30,000
The credit agreement contains certain restrictive covenants related to
minimum net worth, funded debt levels, an interest coverage ratio and restricted
payments, including a cumulative limitation for dividends paid and share
repurchases. Under the most restrictive covenant, approximately $51 million was
available for the payment of future dividends as of April 30, 1997.
The Company and its subsidiaries have other short-term lines of credit
aggregating $51 million at various interest rates. Information relating to all
short-term lines of credit follows:
Dollars in thousands 1997 1996 1995
- --------------------------------------------------------------------------------
End of Year
Amount outstanding $ 172 ---- $ 621
Weighted average interest rate 10.4% ---- 8.5%
During the Year
Maximum amount outstanding $26,253 $18,909 $ 1,351
Average amount outstanding $11,368 $ 5,960 $ 529
Weighted average interest rate 6.0% 7.0% 8.7%
- --------------------------------------------------------------------------------
Based on estimates of interest rates currently available to the Company for
loans with similar terms and maturities, the fair value of notes payable and
long-term debt approximates the carrying value.
Retirement Plans
The Company and its principal subsidiaries have contributory and
noncontributory retirement plans that cover substantially all employees. The
plans generally provide for employee retirement between the ages of 60 and 65
and benefits based on length of service and final average compensation, as
defined. No increase in compensation levels is assumed for the domestic plan, as
the Company may, but is not required to, update from time to time the ending
date (currently December 31, 1993) for the three-year period used to determine
final average compensation. For funded plans, funds are contributed as necessary
to provide for current service and for a portion of any unfunded projected
benefit obligation. To the extent that these requirements are exceeded by plan
assets, a contribution may not be made in a particular year. Plan assets consist
principally of investments in corporate stocks and bonds and government
obligations. The unfunded plan primarily relates to a non-U.S. subsidiary and is
governed by local statutory requirements.
<PAGE>
Pension costs for the defined benefit plans were as follows:
Dollars in thousands 1997 1996 1995
- --------------------------------------------------------------------------
Service Cost $ 2,902 $ 2,598 $ 2,418
Interest Cost on Projected
Benefit Obligation 4,665 3,757 3,440
Return on Assets (6,826) (6,331) (2,937)
Net Amortization and Deferral 1,014 1,430 (1,764)
- --------------------------------------------------------------------------
Net Periodic Pension Expense $ 1,755 $ 1,454 $ 1,157
- --------------------------------------------------------------------------
The net pension expense included above for the international plans amounted
to approximately $1.5 million, $1.1 million and $1.0 million for 1997, 1996, and
1995, respectively.
The following table sets forth the status of the plans and the amounts
recognized in the Company's consolidated statements of financial position.
1997 1996
- --------------------------------------------------------------------------------
Assets Exceed Accumulated Assets Exceed
Accumulated Benefits Accumulated
Dollars in thousands Benefits Exceed Assets Benefits
- --------------------------------------------------------------------------------
Fair Value of Plan Assets $ 68,385 $ ---- $ 61,076
Accumulated Benefit Obligation
Vested Benefits (50,214) (10,462) (45,624)
Nonvested Benefits (3,204) (564) (2,827)
- --------------------------------------------------------------------------------
(53,418) (11,026) (48,451)
Projected Compensation Increases (3,808) (1,420) (3,440)
- --------------------------------------------------------------------------------
Projected Benefit Obligation (57,226) (12,446) (51,891)
- --------------------------------------------------------------------------------
Funded Status 11,159 (12,446) 9,185
Unrecognized Net Asset (3,759) ---- (4,424)
Unrecognized Prior Service Cost 1,692 447 2,265
Unrecognized Net Loss (Gain) (7,524) 350 (6,696)
- --------------------------------------------------------------------------------
Prepaid (Accrued) Pension Cost $ 1,568 $ (11,649) $ 330
- --------------------------------------------------------------------------------
The range of assumptions used in 1997 and 1996 were:
1997 1996
- -------------------------------------------------------------------------------
Assets Exceed Accumulated Assets Exceed
Accumulated Benefits Accumulated
Benefits Exceed Assets Benefits
- -------------------------------------------------------------------------------
Discount Rate 7.5-8.5% 6.5% 7.5%-8.5%
Expected Long-Term Rate of
Return on Plan Assets 7.0-8.0% ---- 7.0%-8.0%
Rate of Increase in
Compensation Levels 0-7.0% 3.7% 0-7.0%
The Company has agreements with certain officers and senior management
personnel that provide for the payment of supplemental retirement benefits
during each of the 10 years after the termination of employment. Under certain
circumstances, including a change of control as defined, the payment of such
amounts could be accelerated on a present value basis. The cost of these
benefits is being charged to expense on a present value basis over the estimated
term of employment and amounted to approximately $1.1 million, $1.0 million, and
$.9 million in 1997, 1996 and 1995, respectively.
The Company provides life insurance and health care benefits, subject to
certain dollar limitations and retiree contributions, for substantially all of
its retired domestic employees. The cost of such benefits is expensed over the
years that the employees render service and is funded on a pay-as-you-go, cash
basis. The accumulated post-retirement benefit obligation amounted to $.3
million at April 30, 1997 and 1996 and the amount expensed in fiscal 1997 and
prior years was not material.
Commitments and Contingencies
The following schedule shows the composition of rent expense for operating
leases:
Dollars in thousands 1997 1996 1995
- --------------------------------------------------------------------------
Minimum Rental $ 13,654 $ 12,550 $ 12,202
Lease Escalation 2,188 1,913 1,848
Less: Sublease Rentals (19) (19) (63)
- --------------------------------------------------------------------------
Total $ 15,823 $ 14,444 $ 13,987
- --------------------------------------------------------------------------
Future minimum payments under operating leases aggregated $93.4 million at
April 30, 1997. Annual payments under these leases are $16.2 million, $15.6
million, $14.1 million, $13.6 million and $13.3 million for fiscal years 1998
through 2002, respectively.
The Company is involved in routine litigation in the ordinary course of its
business. In the opinion of management, the ultimate resolution of all pending
litigation will not have a material effect upon the financial condition or
results of operations of the Company.
Segment Information
The Company operates in one business segment, namely publishing, and
develops, publishes and markets products in print and electronic formats
including textbooks, professional and reference works, consumer books, and
periodicals including journals and other subscription-based products, for the
educational, scientific, technical, professional and trade markets around the
world.
<PAGE>
The Company's international operations are located in Europe, Canada,
Australia and Asia. The following table presents revenues, operating income and
identifiable assets for the domestic and international operations.
Dollars in thousands 1997 1996 1995
- --------------------------------------------------------------------------
Revenues
Domestic $ 297,152 $ 279,998 $ 258,464
International 170,638 112,299 102,907
Interarea transfers (35,816) (29,593) (30,280)
- --------------------------------------------------------------------------
Total $ 431,974 $ 362,704 $ 331,091
- --------------------------------------------------------------------------
Operating Income
Domestic $ 20,817 $ 20,180 $ 15,242
International 13,980 12,775 11,637
- --------------------------------------------------------------------------
Total $ 34,797 $ 32,955 $ 26,879
- --------------------------------------------------------------------------
Identifiable Assets
Domestic $ 186,473 $ 178,442 $ 166,478
International 192,355 50,775 46,593
Corporate 79,116 55,284 34,410
- --------------------------------------------------------------------------
Total $ 457,944 $ 284,501 $ 247,481
- --------------------------------------------------------------------------
Transfers between geographic areas are generally made at a fixed discount
from list price and principally represent sales from the United States to the
Company's international operations. Export sales from the United States to
unaffiliated international customers amounted to approximately $51.4 million,
$47.5 million and $41.2 million in 1997, 1996 and 1995, respectively. The pretax
income for consolidated international operations was approximately $16.5
million, $13.0 million and $11.6 million in 1997, 1996 and 1995, respectively.
Included in operating and administrative expenses were net foreign exchange
gains (losses) of approximately $.7 million, $.2 million and $(.2) million in
1997, 1996 and 1995, respectively.
Changes in the cumulative translation adjustment account were as follows:
Dollars in thousands 1997 1996
- --------------------------------------------------------------------------
Balance at May 1 $ (3,086) $ (2,411)
Aggregate Translation
Adjustments for the Year 3,192 (675)
- --------------------------------------------------------------------------
Balance at April 30 $ 106 $ (3,086)
- --------------------------------------------------------------------------
Stock Compensation Plans
Under the Company's Key Employee Stock Plan, qualified employees are
eligible to receive awards that may include stock options, performance stock
awards and restricted stock awards up to a maximum per year of 3% of Class A
stock outstanding and subject to an overall maximum of 2,000,000 shares through
the year 2000. As of April 30, 1997, approximately 780,689 shares were available
for future grants.
Options granted under the plan may not be less than 100% of the fair market
value of the stock at the date of grant. Options are exercisable, in part or in
full, over a maximum period of 10 years from the date of grant, and generally
vest within five years from the date of the grant. Under certain circumstances
relating to a change of control, as defined, the right to exercise options
outstanding could be accelerated.
The Company elected to apply the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation". Accordingly, no compensation cost is recognized for fixed stock
option grants. Had compensation cost been recognized, net income would have been
reduced on a pro forma basis by $.4 million, or $.02 per share, in 1997 and $.1
million, or $.01 per share, in 1996. For the pro forma calculations, the fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions for 1997 and
1996, respectively: risk-free interest rate of 7.1% and 6.3%, dividend yield of
1.5% and 2.0%, and volatility of 22% and expected life of nine years for both
years.
<PAGE>
A summary of the activity and status of the company's stock option plans
follows:
1997 1996
- --------------------------------------------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
(Options in thousands) Options Price Options Price
- --------------------------------------------------------------------------------
Outstanding at
Beginning of Year 1,028,663 $ 15.38 1,070,038 $ 12.87
Granted 143,349 30.36 133,224 28.76
Exercised (107,323) 10.84 (157,099) 9.62
Canceled (22,750) 17.24 (17,500) 15.64
- --------------------------------------------------------------------------------
Outstanding at
End of Year 1,041,939 $ 17.87 1,028,663 $ 15.38
- --------------------------------------------------------------------------------
Exercisable at
End of Year 603,941 $ 12.26 570,170 $ 11.07
The weighted average fair value of options granted during the year was
$12.05 and $9.88 in 1997 and 1996, respectively.
A summary of information about stock options outstanding and options
exercisable at April 30, 1997, follows:
Options Options
(Options in thousands) Outstanding Exercisable
- --------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Range of Remaining Exercise Exercise
Exercise Prices Options Term Price Options Price
- --------------------------------------------------------------------------------
$ 6.75 to $ 12.25 524,841 4.7 years $ 10.04 498,165 $ 9.96
$ 20.69 204,925 7.1 years $ 20.69 68,700 $ 20.69
$ 26.25 to $ 31.63 312,173 8.9 years $ 29.17 37,076 $ 27.48
- --------------------------------------------------------------------------------
Total 1,041,939 6.2 years $ 17.87 603,941 $ 12.26
- --------------------------------------------------------------------------
Under the terms of the Company's executive long-term incentive plans, upon
the achievement of certain three-year financial performance-based targets,
awards will be payable in restricted shares of the Company's Class A Common
stock. The restricted shares vest equally as to 50% on the first and second
anniversary date after the date the award is earned. Compensation expense is
charged to earnings over the respective three-year period. In addition, the
Company granted restricted shares of the Company's Class A Common stock to key
executive officers and others in connection with their employment. The
restricted shares generally vest one-third at the end of the third, fourth and
fifth years, respectively, following the date of the grant. Under certain
circumstances relating to a change of control or termination, as defined, the
restrictions would lapse and shares would vest earlier. Compensation expense is
charged to earnings ratably over five years, or sooner if vesting is
accelerated, from the dates of grant. Restricted shares issued in connection
with the above plans amounted to 25,638, 145,658 and 101,084 shares at
weighted-average grant-date fair values of $29.00, $28.11, and $21.00 per share,
in 1997, 1996 and 1995, respectively. Compensation expense charged to earnings
for the above amounted to $1.5 million, $1.3 million and $.3 million in 1997,
1996 and 1995, respectively.
Under the terms of the Company's Director Stock Plan, each member of the
Board of Directors who is not an employee of the Company is awarded Class A
Common stock equal to 50% of the board member's annual cash compensation, based
on the market value of the stock on the date of the shareholders' meeting.
Directors may also elect to receive all or a portion of their cash compensation
in stock. Under this plan 10,274, 5,752 and 8,662 shares were issued in 1997,
1996, and 1995, respectively. Compensation expense related to this plan amounted
to approximately $.3 million, $.2 million, and $.2 million in 1997, 1996 and
1995, respectively.
Capital Stock and Changes in Capital Accounts
Preferred stock consists of 2,000,000 authorized shares with $1 par value.
To date, no preferred shares have been issued. Common stock consists of
30,000,000 authorized shares of Class A Common, $1 par value, and 12,000,000
authorized shares of Class B Common, $1 par value.
Each share of the Company's Class B Common stock is convertible into one
share of Class A Common stock. The holders of Class A stock are entitled to
elect 30% of the entire Board of Directors and the holders of Class B stock are
entitled to elect the remainder. On all other matters, each share of Class A
stock is entitled to one-tenth of one vote and each share of Class B stock is
entitled to one vote.
<PAGE>
Changes in selected capital accounts were as follows:
Additional
Common Stock Paid-In Treasury
Dollars in thousands Class A Class B Capital Stock
- --------------------------------------------------------------------------------
Balance at April 30, 1994 $8,045 $2,091 $33,008 $(31,033)
Restricted Share Issuance ---- ---- 1,266 618
Director Stock Plan Issuance ---- ---- 124 59
Executive Long-Term
Incentive Plan Issuance ---- ---- 162 76
Exercise of Stock Options 35 ---- 601 (46)
Purchase of Treasury Shares ---- ---- ---- (212)
Other 7 (7) 455 ----
Retroactive effect of
2 for 1 stock split 8,086 2,084 (10,170) ----
- --------------------------------------------------------------------------------
Balance at April 30, 1995 $16,173 $4,168 $25,446 $(30,538)
Director Stock Plan Issuance ---- ---- 124 41
Executive Long-Term
Incentive Plan Issuance ---- ---- 182 60
Purchase of Treasury Shares ---- ---- ---- (3,323)
Restricted Share Issuance ---- ---- 3,054 948
Issuance of Shares Under
Employee Savings Plan ---- ---- 674 208
Exercise of Stock Options 157 ---- 1,354 (889)
Other 82 (82) 781 ----
- --------------------------------------------------------------------------------
Balance at May 1, 1996 $16,412 $4,086 $31,615 $(33,493)
Director Stock Plan Issuance ---- ---- 217 85
Executive Long-Term
Incentive Plan Issuance ---- ---- 132 47
Purchase of Treasury Shares ---- ---- ---- (10,506)
Restricted Share Issuance ---- ---- 337 149
Issuance of Shares Under
Employee Savings Plan ---- ---- 212 84
Exercise of Stock Options 108 ---- 1,056 ----
Other 49 (49) 763 4
- --------------------------------------------------------------------------------
Balance at April 30, 1997 $16,569 $4,037 $34,332 $(43,630)
- --------------------------------------------------------------------------------
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Results of Operations:
Fiscal 1997 Compared to Fiscal 1996
The Company continued to expand its global operations and grow its core
businesses.
In fiscal 1997, the Company acquired a 90% interest in the German based VCH
Publishing Group ("VCH") through the purchase of 90% of the shares of VCH
Verlagsgesellschaft mbH for approximately $99 million in cash. VCH is a leading
scientific, technical and professional publisher of journals and books in such
disciplines as chemistry, architecture, civil engineering and law. During the
year, the Company also acquired various newsletters including the publishing
assets of Technical Insights, Inc., a publisher of print and electronic
newsletters in various areas of science and technology, for purchase prices
aggregating $4.7 million.
Revenues for the year advanced 19% to $432.0 million. Excluding VCH,
revenues increased 6% over the prior year driven by the Company's scientific,
technical and medical journal programs, by its college division and by its
international operations. The Company's worldwide scientific, technical, and
medical publishing revenues advanced 36% over the prior year, and 9% excluding
VCH. Educational publishing revenues increased 7% and professional/trade
revenues increased marginally over the prior year. Similar to the experience of
other companies in the trade publishing markets, professional/trade results were
adversely affected by a change in a small number of domestic wholesalers and
retailers to just-in-time inventory management policies, which also resulted in
higher returns.
Cost of sales as a percentage of revenues was 35.9% in 1997 compared with
34.9% in the prior year primarily reflecting increased author royalties and
inventory write-offs.
Operating and administrative expenses, excluding VCH, increased by 3.6%
over the prior year. Expenses declined as a percentage of revenues to 54.1% in
1997 from 54.7%, as the rate of growth in expenses was contained at less than
the revenue growth rate.
Operating income increased 6% over the prior year to $34.8 million
primarily due to the effects of the higher revenue base. Operating income
margins declined to 8.1% of revenue from 9.1% in the prior year primarily due to
the amortization of intangibles related to the VCH acquisition.
Interest expense increased by $5.8 million due to the financing costs
related to the VCH acquisition. Interest income decreased by $3.9 million
primarily as a result of interest received in the prior year on the favorable
resolution of amended tax return claims amounting to $4.4 million.
The effective tax rate was 34.1% compared with 36.4% in the prior year
primarily due to higher tax benefits related to the foreign sales corporation
and lower state and local income taxes.
Net income declined $4.3 million to $20.3 million primarily due to VCH's
acquisition related financing and amortization costs in the current year, as
well as the special income item in the prior year of $2.6 million after taxes,
equal to $.16 per share, related to interest received on the resolution of
amended tax return claims.
Results of Operations:
Fiscal 1996 Compared to Fiscal 1995
In fiscal 1996, the Company invested a total of $4.0 million during the
year to acquire the Clinical Psychology Publishing Company (CPPC), a publisher
of journals and books in the fields of clinical and educational psychology;
Preservation Press consisting of architectural heritage books, technical
preservation guides and children's architecture books; and certain other smaller
publishing properties. The Company also became the publisher of Cancer, the
American Cancer Society's medical journal.
<PAGE>
Revenues for the year advanced 10% to $362.7 million led by the Company's
worldwide scientific, technical and medical journal programs, college texts and
the professional/trade computer and business book lines. Worldwide scientific,
technical, and medical publishing revenues increased 13% and professional/trade
revenues increased 10% over the prior year. Educational publishing revenues
increased 5% over the prior year.
Cost of sales as a percentage of revenues was 34.9% in 1996 compared with
34.2% in the prior year primarily reflecting increased paper costs.
Operating and administrative expenses increased by 6.2% but declined as a
percentage of revenues to 54.7% in 1996 from 56.5% as the rate of growth in
expenses was contained at less than the revenue growth rate.
Operating income increased 23% over the prior year to $33.0 million
primarily due to the effects of the higher revenue base coupled with a cost-
contained infrastructure. Operating income margins improved to 9.1% of revenue
from 8.1% in the prior year.
Net interest income increased by $6.9 million over the prior year primarily
as a result of interest received on the favorable resolution of amended tax
return claims amounting to $4.4 million, or $2.6 million after taxes, equal to
$.16 per share. The improvement was also due to the prepayment of high-cost
long-term debt at the end of fiscal 1995.
The effective tax rate was 36.4%, compared with 29.0% in the prior year,
due to higher effective tax rates on state, local and foreign sourced earnings.
Liquidity and Capital Resources
The Company's cash and cash equivalents balance was $79.1 million at the
end of fiscal 1997, compared with $55.3 at the end of the prior year. Cash
provided by operating activities was $63.9 million in fiscal 1997, a decrease of
$4.2 million compared with the prior year. The prior year included $6 million of
cash flow related to the favorable resolution of amended tax return claims.
The Company's operating cash flow is strongly affected by the seasonality
of its domestic college business and receipts from its journal subscriptions.
Receipts from journal subscriptions occur primarily during November and December
from companies commonly referred to as independent subscription agents. These
companies facilitate the journal ordering process by consolidating the
subscription orders/billings of each subscriber with various publishers. Monies
are collected in advance from subscribers by the subscription agents and are
remitted to the Company, generally prior to the commencement of the
subscriptions. Although, at fiscal year-end the Company had minimal credit-risk
exposure to these agents, future calendar-year subscription receipts from these
agents are highly dependent on their financial position and liquidity.
Subscription agents account for approximately 25% of total consolidated revenues
and no one agent accounts for more than 6% of total consolidated revenues.
Sales to the domestic college market tend to be concentrated in June
through August, and again in November through January. Cash disbursements for
inventory are relatively large during the spring in anticipation of these
college sales. The Company normally requires increased funds for working capital
from the beginning of the fiscal year into September. Subject to variations that
may be caused by fluctuations in inventory accumulation or in patterns of
customer payments, the Company's normal operating cash flow is not expected to
vary materially in the near term.
To finance its short-term seasonal working capital requirements and its
growth opportunities, the Company has adequate cash and cash equivalents
available, as well as both domestic and foreign short-term lines of credit, as
more fully described in the note to the consolidated financial statements
entitled "Notes Payable and Debt".
The capital expenditures of the Company consist primarily of investments in
product development and property and equipment. Capital expenditures for fiscal
1998 are expected to increase approximately 40% over 1997, primarily
representing increased investments in product development, including electronic
media products, and computer equipment upgrades to support the higher volume of
business to ensure efficient, quality-driven customer service. These investments
will be funded primarily from internal cash generation or from the liquidation
of cash equivalents.
<PAGE>
Effects of Inflation and Cost Increases
Although the impact of inflation is somewhat minimized, as the business
does not require a high level of investment in property and equipment, the
Company does experience continuing cost increases reflecting, in part, general
inflationary factors. To mitigate the effects of paper and other cost increases,
the Company has taken a number of initiatives including various steps to lower
overall production and manufacturing costs including substitution of paper
grades. In addition, selling prices have been selectively increased as
competitive conditions permit. The Company anticipates that it will be able to
continue this approach in the future. Paper prices decreased in fiscal 1997
after a few years of an increasing price environment.
<PAGE>
Results by Quarter (Unaudited)
John Wiley & Sons, Inc. and Subsidiaries
Dollars in thousands except per share data 1997 1996
- --------------------------------------------------------------------------------
Revenues
First quarter $ 99,217 $ 88,092
Second quarter 107,070 86,831
Third quarter 118,105 97,409
Fourth quarter 107,582 90,372
Fiscal year $431,974 $362,704
Operating Income
First quarter $ 11,716 $ 11,496
Second quarter 7,189 7,119
Third quarter 11,913 10,710
Fourth quarter 3,979 3,630
Fiscal year $ 34,797 $ 32,955
Net Income
First quarter $ 7,229 $ 7,118
Second quarter 3,494 4,240
Third quarter 6,731 9,835<F1>
Fourth quarter 2,886 3,487
Fiscal year $ 20,340 $ 24,680
Income Per Share
Primary and Fully Diluted
First quarter $ .44 $ .43
Second quarter .21 .26
Third quarter .41 .59<F1>
Fourth quarter .18 .21
Fiscal year $ 1.24 $ 1.49
<F1> Includes interest income after taxes in 1996 of $2.6 million, equal to $.16
per share, relating to interest received on the favorable resolution of
amended tax return claims.
The Company's Class A and Class B shares are listed on the New York
Stock Exchange under the symbols JWA and JWB, respectively. Dividends per share
and the market price range by fiscal quarter for the past two fiscal years were
as follows:
Class A Common Stock Class B Common Stock
- --------------------------------------------------------------------------------
Divi- Market Price Divi- Market Price
dends High Low dends High Low
- --------------------------------------------------------------------------------
1997
First quarter $ .10 $35.13 $27.50 $.0875 $34.75 $28.75
Second quarter .10 30.75 27.75 .0875 30.50 28.00
Third quarter .10 32.25 27.50 .0875 32.00 27.50
Fourth quarter .10 31.88 28.13 .0875 31.25 28.75
- --------------------------------------------------------------------------------
1996
First quarter $.0875 $28.75 $27.13 $.0775 $29.00 $27.75
Second quarter .0875 30.50 27.13 .0775 30.00 28.00
Third quarter .0875 35.00 28.88 .0775 34.75 28.75
Fourth quarter .0875 35.00 29.63 .0775 34.63 29.50
As of April 30, 1997, the approximate number of holders of the
Company's Class A and Class B Common Stock were 1,290 and 200, respectively,
based on the holders of record and other information available to the Company.
The Company's credit agreement contains certain restrictive covenants
related to the payment of dividends. Under the most restrictive covenant,
approximately $51 million was available for the payment of future dividends.
Subject to the foregoing, the Board of Directors considers quarterly the payment
of cash dividends based upon its review of earnings, the financial position of
the Company and other relevant factors.
<PAGE>
Selected Financial Data
John Wiley & Sons, Inc. and Subsidiaries
For the years ended April 30
- --------------------------------------------------------------------------------
Dollars in thousands except per share data
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<FN>
Revenues $431,974 $362,704 $331,091 $294,289 $272,894
Operating Income 34,797 32,955 26,879 18,883 13,016
Net Income 20,340 24,680<F1> 18,311 12,117 7,718
Working Capital 39,783 31,515 11,241 35,059 31,804
Total Assets 457,944 284,501 247,481 243,940 220,593
Long-Term Debt 125,000 -- -- 26,000 32,000
Shareholders' Equity 128,983 117,982 98,832 82,330 71,276
- ----------------------------------------------------------------------------------------
Per Share Data
Net Income
Primary and Fully Diluted 1.24 1.49<F1> 1.12 .76 .50
Cash Dividends
Class A Common .40 .35 .31 .275 .275
Class B Common .35 .31 .275 .245 .245
Book Value-End of Year 8.11 7.32 6.21 5.23 4.63
</FN>
<FN>
<F1> Fiscal 1996 net income includes interest income after taxes of $2.6
million, or $.16 per share, received on the favorable resolution of amended
tax return claims.
</FN>
</TABLE>
<PAGE>
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance
Beginning Charged to From from at End of
Description of Period Costs and Expenses Acquisitions Reserves Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<FN>
Year Ended April 30, 1997
Allowance for sales returns<F1> $ 20,786 $ 26,396 $ 357 $ 20,440 $ 27,099
Allowance for doubtful accounts $ 6,049 $ 2,591 $ 1,548 $ 2,774<F2> $ 7,414
Year Ended April 30, 1996
Allowance for sales returns<F1> $ 17,519 $ 17,744 $ 14,477 $ 20,786
Allowance for doubtful accounts $ 5,114 $ 5,499 $ 4,564<F2> $ 6,049
Year Ended April 30, 1995
Allowance for sales returns<F1> $ 15,558 $ 16,110 $ 14,149 $ 17,519
Allowance for doubtful accounts $ 4,385 $ 4,014 $ 3,285<F2> $ 5,114
</FN>
<FN>
<F1> Allowance for sales returns represents anticipated returns net of inventory
and royalty costs.
<F2> Accounts written off, less recoveries.
</FN>
</TABLE>
<PAGE>
SIGNATURES
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.
JOHN WILEY & SONS, INC.
----------------------------------
(Company)
By: /s/ Charles R. Ellis
---------------------------------------------
Charles R. Ellis
President and Chief Executive Officer
By: /s/ Robert D. Wilder
---------------------------------------------
Robert D. Wilder
Executive Vice President and
Chief Financial & Support Operations Officer
By: /s/ Peter W. Clifford
---------------------------------------------
Peter W. Clifford
Senior Vice President, Finance
Corporate Controller
& Chief Accounting Officer
Dated: June 26, 1997
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons constituting directors of
the Company on June 26, 1997.
/s/ Franklin E. Agnew /s/ Henry A. McKinnell, Jr
-------------------- -------------------------
Franklin E. Agnew Henry A. McKinnell, Jr.
/s/ Warren J. Baker /s/ Chester O. Macey
-------------------- -------------------------
Warren J. Baker Chester O. Macey
/s/ Charles R. Ellis /s/ William R. Sutherland
-------------------- -------------------------
Charles R. Ellis William R. Sutherland
/s/ H. Allen Fernald /s/ Thomas M. Taylor
-------------------- -------------------------
H. Allen Fernald Thomas M. Taylor
/s/ Leo J. Thomas
-------------------- -------------------------
Gary J. Fernandes Leo J. Thomas
/s/ Larry Franklin /s/ Bradford Wiley II
-------------------- -------------------------
Larry Franklin Bradford Wiley II
/s/ John S. Herrington /s/ Deborah E. Wiley
-------------------- -------------------------
John S. Herrington Deborah E. Wiley
/s/ Peter Booth Wiley
-------------------------
Peter Booth Wiley
January 16, 1997
Richard S. Rudick, Esq.
125 East 63rd Street
New York, N.Y. 10021
Dear Dick:
This letter, when signed by both of us, will confirm our understanding as
follows regarding certain matters relating to your employment.
Your employment as a Senior Vice President of the Company is "at will", and may
be terminated by the Company or by you at any time, for any reason, subject
however to the provisions of this agreement.
If your employment is terminated by the Company other than for cause as defined
below, you shall be entitled to severance as follows:
Continuation of base salary then in effect for 15 months ("the Severance
Period") from the date of termination. If during the Severance Period you obtain
regular employment, you agree to promptly notify the Company, and the payments
due hereunder shall be reduced dollar for dollar by the amount of cash
compensation in excess of $90,000 from such employment during the Severance
Period. If as a result of any such offset, the Company has overpaid you, you
agree to promptly reimburse the Company.
Coverage during the Severance Period (at the levels in effect for comparable
employees from time to time,) under the following employee benefit plans or
provisions for comparable benefits outside such plans, but only to the extent
comparable coverage is not provided by any new employer: (1) Group Health
Insurance Program; (2) Group Life and Accidental Death and Dismemberment
Insurance, taking into account any waiver of coverage under the Supplemental
Executive Retirement Plan ("SERP") in which you participate.
Outplacement services, in accordance with the policy of the Company for senior
executives at the time of termination.
If within 18 months following a "change of control" as defined in the SERP, you
are terminated by the Company other than for cause as defined below, or elect to
terminate your contract for "good reason" as defined in the SERP, in either case
you shall, in addition to the amounts specified above, be entitled to your
"target incentive amount" under the Executive Annual Incentive Plan ("EAIP") for
a fiscal year ending during the Severance Period, (and if not otherwise
determined prior to termination, for any prior fiscal year) and the same amount
(pro- rated to the end of the Severance Period), for the EAIP for a fiscal year
beginning during the Severance Period, or the equivalent under any comparable
bonus or variable compensation plan which may hereafter be adopted by the
Company in lieu of the EAIP.
<PAGE>
Richard S. Rudick, Esq. January 16, 1997
You agree that the payments and benefits set forth above shall be full and
adequate compensation for all damages you may suffer as result of termination of
your employment.
If, without cause or your consent, or other than on account of disability as
defined in the Company's programs, your cash compensation is reduced from the
current levels (other than as a result of targets not being met in any EAIP or
equivalent program) and within 30 days thereafter you elect to terminate your
employment by written notice, or if you elect to terminate your employment for
"good reason" within 18 months following a "change of control", in either case
such termination shall be treated as a termination by the Company without cause
for purposes of this agreement.
Notwithstanding the foregoing, any rights or benefits you may have under the
employment and benefit plans and programs of the Company (other than for
severance, which shall be determined hereunder), including without limitation
the SERP shall be determined in accordance with such plans and programs, and
nothing in this agreement shall modify or reduce any rights you may have
resulting from a "change of control" as defined in the SERP.
For purposes of this agreement, "cause" shall be limited to:
a substantial failure or refusal to devote your full business time, and your
knowledge and skills, to the best of your ability, to the performance of your
duties, after notice by the Company, or serious willful misconduct relating to
your duties and obligations as an employee.
Conviction of a crime, perpetuation of a fraud, habitual intoxication or illegal
use of controlled or habit forming substances, or knowingly making a material
false statement to the Company's board or management.
In consideration of our entering into this agreement, you agree that for period
of five months after termination of your employment for any reason other than
termination by the Company without cause, or termination by you for "good
reason" following a "change of control" as defined in the SERP, you will not
directly or indirectly be employed by, render services to, or participate in the
management, operation or control (as a consultant or otherwise), of a business
<PAGE>
Richard S. Rudick, Esq. January 16,1997
of the same nature as that carried on by the Company or any of its subsidiaries.
You further agree that for one year after termination of your employment for any
reason (including termination by the company without cause) except for a
termination by the company, or by you for "good reason within 18 months
following a change of control", you will not directly or indirectly solicit for
employment or hire any employee of the company, without our prior written
consent.
Except as otherwise provided above, this is our entire agreement concerning your
employment, and no modification shall be binding unless it is in writing and
signed by the party against whom enforcement is sought. This agreement shall be
interpreted and construed in accordance with the laws of the State of New York,
without giving effect to its conflict of laws provisions, and shall be binding
upon the Corporation and its successors and assigns.
Please sign and return the enclosed copy of this letter to confirm our
agreement.
Sincerely,
JOHN WILEY & SONS, INC.
By: ______________________
Charles R. Ellis
President & Chief Executive
Officer
Agreed:
_______________________
SUBSIDIARIES OF JOHN WILEY & SONS, INC.<F1>
----------------------------------------------
Jurisdiction
In Which
Incorporated
-------------------
Wiley Europe Limited England
Wiley Heyden Limited England<F2>
John Wiley & Sons Limited England<F2>
Academy Group Limited England<F2>
Chancery Law Publishing Limited England<F2>
Jacaranda Wiley Limited Australia
John Wiley & Sons (HK) Limited Hong Kong
Wiley Interscience, Inc. New York
John Wiley & Sons International Rights, Inc. Delaware
Wiley-Liss, Inc. Delaware
Wiley Publishing Services, Inc. Delaware
Wiley Subscription Services, Inc. Delaware
Clinical Psychology Publishing Company, Inc. Delaware
John Wiley & Sons Canada Limited Canada
Wiley Foreign Sales Corporation Barbados
John Wiley & Sons (Asia) Pte Ltd. Singapore
Scripta Technica, Inc. District of Columbia
John Wiley & Sons GmbH Germany
VCH Verlagsgesellschaft mbH Germany<F3>
Wilhelm Ernst & Sohn, Verlag fur
Architektur und technische
Wissenschaften, GmbH Germany<F4>
Akademie Verlag GmbH Germany<F4>
Chemical Concepts Gesellschaft fur
Chemie-Informationssysteme mbH Germany<F4>
VCH Publishers (U.K.) Limited England<F4>
VCH Verlags AG Switzerland<F4>
Verlag Chemie GmbH Germany<F4>
Physik-Verlag GmbH Germany<F4>
- --------------------------------------------------------------------------------
<F1> The names of other subsidiaries which would not constitute a significant
subsidiary in the aggregate have been omitted.
<F2> Subsidiary of Wiley Europe Limited.
<F3> Subsidiary of John Wiley & Sons GmbH.
<F4> Subsidiary of VCH Verlagsgesellschaft mbH.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND THE CONSOLIDATED STATEMENT OF
INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000107140
<NAME> John Wiley & Sons, Inc.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<CASH> 79,116
<SECURITIES> 0
<RECEIVABLES> 96,354
<ALLOWANCES> 34,513
<INVENTORY> 49,100
<CURRENT-ASSETS> 204,135
<PP&E> 75,386
<DEPRECIATION> 42,687
<TOTAL-ASSETS> 457,944
<CURRENT-LIABILITIES> 164,352
<BONDS> 125,000
0
0
<COMMON> 20,606
<OTHER-SE> 108,377
<TOTAL-LIABILITY-AND-EQUITY> 457,944
<SALES> 0
<TOTAL-REVENUES> 431,974
<CGS> 155,245
<TOTAL-COSTS> 397,177
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,225
<INCOME-PRETAX> 30,853
<INCOME-TAX> 10,513
<INCOME-CONTINUING> 20,340
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,340
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
</TABLE>
