SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended July 31, 1998 Commission File No. 1-11507
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from to
JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5593032
- ----------------------------- ----------------------------------
(State or other jurisdictionf (I.R.S. Employer Identification No.)
incorporation or organization)
605 THIRD AVENUE, NEW YORK, NY 10158-0012
- --------------------------------------- ----------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (212) 850-6000
----------------------
NOT APPLICABLE
------------------------------------------------------------
Former name, former address, and former fiscal year,
if changed since last report
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 [ ]
The number of shares outstanding of each of the Registrant's classes of
common stock as of July 31, 1998 were:
Class A, par value $1.00 - 12,914,109
Class B, par value $1.00 - 3,084,658
This is the first page of a eleven page document
<PAGE>
JOHN WILEY & SONS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
-------
Item 1. Financial Statements.
Condensed Consolidated Statements of Financial Position - Unaudited
as of July 31, 1998 and 1997 and April 30, 1998......................... 3
Condensed Consolidated Statements of Income - Unaudited
for the Three Months ended July 31, 1998 and 1997....................... 4
Condensed Consolidated Statements of Cash Flow - Unaudited
for the Three Months ended July 31, 1998 and 1997....................... 5
Notes to Unaudited Condensed Consolidated Financial Statements.......... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.... ......................... 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................10
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995......................10
SIGNATURES................................ ................................11
EXHIBITS
27 Financial Data Schedule
<PAGE>
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
July 31, April 30,
-------------------- -------------
<S> <C> <C> <C>
Assets 1998 1997 1998
--------------------- -------------
Current Assets
Cash and cash equivalents $ 94,821 49,905 127,405
Accounts receivable 72,929 74,721 56,147
Inventories 43,835 49,355 44,912
Deferred income tax benefits 477 7,146 456
Prepaid expenses 8,071 7,390 8,690
------- -------- --------
Total Current Assets 220,133 188,517 237,610
Product Development Assets 34,992 33,155 36,039
Property and Equipment 33,491 32,346 34,310
Intangible Assets 180,051 159,830 172,798
Deferred income tax benefits 15,597 16,898 15,593
Other Assets 10,811 11,253 10,564
------- -------- --------
Total Assets 495,075 441,999 506,914
======== ======== ========
Liabilities & Shareholders' Equity
Current Liabilities
Notes pay. & curr portion of L/T debt $ - 62 -
Accounts and royalties payable 48,918 44,068 36,854
Deferred subscription revenues 66,838 62,535 99,225
Accrued income taxes 8,709 6,186 1,174
Other accrued liabilities 35,560 28,551 41,100
------- ------- -------
Total Current Liabilities 160,025 141,402 178,353
Long-Term Debt 125,000 125,000 125,000
Other Long-Term Liabilities 27,074 24,708 26,663
Deferred Income Taxes 16,073 15,238 16,147
Shareholders' Equity 166,903 135,651 160,751
------- -------- --------
Total Liab.& Shareholders' Equity 495,075 441,999 506,914
========= ========= ========
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
JOHN WILEY & SONS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands except per share information)
<TABLE>
<CAPTION>
Three Months
Ended July 31,
-------------------------------------
<S> <C> <C>
1998 1997
------------------ ------------
Revenues $ 122,091 112,086
Costs and Expenses
Cost of sales 42,367 38,150
Operating and administrative expenses 60,374 58,161
Amortization of intangibles 2,284 2,064
------------ ----------
Total Costs and Expenses 105,025 98,375
------------ ----------
Operating Income 17,066 13,711
Interest Income and Other 1,422 877
Interest Expense (1,982) (1,960)
------------- -----------
Interest Income (Expense) - Net (560) (1,083)
------------- -----------
Income Before Taxes 16,506 12,628
Provision For Income Taxes 5,942 4,546
------------- -----------
Net Income $ 10,564 8,082
============= ============
Net Income Per Share
Diluted $ 0.64 0.49
Basic $ 0.67 0.51
Cash Dividends Per Share
Class A Common $ 0.1275 0.1125
Class B Common $ 0.1125 0.1000
Average Shares
Diluted 16,609 16,332
Basic 15,809 15,743
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW - UNAUDITED
(In thousands)
<TABLE>
<CAPTION>
For The Three Months
Ended July 31,
------------------------------
<S> <C> <C>
1998 1997
--------- --------
Operating Activities
Net income 10,564 8,082
Non-cash items 18,786 11,385
Net change in operating assets and liab. (41,351) (37,400)
---------- ---------
Cash Provided by Operating Activities (12,001) (17,933)
---------- ---------
Investing Activities
Additions to product development assets (5,919) (7,327)
Additions to property and equipment (2,142) (1,826)
Acquisition of publishing assets (8,396) (447)
---------- ---------
Cash Used for Investing Activities (16,457) (9,600)
---------- ---------
Financing Activities
Purchase of treasury shares (2,285) (559)
Net repayments of short-term debt - (104)
Cash dividends (1,988) (1,751)
Proceeds from exercise of stock options 419 587
---------- ----------
Cash Provided by (Used for) Financing (3,854) (1,827)
Activities ---------- ----------
Effects of Exchange Rate Changes on Cash (272) 149
---------- ----------
Cash and Cash Equivalents
Decrease for Period (32,584) (29,211)
Balance at Beginning of Period 127,405 79,116
---------- ----------
Balance at End of Period $ 94,821 49,905
========== ==========
Cash Paid During the Period for
Interest $ 1,960 2,497
Income taxes $ 5,192 1,587
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the Company's
consolidated financial position as of July 31, 1998 and 1997, and April 30,
1998, and results of operations and cash flows for the periods ended July
31, 1998 and 1997. These statements should be read in conjunction with the
most recent audited financial statements contained in the Company's Form
10-K for the fiscal year ended April 30, 1998.
2. The results for the three months ended July 31, 1998 are not necessarily
indicative of the results to be expected for the full year.
3. A reconciliation of the shares used in the computation of income per share
follows:
<TABLE>
<CAPTION>
Three Months
Ended July 31
------------------
<S> <C> <C>
1998 1997
------- --------
(thousands)
Weighted average shares outstanding 15,999 15,933
Less: Unearned deferred compensation shares (190) (190)
------- ------
Shares used for basic income per share 15,809 15,743
Dilutive effect of stock options and other stock awards 800 589
------- ------
Shares used for diluted income per share 16,609 16,332
======= ======
</TABLE>
4. Inventories were as follows:
<TABLE>
<CAPTION>
July 31, April 30,
--------------------- -------------
<S> <C> <C> <C>
1998 1997 1998
-------- -------- -------------
(thousands)
Finished goods $ 35,748 $ 38,507 $ 38,039
Work-in-process 6,236 8,180 6,864
Paper, cloth and other 4,026 4,560 2,084
-------- -------- -------
46,010 51,247 46,987
LIFO reserve (2,175) (1,892) (2,075)
--------- -------- -------
Total inventories $ 43,835 49,355 $ 44,912
========= ======== =======
</TABLE>
<PAGE>
5. In the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
income", which requires disclosure of comprehensive income and its
components, as defined. Comprehensive income was as follows:
<TABLE>
<CAPTION>
Three Months
Ended July 31,
---------------------------
<S> <C> <C>
1998 1997
--------- ---------
(thousands)
Net Income $ 10,564 $ 8,082
Other Comprehensive Income (Loss) -
Foreign Currency Translation Adjustments (1,330) 270
---------- --------
Comprehensive Income $ 9,234 $ 8,352
========== ========
</TABLE>
<PAGE>
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JULY 31, 1998
FINANCIAL CONDITION
During this seasonal period of cash usage, operating activities used $12.0
million of cash, or $5.9 million less than the prior year's comparable
quarter. The decrease was primarily due to higher cash income. The use of
cash during this period is consistent with the seasonality of the journal
subscription and the educational sector's receipts cycle that occur, for
the most part, later in the fiscal year.
Investing activities used $16.5 million during the current quarter, or $6.9
million more than the comparable prior year's quarter, as the Company
continued to expand its core publishing programs through acquisitions
including the German based Huthig Publishing Group's scientific journals
and book program.
Financing activities primarily reflect the purchase of treasury shares and
dividend payments during the quarter.
RESULTS OF OPERATIONS
FIRST QUARTER ENDED JULY 31, 1998
Revenues for the first quarter advanced 9% to $122.1 million compared with
$112.1 million in the prior year. Operating income for the current quarter
increased 24% to $17.1 million, compared with $13.7 million in the prior
year. Net income advanced 31% to $10.6 million.
The improvement in operating results was led by the domestic college
division, which continued to report strong market share gains. The
scientific, technical and medical and the professional and trade publishing
programs also contributed to the increase in revenues. International
operations, with the exception of Asia, experienced solid revenue growth.
The Company's Asian markets are still feeling the effects of the economic
downturn in that region.
Cost of sales as a percentage of revenues increased from 33.9% in the prior
year to 34.7% due to higher inventory obsolescence provisions. Operating
expenses as a percentage of revenues declined to 49.5% in the current
quarter compared with 51.9% in the prior year's first quarter, as the rate
of expense growth was contained to 4%.
Interest income increased $.5 million due to higher cash balances. The
effective tax rate of 36% was the same for both years.
<PAGE>
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities", which specifies the accounting and
disclosure requirements for such instruments, and is effective for the
Company's fiscal year beginning on May 1, 2000. In the opinion of the
Company's management, it is anticipated that the adoption of this new
accounting standard will not have a material effect on the consolidated
financial statements of the Company.
YEAR 2000 ISSUES
The Company has essentially completed the review of its systems and
products to determine the extent and impact of the year 2000 issues, and
has begun implementing the needed changes. Many of the Company's systems
are new and were designed to accommodate the year 2000 issue when
originally installed. The Company currently anticipates completing
corrective measures to its systems and products by mid-year of calendar
1999. The total cost to remedy the situation is currently estimated to be
approximately $2 million, of which $.6 million has been expended to date.
The Company is in the process of communicating with its customers and
suppliers in an effort to assess how they intend to resolve their year 2000
issues. The Company at this time is not able to form an opinion as to
whether its customers or suppliers will be able to resolve their year 2000
issues in a satisfactory and timely manner, or the magnitude of the adverse
impact it would have on the Company's operations, if they fail to do so.
EURO CONVERSION ISSUES
Effective January 1, 1999, eleven member countries of the European union
are scheduled to establish fixed conversion rates between their existing
legal currencies and the Euro, and to adopt the Euro as their common legal
currency.
The Company is in the process of assessing the impact that the conversion
to the Euro will have on its operations and the modifications that will be
required to its systems. Although it is still in the early stages of
assessment, the Company believes that the Euro conversion should not have a
material effect on its operations.
The anticipated costs and timing of resolving the year 2000 and Euro issues
are based on numerous assumptions and estimates relating to future events
including the continued availability and cost of the personnel required to
modify the systems, the timely resolution of the third party customer and
supplier interface issues, and other similar uncertainties. The Company is
in the process of developing contingency plans in the event remediation
measures will not be completed on a timely basis.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------
(a) Exhibits
------
27 - Financial Data Schedule
(b) Reports on Form 8-K
----------------
No reports on Form 8-K were filed during the quarter ended
July 31, 1998.
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995
This report contains certain forward-looking statements concerning the Company's
operations, performance and financial condition. Reliance should not be placed
on forward-looking statements, as actual results may differ materially from
those in any forward-looking statements. Any such forward-looking statements are
based upon a number of assumptions and estimates that are inherently subject to
uncertainties and contingencies, many of which are beyond the control of the
Company, and are subject to change based on many important factors. Such factors
include, but are not limited to: (i) the pace, acceptance, and level of
investment in emerging new electronic technologies and products; (ii) subscriber
renewal rates for the Company's journals; (iii) the consolidation of the retail
book trade market; (iv) the seasonal nature of the Company's educational
business and the impact of the used book market; (v) the ability of the Company
and its customers and suppliers to satisfactorily resolve the year 2000 and Euro
issues in a timely manner; (vi) worldwide economic and political conditions; and
(vii) other factors detailed from time to time in the Company's filings with the
Securities and Exchange Commission. The Company undertakes no obligation to
update or revise any such forward-looking statements to reflect subsequent
events or circumstances.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JOHN WILEY & SONS, INC.
Registrant
By /s/William J. Pesce
--------------
William J. Pesce
President and
Chief Executive Officer
By /s/Robert D. Wilder
--------------
Robert D. Wilder
Executive Vice President and
Chief Financial Officer
Dated: September 4th, 1998
<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> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> JUL-31-1998
<CASH> $94,821
<SECURITIES> 0
<RECEIVABLES> 119,818
<ALLOWANCES> 46,889
<INVENTORY> 43,835
<CURRENT-ASSETS> 220,133
<PP&E> 84,201
<DEPRECIATION> 50,710
<TOTAL-ASSETS> 495,075
<CURRENT-LIABILITIES> 160,025
<BONDS> 125,000
0
0
<COMMON> 20,752
<OTHER-SE> 146,151
<TOTAL-LIABILITY-AND-EQUITY> 495,075
<SALES> 0
<TOTAL-REVENUES> 122,091
<CGS> 42,367
<TOTAL-COSTS> 62,658
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<INTEREST-EXPENSE> 1,982
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<INCOME-TAX> 5,942
<INCOME-CONTINUING> 10,564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,564
<EPS-PRIMARY> .67
<EPS-DILUTED> .64
</TABLE>
