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, 1998
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 (212) 850-6000
including area code
-------------------------------
Securities registered pursuant to
Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
- ------------------------------- ------------------------------
Class A Common Stock, New York Stock Exchange
par value $1.00 per share
Class B Common Stock, New York Stock Exchange
par value $1.00 per share
Securities registered pursuant None
to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K
The number of shares outstanding of the Registrant's Class A and Class
B Common Stock, par value $1.00 per share as of May 31, 1998, was 12,916,657 and
3,085,158 respectively, and the aggregate market value of such shares of Common
Stock held by non-affiliates of the Registrant as of such date was $663,476,279
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 7, 1998 for the Annual Meeting of Shareholders to
be held on September 17, 1998, (the "1998 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, produces, markets and services products in print and electronic
formats including journals and other subscription-based products, professional
and reference works, consumer books and textbooks, for the scientific,
technical, professional, trade and educational markets in the United States and
internationally.
Journal publications are primarily in the scientific and technical, and
biomedical research areas. Book publications are primarily in the areas of pure
and applied science, engineering, architecture, the social sciences,
biomedicine, accounting, computer science, business and culinary arts and
hospitality. Professional and reference books, encyclopedias, dictionaries, and
periodicals are intended primarily for practicing and research professionals and
for libraries, while textbooks are produced primarily for use in formal
instruction in the college and university markets, as well as the secondary
school market in Australia. 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.
In fiscal 1998, the Company sold its domestic law publishing program for
$26.5 million, and reinvested the proceeds by acquiring the publishing assets of
Van Nostrand Reinhold (VNR) for $28.5 million in cash. The domestic law program
had limited potential for the Company. VNR reinforces the Company's strong
position in four core subject areas: architecture/design,
environmental/industrial science, culinary arts/hospitality, and business
technology.
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 and civil engineering.
The Company is on the Internet with a World Wide Web site located at
http://www.wiley.com.
<PAGE>
Publishing Operations
The Company publishes approximately 460 journals and other
subscription-based products, which accounted for approximately 37% of the
Company's fiscal 1998 revenues. Most journals are owned by the Company, in which
case they may or may not be sponsored by a professional society. Some are owned
by such societies and published by the Company under an agreement. Societies
which sponsor or own such journals generally receive a royalty and/or other
consideration which varies with the nature of the relationship. The Company
usually enters into agreements with the editors of journals which state the
duties of the editors, and the fees and expenses for their services.
Contributors of journal articles transfer publication rights to the Company or
professional society, as applicable.
Journal subscriptions result primarily from direct mail and other
advertising and promotional campaigns, renewals which are solicited annually
either directly or by companies commonly referred to as independent subscription
agents, and memberships in the professional societies for those journals that
are sponsored by such societies. Journals are generally mailed to subscribers
directly from independent printers.
Materials for book publications are obtained from authors throughout most
of the world through the efforts of an editorial staff, outside editorial
advisors, and advisory boards. Most materials originate with their authors, but
many are prepared as a result of suggestions or solicitations by editors or
advisors. The Company usually enters into agreements with authors which state
the terms and conditions under which the respective authors' materials will be
published and under which other related rights may be exercised, the name in
which the copyright will be registered, the basis for any royalties, and other
matters. Most of the authors are compensated by royalties which vary with the
nature of the product and its anticipated sales potential. In general, royalties
for textbooks and consumer books are higher than royalties for research and
reference works. The Company makes advances against future royalties to authors
of certain of its publications. The Company continues to add new titles, revise
existing titles, and discontinue the sale of others in the normal course of its
business. The Company's general practice is to revise its basic textbooks every
three to five years, if warranted, and to revise other titles as appropriate.
Subscription-based products, other than journals, are updated more frequently on
a regular schedule. Approximately 36% of the Company's fiscal 1998 domestic book
publishing revenues were from titles published or revised in that fiscal year.
Professional and consumer book sales consist of sales to trade bookstores
serving the general public, to wholesalers who supply such bookstores, to
certain college bookstores for their non-textbook requirements, to individual
professional practitioners, and to research institutions, jobbers, libraries
(including public, professional, academic, and other special libraries),
industrial organizations, and governmental agencies. The Company employs sales
representatives who call upon independent bookstores, along with national and
regional chain bookstores, wholesalers and jobbers. Trade sales to bookstores,
wholesalers and jobbers are generally made on a fully returnable basis. Sales of
professional and consumer books also result from direct mail campaigns,
telemarketing, 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.
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 sales representatives who call
on faculty members responsible for selecting books to be used in courses, and on
the bookstores which serve such institutions and their students. Textbook sales
are generally made on a fully returnable basis. The textbook business is
seasonal with the majority of textbook sales occurring during June through
August and November through January. 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.
The Company performs marketing and distribution services for other
publishers under agency arrangements. It also engages in co-publishing of titles
with foreign publishers and in publication of adaptations of works from other
publishers for particular markets. The Company also receives licensing revenues
from photocopies and electronic uses and reproductions of journal articles and
other materials.
Like most other publishers, the Company generally contracts with
independent printers and binderies for their services. The Company purchases its
paper from independent suppliers and printers. Paper prices continued to decline
during fiscal 1998. The Company believes that adequate printing and binding
facilities, and sources of paper and other required materials are available to
it, and that it is not dependent upon any single supplier. Book products are
distributed from Company operated warehouses.
The Company produces electronic versions of some of its products including
software, video, CD-ROM, and through on-line services. 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 distribution of
virtually all the Company's journals as full-text electronic files over the
Internet.
The Company's publishing business is not dependent upon a single customer,
the loss of whom could have a material adverse effect. The journal subscription
business is primarily sourced through independent subscription agents who
facilitate the journal ordering process by consolidating the subscription
orders/billings of each subscriber with various publishers. Monies are collected
in advance from subscribers by the subscription agents and are remitted to the
journal publishers, including the Company, generally prior to the commencement
of the subscriptions. Although at fiscal year-end, the Company had minimal
credit risk exposure to these agents, future calendar year subscription receipts
from these agents are highly dependent on their financial position and
liquidity. Subscription agents account for approximately 26% of total
consolidated revenues and no one agent accounts for more than 6% of total
consolidated revenues. The book publishing business has witnessed a significant
concentration in national and regional bookstore chains in recent years,
however, no one customer accounts for more than 5% of total consolidated
revenues.
International Operations
The Company's publications are sold throughout most of the world through
subsidiaries located in Europe, Canada, Australia, and Asia, or through agents,
or directly from the United States. These subsidiaries market their own
indigenous publications, as well as publications produced by the domestic
operations and other subsidiaries and affiliates. The Export Sales Department in
the United States markets the Company's publications through agents as well as
foreign sales representatives in countries not served by a foreign subsidiary.
John Wiley & Sons International Rights, Inc. sells foreign reprint and
translations rights. The Company publishes, or licenses others to publish, its
products which are distributed throughout the world in 35 foreign languages.
Approximately 47% of the Company's fiscal 1998 revenues were derived from
non-U.S. markets.
Copyrights, Patents, Trademarks, and Environment
Substantially all of the Company's publications are protected by copyright,
either in its own name, in the name of the author of the work, or in the name of
the sponsoring professional society. Such copyrights protect the Company's
exclusive right to publish the work in the United States and in many countries
abroad for specified periods: in most cases the author's life plus 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, on-line availability of journal and other published
information 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.
Based upon currently available industry statistics, the Company believes
that of books published and sold in the United States, it accounts for
approximately 3% of the total sales of such university and college textbooks,
and approximately 3% of the total sales of such professional books.
The Company knows of no reliable industry statistics which would enable it
to determine its share of the various foreign markets in which it operates. The
Company believes that the percentage of its total book publishing sales in
markets outside the United States is higher than that of most of the United
States publishers. The Company also believes it is in the top rank of publishers
of scientific and technical journals worldwide, as well as the leading
commercial chemistry publisher at the research level, and one of the four
largest publishers of university and college textbooks for the "hardside"
disciplines, i.e. engineering, sciences and mathematics.
Employees
As of April 30, 1998, the Company employed approximately 2,100 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, 1998 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.
OFFICER
NAME AND AGE SINCE PRESENT OFFICE
- --------------------------------------------------------------------------------
Bradford Wiley II 1993 Chairman of the Board since January 1993 and a
57 Director
Charles R. Ellis 1988 President and Chief Executive Officer and a
62 Director throug April 30, 1998
William J. Pesce 1989 President and Chief Executive Officer and a
47 Director since May 1, 1998, (previously Chief
Operating Officer 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 President,
51 PRT since June 1996 (previously Senior Vice
President, Professional, Reference & Trade
Publishing Group)
Richard S. Rudick 1978 Senior Vice President, General Counsel since
59 June 1989
Robert D. Wilder 1986 Executive Vice President and Chief Financial
49 and Support Operations Officer since June 1996
(previously Senior Vice President, Chief
Financial Officer)
William Arlington 1990 Senior Vice President, Human Resources since
49 June 1996 (previously Vice President, Human
Resources)
Peter W. Clifford 1989 Senior Vice President, Finance, Corporate
52 Controller and Chief Accounting Officer since
June 1996 (previously Vice President, Finance
and Controller)
Deborah E. Wiley 1982 Senior Vice President, Corporate Communications
52 since June 1996 and a Director (previously Vice
President and Director of Corporate
Communications)
Timothy B. King 1996 Senior Vice President, Planning and Development
57 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).
LOCATION PURPOSE APPROX. SQ. FT. LEASE 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 14,000 2000
OWNED-FOREIGN
Germany Office and Warehouse 66,000
LEASED-FOREIGN
Australia Office 16,000 2002
Warehouse 26,000 2000
Canada Office 14,000 2001
Warehouse 41,000 2001
England Office 48,000 2009
Warehouse 69,000 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, 1998.
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 andResults
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
1998 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 1998 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 1998 Proxy Statement is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
<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, 1998.
(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, 1997)
3.3 By-Laws as Amended, dated as of December 1997 (incorporated by
reference to the Company's Report on Form 10-Q for the quarterly
period ended October 31, 1997).
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, 1997).
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 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>
10.12 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).
10.13 Form of the Fiscal Year 1998 Executive Long-Term Incentive Plan.
10.14 Form of the Fiscal Year 1998 Executive Annual Incentive Plan.
10.15 Senior Executive Employment Agreement dated as of January 8, 1998
between William J. Pesce and the Company.
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20 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).
10.21 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).
10.22 Senior Executive Employment Agreement dated as of July 1, 1994 between
Robert D. Wilder and the Company (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended July 31,
1995).
10.23 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).
<PAGE>
10.24 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).
10.25 Employment agreement letter dated as of January 16, 1997 between
Richard S. Rudick and the Company (Incorporated by reference to the
Company's Report on Form 10-K for the year ended April 30, 1997).
22 List of Subsidiaries of the Company.
23 Consent of Independent Public Accountants (included in this report as
listed in the attached index).
27 Financial Data Schedule.
<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, 1998 and 1997............................................17
Consolidated Statements of Income and Retained Earnings
for the years ended April 30, 1998, 1997 and 1996........................18
Consolidated Statements of Cash Flows for the
years ended April 30, 1998, 1997 and 1996................................19
Notes to Consolidated Financial Statements..........................20 - 29
Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................30 - 32
Results by Quarter (Unaudited)...........................................33
Quarterly Share Prices, Dividends and Related Stockholder Matters........33
Selected Financial Data..................................................34
Schedule II - Valuation and Qualifying Accounts..........................35
Other schedules are omitted because of absence of conditions under which
they apply or because the information required is included in Notes to
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, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended April 30,
1998 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, 1998
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, 1998, 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
July 7, 1998
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
John Wiley & Sons, Inc. and Subsidiaries April 30
Dollars in thousands -------------------------
1998 1997
-------------------------
Assets
Current Assets
Cash and cash equivalents $ 127,405 $ 79,116
Accounts receivable 56,147 61,841
Inventories 44,912 49,100
Deferred income tax benefits 456 7,143
Prepaid expenses 8,690 6,935
-------------------------
Total Current Assets 237,610 204,135
-------------------------
Product Development Assets 36,039 31,683
Property and Equipment 34,310 32,699
Intangible Assets 172,798 165,147
Deferred Income Tax Benefits 15,593 13,004
Other Assets 10,564 11,276
-------------------------
Total Assets $ 506,914 $ 457,944
-------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable $ -- $ 172
Accounts and royalties payable 36,854 30,988
Deferred subscription revenues 99,225 94,419
Accrued income taxes 1,174 3,825
Other accrued liabilities 41,100 34,948
-------------------------
Total Current Liabilities 178,353 164,352
-------------------------
Long-Term Debt 125,000 125,000
Other Long-Term Liabilities 26,663 24,907
Deferred Income Taxes 16,147 14,702
Shareholders' Equity
Common stock issued
Class A (16,776,549 and 16,569,066 shares) 16,777 16,569
Class B (3,967,182 and 4,037,082 shares) 3,967 4,037
Additional paid-in capital 40,369 34,332
Retained earnings 150,392 120,823
Cumulative translation adjustment (540) 106
Unearned deferred compensation (2,715) (3,254)
-------------------------
208,250 172,613
Less Treasury shares at cost (Class A-3,874,603
and 3,824,978; Class B-871,024 and 871,024) (47,499) (43,630)
-------------------------
Total Shareholders' Equity 160,751 128,983
-------------------------
Total Liabilities and Shareholders' Equity . $ 506,914 $ 457,944
-------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
<TABLE>
<CAPTION>
John Wiley & Sons, Inc. and Subsidiaries
Dollars in thousands except per share data For the years ended April 30
------------------------------------
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Revenues $ 467,081 $ 431,974 $ 362,704
Costs and Expenses
Cost of sales 164,169 155,245 126,718
Operating and administrative expenses 250,008 233,771 198,494
------------------------------------
Amortization of intangibles 12,040 8,161 4,537
Total Costs and Expenses 426,217 397,177 329,749
Gain on Sale of Publishing Assets 21,292 -- --
Operating Income 62,156 34,797 32,955
Interest Income and Other 3,863 2,281 6,211
Interest Expense (7,933) (6,225) (368)
------------------------------------
Interest Income (Expense)-Net (4,070) (3,944) 5,843
------------------------------------
Income Before Taxes 58,086 30,853 38,798
Provision for Income Taxes 21,498 10,513 14,118
------------------------------------
Net Income 36,588 20,340 24,680
------------------------------------
Retained Earnings at Beginning of Year 120,823 106,716 87,541
Cash Dividends
Class A Common ($.45, $.40, and $.35 per share) 5,766 5,116 4,492
Class B Common ($.40, $.35, and $.31 per share) 1,253 1,117 1,013
------------------------------------
Total Dividends 7,019 6,233 5,505
------------------------------------
Retained Earnings at End of Year $ 150,392 $ 120,823 $ 106,716
------------------------------------
Income Per Share
Diluted $ 2.22 $ 1.24 $ 1.49
Basic $ 2.32 $ 1.29 $ 1.55
</TABLE>
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 ------------------------------------
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Operating Activities
Net Income $ 36,588 $ 20,340 $ 24,680
Noncash Items
Amortization of intangibles 12,040 8,161 4,537
Amortization of composition costs 20,213 17,763 15,196
Depreciation of property and equipment 9,188 8,340 7,314
Reserves for returns, doubtful accounts, and obsolescence 10,181 11,861 6,586
Deferred income taxes 9,234 3,243 7,873
Gain on sale of publishing assets (21,292) -- --
Other 12,207 7,300 7,583
Changes in Operating Assets and Liabilities
Increase in receivables (2,872) (178) (12,150)
Decrease (increase) in inventories 4,426 1,791 (3,734)
Increase (decrease) in accounts and royalties payable 6,000 (12,109) 3,821
Increase in deferred subscription revenues . 5,983 7,769 4,996
Net change in other operating assets and liabilities 2,162 (10,372) 1,420
------------------------------------
Cash Provided by Operating Activities 104,058 63,909 68,122
------------------------------------
Investing Activities
Additions to product development assets (30,220) (25,466) (26,483)
Additions to property and equipment (11,935) (8,868) (9,310)
Proceeds from sale of publishing assets 26,500 -- --
Acquisition of publishing assets (30,491) (103,980) (3,968)
------------------------------------
Cash Used for Investing Activities (46,146) (138,314) (39,761)
------------------------------------
Financing Activities
Purchase of treasury shares (4,281) (10,506) (3,323)
Additions to long-term debt -- 125,000 --
Repayment of long-term debt -- (10,542) --
Net repayments of short-term debt (156) (1,270) (624)
Cash dividends (7,019) (6,233) (5,505)
Proceeds from issuance of stock on option exercises and other 2,288 1,249 2,289
------------------------------------
Cash Provided by (Used for) Financing Activities (9,168) 97,698 (7,163)
------------------------------------
Effects of exchange rate changes on cash (455) 539 (324)
------------------------------------
Cash and Cash Equivalents
Increase for year 48,289 23,832 20,874
Balance at beginning of year 79,116 55,284 34,410
------------------------------------
Balance at end of year $ 127,405 $ 79,116 $ 55,284
------------------------------------
Cash Paid During the Year for
Interest $ 8,042 $ 5,143 $ 647
Income taxes $ 12,409 $ 7,995 $ 2,799
</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 $41.6 and $34.5 million at April 30,
1998 and 1997, respectively.
Depreciation and Amortization: Buildings, leasehold
improvements, and capital leases are amortized over the lesser of the estimated
useful lives of the assets up to 40 years, or the duration of the various
leases, using the straight-line method. Furniture and equipment is depreciated
principally on the straight-line method over estimated useful lives ranging from
3 to 10 years. Composition costs representing the costs incurred to bring an
edited manuscript to publication including typesetting, proofreading, design and
illustration, etc., are capitalized and amortized over estimated useful lives
representative of product revenue patterns, generally three years.
Intangible Assets: Intangible assets consist of acquired publication rights,
which are principally amortized over periods ranging from 3 to 30 years based on
the projected revenues of rights acquired; noncompete agreements; which are
amortized over the term of such agreements, and goodwill and other intangibles,
which are amortized on a straight - line basis over periods ranging from 5 to 40
years. If facts and circumstances indicate that long-lived assets and/or
intangible assets may be permanently impaired, it is the Company's policy to
assess the carrying value and recoverability of such assets based on an analysis
of undiscounted future cash flows of the related operations. Any resulting
reduction in carrying value based on the estimated fair value would be charged
to operating results.
Foreign Exchange Contracts: The Company, from time to time, enters into forward
exchange contracts as a hedge against its overseas subsidiaries' foreign
currency asset, liability, 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. There were no open foreign exchange contracts at April 30, 1998. 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. No gains or losses were deferred at April 30, 1998 or 1997.
Stock-Based Compensation: Stock options and restricted stock grants are
accounted for in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensations." Accordingly, the Company recognizes no compensation expense for
fixed stock option grants since the exercise price is equal to the fair value of
the shares at date of grant. For restricted stock grants, compensation cost is
recognized generally ratably over the vesting period based on the fair value of
shares.
Cash Equivalents: Cash equivalents consist primarily of highly liquid
investments with a maturity of three months or less and are stated at cost plus
accrued interest, which approximates market value.
New Accounting Standards: The Financial Accounting Standards Board issued the
following Statements of Financial Accounting Standards ("SFAS"), which become
effective for the Company's fiscal 1999 financial statements: SFAS No. 130,
"Reporting Comprehensive Income," which requires disclosure of comprehensive
income and its components, as defined; SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information," which requires certain financial and
descriptive information about a company's reportable operating statements; and
SFAS No. 132, "Employers' Disclosures about Pensions and other Postretirement
Benefits," which requires additional disclosures relating to a company's pension
and postretirement benefit plans. In the opinion of the Company's management,
the adoption of these new accounting standards may require additional
disclosures but should not have a material effect on the consolidated financial
statements of the Company.
<PAGE>
Income Per Share
In the third quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which
requires the presentation of "basic" income per share which excludes the
dilutive effects of unexercised stock options and nonvested stock awards, and
"diluted" income per share which includes the effects of such items. Prior
periods' income per share have been restated. A reconciliation of the shares
used in the computation follows:
In thousands 1998 1997 1996
- ----------------------------------------------------------------------------
Weighted average shares outstanding 15,969 16,029 16,062
Less: Unearned deferred
compensation shares (196) (209) (167)
- ----------------------------------------------------------------------------
Shares used for basic
income per share 15,773 15,820 15,895
Dilutive effect of stock
options and other stock awards 715 552 643
- ----------------------------------------------------------------------------
Shares used for diluted
income per share 16,488 16,372 16,538
- ----------------------------------------------------------------------------
Acquisitions
In fiscal 1998, the Company acquired the publishing assets of Van Nostrand
Reinhold (VNR) for approximately $28.5 million in cash. VNR publishes in such
areas as architecture / design, environmental / industrial sciences, culinary
arts / hospitality, and business technology. 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 $24 million, relating primarily to acquired publication rights
that are being amortized on a straight-line basis over an estimated average life
of 15 years. In addition, during the year, the Company acquired various
newsletters, books, and journals for purchase prices aggregating approximately
$2 million, which primarily relates to acquired publication rights that are
being amortized over periods ranging from 15 to 30 years.
In fiscal 1997, the Company acquired a 90% interest in the German-based VCH
Publishing Group ("VCH") through the purchase of 90% of the shares of VCH
Verlagsgesellschaft mbH for approximately $99 million in cash. VCH is a leading
scientific, technical, and professional publisher of journals and books in such
disciplines as chemistry, architecture, and civil engineering. The excess of
cost over the fair value of the tangible assets acquired amounted to
approximately $111.6 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 that are being amortized over
5 to 15 years.
All acquisitions have been accounted for by the purchase method, and the
accompanying financial statements include their results of operations since
their respective dates of acquisition. 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.
1997 1996
--------------- ---------------
(In thousands, except per share information)
Revenues $ 441,650 $ 424,570
Net Income $ 18,931 $ 17,520
Net Income Per Diluted Share $ 1.16 $ 1.06
Net Income Per Basic Share $ 1.20 $ 1.10
<PAGE>
Divested Operations
In fiscal 1998, the Company sold its domestic law publishing program for
$26.5 million, resulting in a gain of $21.3 million. Offsetting this gain are
special asset write-downs and other items amounting to approximately $4.4
million, including write-downs of intangible assets of approximately $3.3
million in accordance with the Company's policy of evaluating such assets, and
if deemed to be permanently impaired, writing them down to net realizable value
based on discounted cash flows. The net effect of these unusual items amounted
to a pretax gain of $16.9 million, or $9.7 million after taxes, equal to $0.59
per diluted share, or $0.62 per basic share.
Inventories
Inventories at April 30 were as follows:
Dollars in thousands 1998 1997
- -------------------------- ---------------- -----------------
Finished Goods $ 38,039 $ 40,859
Work-in-Process 6,864 7,475
Paper, Cloth, and Other 2,084 2,559
- -------------------------- ---------------- -----------------
46,987 50,893
LIFO Reserve (2,075) (1,793)
- -------------------------- ---------------- -----------------
Total $ 44,912 $ 49,100
- -------------------------- ---------------- -----------------
Domestic book inventories aggregating $29.6 and $29.9 million at April 30,
1998 and 1997, 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 1998 1997
- -------------------------------- -------------- -------------
Composition Costs $25,468 $21,819
Royalty Advances 10,571 9,864
- -------------------------------- -------------- -------------
Total $36,039 $31,683
- -------------------------------- -------------- -------------
Composition costs are net of accumulated amortization of $40,108 in 1998 and
$33,323 in 1997.
Property and Equipment
Property and equipment consisted of the following at April 30:
Dollars in thousands 1998 1997
- ----------------------------------- ------------ -------------
Land and Land Improvements $ 1,542 $ 1,542
Buildings and Leasehold Improvements 17,043 18,222
Furniture and Equipment 64,570 55,622
- ----------------------------------- ------------ -------------
83,155 75,386
Accumulated Depreciation (48,845) (42,687)
- ----------------------------------- ------------ -------------
Total $ 34,310 $ 32,699
- ----------------------------------- ------------ -------------
Intangible Assets
Intangible assets consisted of the following at April 30:
Dollars in thousands 1998 1997
- ------------------------------- ------------- -------------
Acquired Publication Rights $149,977 $132,901
Goodwill and Other Intangibles 52,061 54,283
Non-compete Agreements 1,316 1,435
- ------------------------------- ------------- -------------
203,354 188,619
Accumulated Amortization (30,556) (23,472)
- ------------------------------- ------------- -------------
Total $172,798 $165,147
- ------------------------------- ------------- -------------
Other Accrued Liabilities
Included in other accrued liabilities was accrued compensation of
approximately $20.1 million and $17.7 million for 1998 and 1997, respectively.
<PAGE>
Income Taxes
The provision for income taxes was as follows:
Dollars in thousands 1998 1997 1996
- --------------------------- ---------- ---------- -----------
Currently Payable
Federal $6,781 $ 945 $1,122
Foreign $4,332 $5,295 $4,142
State and local $1,166 $1,026 $1,000
- --------------------------- ---------- ---------- -----------
Total Current Provision $12,279 $7,266 $6,264
- --------------------------- ---------- ---------- -----------
Deferred Provision
Federal $6,211 $2,496 $5,270
Foreign $1,629 $ 834 $1,687
State and local $1,379 $ (83) $ 897
- --------------------------- ---------- ---------- -----------
Total Deferred Provision $9,219 $3,247 $7,854
- --------------------------- ---------- ---------- -----------
Total Provision $21,498 $10,513 $14,118
- --------------------------- ---------- ---------- -----------
The Company's effective income tax rate as a percent of pretax income
differed from the U.S. federal statutory rate as shown below:
1998 1997 1996
- ------------------------------------ -------- -------- --------
U.S. Federal Statutory Rate 35.0% 35.0% 35.0%
State and Local Income Taxes
Net of Federal Income Tax Benefit 2.8 2.0 3.2
Tax Benefit Derived From FSC Income (2.7) (4.8) (3.1)
Foreign Source Earnings Taxed at
Other Than U.S. Statutory Rate .6 .3 1.1
Nondeductible Amortization of Intangibles .7 .9 .7
Other-Net .6 .7 (.5)
- ------------------------------------ -------- -------- --------
Effective Income Tax Rate 37.0% 34.1% 36.4%
- ------------------------------------ -------- -------- --------
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 1998 1997 1996
- --------------------------------- -------- --------- ---------
Depreciation and Amortization $(2,898) $(691) $(3,684)
Accrued Expenses (275) 264 6,100
Circulation Costs -- -- 1,471
Provision for Sales Returns and
Doubtful Accounts 5,699 (959) (1,391)
Inventory 1,331 112 578
Retirement Benefits (23) (87) (66)
Divested Operations -- -- (3,386)
Long-Term Liabilities 2,541 1,562 5,102
Alternative Minimum Tax Credit
and Other Carryforwards 236 653 1,869
Net Operating Loss Carryforwards 1,631 (1,150) --
Valuation Allowance 826 2,432 --
Other-Net 151 1,111 1,261
- --------------------------------- -------- --------- ---------
Total Deferred Provision $9,219 $3,247 $7,854
- --------------------------------- -------- --------- ---------
The significant components of deferred tax assets and liabilities were as
follows:
1998 1997
------------------ -------------------
Dollars in thousands Current Long-Term Current Long-Term
- -------------------------------------------------------------------------------
Deferred Tax Assets
Net Operating Loss Carryforward -- 26,131 -- 25,703
Reserve for Sales Returns and
Doubtful Accounts 2,194 -- 8,219 --
Costs Capitalized for Taxes -- 3,054 -- 3,282
Retirement and Post-
Employment Benefits -- 3,470 -- 3,387
Amortization of Intangibles 2,513 -- 1,140
Other -- -- 52 --
- -------------------------------------------------------------------------------
Total Deferred Tax Assets 2,194 35,168 8,271 33,512
Less: Valuation Allowance -- (12,553) -- (13,344)
- -------------------------------------------------------------------------------
Net Deferred Tax Assets 2,194 22,615 8,271 20,168
- -------------------------------------------------------------------------------
Deferred Tax Liabilities
Inventory (1,738) -- (1,128) --
Depreciaton and Amortization -- (4,305) -- (5,149)
Divested Operations -- (196) -- (44)
Accrued Expenses -- (7,002) -- (6,230)
Long-Term Liabilities -- (10,822) -- (8,891)
Other -- (844) -- (1,552)
- -------------------------------------------------------------------------------
Total Deferred Tax Liabilities (1,738) (23,169) (1,128) (21,866)
- -------------------------------------------------------------------------------
Net Deferred Tax Assets (Liability) 456 (554) 7,143 (1,698)
- -------------------------------------------------------------------------------
<PAGE>
Approximately $9.3 million of the valuation allowance relates to net
deferred tax assets recorded in connection with the VCH acquisition. Any amounts
realized in future years will reduce the intangible assets recorded at date of
acquisition.
Current taxes payable for 1998 have been reduced by $2.5 million relating
to the utilization of net operating loss carryforwards. At April 30, 1998, the
Company had aggregate unused net operating loss carryforwards of approximately
$61.0 million, which may be available to reduce future taxable income primarily
in foreign tax jurisdictions and generally have no expiration date.
In general, the Company plans to continue to invest the undistributed
earnings of its foreign subsidiaries in those businesses, and therefore no
provision is made for taxes that would be payable if such earnings were
distributed. At April 30, 1998, the undistributed earnings of foreign
subsidiaries approximated $35.8 million and, if remitted currently, would result
in additional taxes approximating $7.1 million.
Notes Payable and Debt
Long-term debt consisted of the following at April 30:
Dollars in thousands 1998 1997
- ------------------------------------------------------------------
Term Loan Notes Payable Due
October 2000 Through 2003 $125,000 $125,000
The weighted average interest rate on the term loan was 6.21% and 5.82%
during 1998 and 1997, respectively; and 6.19% and 5.82% at April 30, 1998 and
1997, respectively.
The Company has a seven-year $175 million credit agreement expiring on
October 31, 2003, with nine banks. The credit agreement consists of a term loan
of $125 million and a $50 million revolving credit facility. The Company has the
option of borrowing at the following floating interest rates: (i) Eurodollars at
a rate based on the London Interbank Offered Rate (LIBOR) plus an applicable
margin ranging from .15% to .30% depending on certain coverage ratios or, (ii)
dollars at a rate based on the current certificate of deposit rate, plus an
applicable margin ranging from .275% to .425% depending on certain coverage
ratios or, (iii) dollars at the higher of (a) the Federal Funds Rate plus .5%
and (b) the banks' prime rate. In addition, the Company pays a facility fee
ranging from .10% to .20 % on the total facility depending on certain coverage
ratios.
In the event of a change of control, as defined, the banks have the option
to terminate the agreement and require repayment of any amounts outstanding.
Amounts outstanding under the term loan have mandatory repayments as follows:
Dollars in thousands 1999 2000 2001 2002 2003
- -------------------- -------- ------- -------- -------- --------
$ -- $ -- $30,000 $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 $71
million was available for such restricted payments as of April 30, 1998.
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 1998 1997 1996
- ----------------------------------------------------------------------
End of Year
Amount outstanding $ -- $ 172 $ --
Weighted average interest rate -- 10.4% --
During the Year
Maximum amount outstanding $ 28,794 $ 26,253 $ 18,909
Average amount outstanding $ 742 $ 11,368 $ 5,960
Weighted average interest rate 8.5% 6.0% 7.0%
- ----------------------------------------------------------------------
Based on estimates of interest rates currently available to the Company for
loans with similar terms and maturities, the fair value of notes payable and
long-term debt approximates the carrying value.
Retirement Plans
The Company and its principal subsidiaries have contributory and
noncontributory retirement plans that cover substantially all employees. The
plans generally provide for employee retirement between the ages of 60 to 65 and
benefits based on length of service and final average compensation, as defined.
In fiscal 1998, the domestic plan was amended to provide that final average
compensation be based on the highest three consecutive years ended December 31,
1994. The Company may, but is not required to, update from time to time the
ending date for the three-year period used to determine final average
compensation. The amendment had the effect of increasing pension expense for
fiscal 1998 by $.2 million. 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 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 1998 1997 1996
- ------------------------------------------------------------------
Service Cost $3,432 $2,902 $2,598
Interest Cost on Projected
Benefit Obligation 5,325 4,665 3,757
Return on Assets (15,941) (6,826) (6,331)
Net Amortization and Deferral 9,746 1,014 1,430
- ------------------------------------------------------------------
Net Periodic Pension Expense $2,562 $1,755 $1,454
- ------------------------------------------------------------------
The net pension expense included above for the international plans amounted
to approximately $2.1, $1.5, and $1.1 million for 1998, 1997, and 1996,
respectively.
The following table sets forth the status of the plans and the amounts
recognized in the Company's consolidated statements of financial position.
1998 1997
------------------------ ---------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Dollars in thousands Benefits Assets Benefits Assets
- --------------------------------------------------------------------------------
Fair Value of Plan Assets $ 84,262 $ -- $ 68,385 $ --
Accumulated Benefit Obligation
Vested Benefits (54,769) (10,452) (50,214) (10,462)
Nonvested Benefits (2,810) (537) (3,204) (564)
- --------------------------------------------------------------------------------
(57,579) (10,989) (53,418) (11,026)
Projected Compensation Increases (5,851) (1,317) (3,808) (1,420)
- --------------------------------------------------------------------------------
Projected Benefit Obligation (63,430) (12,306) (57,226) (12,446)
- --------------------------------------------------------------------------------
Funded Status 20,832 (12,306) 11,159 (12,446)
Unrecognized Net Asset (2,907) -- (3,759) --
Unrecognized Prior Service Cost 2,401 365 1,692 447
Unrecognized Net Loss (Gain) (18,738) 102 (7,524) 350
- --------------------------------------------------------------------------------
Prepaid (Accrued) Pension Cost $ 1,588 $(11,863) $ 1,568 $(11,649)
- --------------------------------------------------------------------------------
The range of assumptions used in 1998 and 1997 were:
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Benefits Assets
- ---------------------------------------------------------------------------
Discount Rate 7.5 - 8.5% 6.5%
Expected Long-Term Rate of Return
on Plan Assets 7.0 - 8.0% --
Rate of Increase in Compensation Levels 0 - 7.0% 3.7%
- ---------------------------------------------------------------------------
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 $1.2, $1.1, and $1.0 million in
1998, 1997, and 1996, 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 postretirement benefit obligation amounted to $.3 million
at April 30, 1998 and 1997, and the amount expensed in fiscal 1998 and prior
years was not material.
Commitments and Contingencies
The following schedule shows the composition of rent expense for operating
leases:
Dollars in thousands 1998 1997 1996
- ------------------------------ ---------- ----------- ----------
Minimum Rental 13,137 13,654 12,550
Lease Escalation 2,250 2,188 1,913
Less: Sublease Rentals (50) (19) (19)
- ------------------------------ ---------- ----------- ----------
Total 15,337 15,823 14,444
- ------------------------------ ---------- ----------- ----------
Future minimum payments under operating leases aggregated $78.5 million at
April 30, 1998. Annual payments under these leases are $15.7, $14.4, $14.0,
$13.6, and $13.0 million for fiscal years 1999 through 2003, 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.
<PAGE>
Segment Information
The Company operates in one business segment, namely publishing, and
develops, produces, publishes, markets, and services products in print and
electronic formats, such as periodicals including journals and other
subscription-based products, professional and reference works, consumer books,
and textbooks, for the scientific, technical, professional, trade, and
educational markets around the world.
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 1998 1997 1996
- ---------------------- ------------ ------------ ------------
Revenues
Domestic $322,789 297,152 279,998
Europe 138,320 123,142 70,942
Other International 46,165 47,496 41,357
Interarea transfers (35,816) (29,593) (40,193)
- ---------------------- ------------ ------------ ------------
Total $467,081 431,974 362,704
- ---------------------- ------------ ------------ ------------
Operating Income
Domestic $49,315(a) 20,817 20,180
Europe 13,633 11,728 12,064
Other International (792) 2,252 711
- ---------------------- ------------ ------------ ------------
Total $62,156(a) 34,797 32,955
- ---------------------- ------------ ------------ ------------
Identifiable Assets
Domestic $187,184 178,861 178,442
Europe $174,323 179,210 30,988
Other International 18,002 20,757 19,787
Corporate 79,116 55,284 127,405
- ---------------------- ------------ ------------ ------------
Total $506,914 457,944 284,501
- ---------------------- ------------ ------------ ------------
(a) Includes unusual items amounting to $16,893 relating to the gain on the
sale of the domestic law publishing program, net of a write-down of certain
intangible assets and other items.
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 $56.5, $51.4, and
$47.5 million in 1998, 1997, and 1996, respectively. The pretax income for
consolidated international operations was approximately $14.1, $16.5, and $13.0
million in 1998, 1997, and 1996, respectively.
Included in operating and administrative expenses were net foreign exchange
gains (losses) of approximately $(.1), $.7, and $.2 million in 1998, 1997, and
1996, respectively.
Changes in the cumulative translation adjustment account were as follows:
Dollars in thousands 1998 1997
----------------------------- ------------ -----------
Balance at beginning of year $ 106 $(3,086)
Aggregate translation
adjustments for the year (646) 3,192
----------------------------- ------------ -----------
Balance at end of year $ (540) $ 106
----------------------------- ------------ -----------
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, 1998, approximately 595,520 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 $.6 million, or $.04 per diluted share, in 1998;
$.4 million, or $.02 per diluted share, in 1997; and $.1 million, or $.01 per
diluted 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 1998, 1997, and 1996:
risk-free interest rate of 6.5%, 7.1%, and 6.3%, respectively; dividend yield of
1.3%, 1.5%, and 2.0%, respectively; volatility of 18.1%, 22.0%, and 22.2%,
respectively; and expected life of nine years for all years.
<PAGE>
A summary of the activity and status of the Company's stock option plans
follows:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 1,041,939 $ 17.87 1,028,663 $ 15.38 1,070,038 $ 12.87
Granted 149,678 34.60 143,349 30.36 133,224 28.76
Exercised (137,583) 14.14 (107,323) 10.84 (157,099) 9.62
Canceled (2,125) 25.89 (22,750) 17.24 (17,500) 15.64
- ----------------------------------------------------------------------------------------
Outstanding at end of year 1,051,909 $ 20.71 1,041,939 $ 17.87 1,028,663 $ 15.38
- ----------------------------------------------------------------------------------------
Exercisable at end of year 540,568 $ 13.51 603,941 $ 12.26 570,170 $ 11.07
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The weighted average fair value of options granted during the year was
$12.39 and $12.05 in 1998 and 1997, respectively.
A summary of information about stock options outstanding and options
exercisable at April 30, 1998, follows:
Options Outstanding Options Exercisable
--------------------- ----------------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range of Of Remaining Exercise Of Exercise
Exercise Prices Options Term Price Options Price
- ------------------ --------- ---------- -------- ------- --------
$ 7.88 to $ 12.25 428,162 3.4 years $ 10.10 401,586 $ 9.99
$ 20.69 179,850 6.1 years $ 20.69 82,400 $ 20.69
$ 26.25 to $ 34.50 443,897 8.1 years $ 30.95 56,582 $ 28.02
- ------------------ --------- ---------- -------- ------- --------
Total 1,051,909 5.8 years $ 20.71 540,568 $ 13.51
- ------------------ --------- ---------- -------- ------- --------
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 38,487, 25,638, and 145,658 shares at
weighted-average grant-date fair values of $33.61, $29.00, and $28.11 per share
in 1998, 1997, and 1996, respectively. Compensation expense charged to earnings
for the above amounted to $2.6 million, $1.5 million, and $1.3 million in 1998,
1997, and 1996, 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 7,049, 10,274, and 5,752 shares were issued in 1998,
1997, and 1996, respectively. Compensation expense related to this plan amounted
to approximately $.3 million, $.3 million, and $.2 million in 1998, 1997, and
1996, 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:
Common Stock Additional
------------------ Paid-in Treasury
Dollars in thousands Class A Class B Capital Stock
- --------------------------------------------------------------------------------
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 May 1, 1997 $16,569 $4,037 $34,332 $(43,630)
Director Stock Plan Issuance -- -- 217 67
Executive Long-Term
Incentive Plan Issuance -- -- 192 73
Purchase of Treasury Shares -- -- -- (4,281)
Restricted Share Issuance -- -- 1,862 270
Issuance of Shares Under Employee
Savings Plan -- -- 316 101
Exercise of Stock Options 138 -- 3,450 (99)
Other 70 (70) -- --
- -------------------------------------------------------------------------------
Balance at April 30, 1998 $16,777 $3,967 $40,369 $(47,499)
- -------------------------------------------------------------------------------
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Results of Operations:
Fiscal 1998 Compared to Fiscal 1997
The Company continued to grow and strengthen its core businesses. In fiscal
1998, the Company sold its domestic law publishing program for $26.5 million,
and reinvested the proceeds by acquiring the publishing assets of Van Nostrand
Reinhold (VNR) for $28.5 million in cash. The domestic law program had limited
potential for the Company. VNR reinforces the Company's strong position in four
core subject areas: architecture / design, environmental / industrial science,
culinary arts / hospitality, and business technology.
Fiscal 1998 income includes unusual items amounting to a pre-tax gain of
$16.9 million, or $9.7 million after taxes, equal to $.59 per diluted share,
relating to the gain on the sale of the domestic law publishing program, net of
a write-down of certain intangible assets and other items.
Revenues increased 8% over the prior year to $467.1 million reflecting
improvement in all of the Company's core businesses. Worldwide revenue increases
over the prior year included 9% for scientific, technical, and medical
publishing; 8% for professional/trade publishing; and 7% for educational
publishing, led by the domestic college division, which increased 9%. The strong
U.S. dollar depressed revenues in some of the Company's overseas markets.
Cost of sales as a percentage of revenues was 35.1% in 1998 compared with
35.9% in the prior year primarily reflecting lower inventory obsolescence
provisions in the current year.
Operating and administrative expenses increased 6.9% over the prior year.
Expenses as a percentage of revenues declined to 53.5%, compared with 54.1% in
the prior year, as the rate of growth in expenses was contained at less than the
revenue growth rate.
Operating income excluding the unusual items mentioned above increased 30%
over the prior year to $45.3 million. Operating income margins increased to 9.7%
of revenue from 8.1% in the prior year, primarily due to the effects of the
higher revenue base and lower operating expenses as a percentage of revenues.
Operating income was adversely affected by weakness in the Company's Asian
markets due to the economic downturn in that region.
Interest expense increased by $1.7 million reflecting a full year of
financing costs related to VCH, which was acquired during fiscal 1997. Interest
income increased by $1.6 million primarily as a result of higher cash balances
compared with the prior year.
The effective tax rate was 37.0% compared with 34.1% in the prior year
primarily reflecting the higher incremental tax rate on the unusual items gain.
Net income, excluding the unusual items net gain of $9.7 million after
taxes, increased 32% to $26.9 million.
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, and civil engineering. 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.
<PAGE>
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.
Liquidity and Capital Resources
The Company's cash and cash equivalents balance was $127.4 million at the
end of fiscal 1998, compared with $79.1 million at the end of the prior year.
Cash provided by operating activities was $104.0 million in fiscal 1998, an
increase of $40.1 million compared with the prior year.
The Company's operating cash flow is strongly affected by the seasonality
of its domestic college business and receipts from its journal subscriptions.
Receipts from journal subscriptions occur primarily during November and December
from companies commonly referred to as independent subscription agents. These
companies facilitate the journal ordering process by consolidating the
subscription orders/billings of each subscriber with various publishers. Monies
are collected in advance from subscribers by the subscription agents and are
remitted to the Company, generally prior to the commencement of the
subscriptions. Although at fiscal year-end, the Company had minimal credit risk
exposure to these agents, future calendar year subscription receipts from these
agents are highly dependent on their financial position and liquidity.
Subscription agents account for approximately 26% 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
1999 are expected to increase approximately 25% over 1998, 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.
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 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 continued to decline during fiscal 1998.
Year 2000 Issues
The Company substantially 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. Since many of the Company's systems are new and
were designed to accommodate the year 2000 coding when originally installed, the
year 2000 issues should not have a material adverse impact on the Company's
operations. It is anticipated that any corrective measures required will be
completed by mid-year of calendar 1999.
New Accounting Standards
The Financial Accounting Standards Board issued the following Statements of
Financial Accounting Standards ("SFAS"), which become effective for the
Company's fiscal 1999 financial statements: SFAS No. 130, "Reporting
Comprehensive Income," which requires disclosure of comprehensive income and its
components, as defined; SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," which requires certain financial and
descriptive information about a company's reportable operating statements; and
SFAS No. 132, "Employers' Disclosures about Pensions and other Postretirement
Benefits," which requires additional disclosures relating to a company's pension
and postretirement benefit plans. In the opinion of the Company's management,
the adoption of these new accounting standards may require additional
disclosures but should not have a material effect on the consolidated financial
statements of the Company.
<PAGE>
"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)
worldwide economic and political conditions; and (vi) other factors detailed
from time to time in the Company's filings with the Securities and Exchange
Commission.
<PAGE>
Results by Quarter (Unaudited)
John Wiley & Sons, Inc. and Subsidiaries
Dollars in thousands except per share data
1998 1997
- ---------------------- -------------------- -------------------
Revenues
First quarter $ 112,086 $ 99,217
Second quarter 115,886 107,070
Third quarter 124,350 118,105
Fourth quarter 114,759 107,582
---------------------- -------------------- -------------------
Fiscal year $ 467,081 $ 431,974
---------------------- -------------------- -------------------
Operating Income
First quarter $ 13,711 $ 11,716
Second quarter 10,326 7,189
Third quarter 31,806 (a) 11,913
Fourth quarter 6,313 3,979
---------------------- -------------------- -------------------
Fiscal year $ 62,156 (a) $ 34,797
---------------------- -------------------- -------------------
Net Income
First quarter $ 8,082 $ 7,229
Second quarter 5,639 3,494
Third quarter 18,638 (a) 6,731
Fourth quarter 4,229 2,886
---------------------- -------------------- -------------------
Fiscal year $ 36,588 (a) $ 20,340
---------------------- -------------------- -------------------
Income Per Share Diluted Basic Diluted Basic
--------- ---------- --------- ----------
First quarter $ .49 $ .51 $ .44 $ .45
Second quarter .34 .36 .21 .22
Third quarter 1.12 (a) 1.18 (a) .41 .43
Fourth quarter .25 .27 .18 .18
Fiscal year $ 2.22 (a) $ 2.32 (a) $ 1.24 $ 1.29
---------------------- --------- ---------- --------- ----------
(a) Includes unusual items amounting to a pretax gain of $16,893, or $9,713
after tax, equal to $0.59 per diluted share ($0.62 per basic share)
relating to the gain on the sale of the domestic law publishing program,
net of a write-down of certain intangible assets and other items.
Quarterly Share Prices, Dividends and Related Stockholder Matters
The Company's Class A and Class B shares are listed on the New York
Stock Exchange under the symbols JWA and JWB, respectively. Dividends per share
and the market price range by fiscal quarter for the past two fiscal years were
as follows:
Class A Common Stock Class B Common Stock
---------------------- -----------------------
Market Price Market Price
Divi- -------------- Divi- ---------------
dends High Low dends High Low
------- ------ ------- ------- ------- -------
1998
First quarter $.1125 $34.50 $29.88 $.1000 $35.00 $30.00
Second quarter .1125 44.38 31.50 .1000 44.25 31.63
Third quarter .1125 57.00 44.06 .1000 56.38 44.50
Fourth quarter .1125 56.00 49.31 .1000 56.00 49.06
- ---------------- ------- ------ ------- ------- ------- -------
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
- ---------------- ------- ------ ------- ------- ------- -------
As of April 30, 1998, the approximate number of holders of the Company's
Class A and Class B Common Stock were 1,274 and 191, respectively, based on the
holders of record and other information available to the Company.
The Company's credit agreement contains certain restrictive covenants
related to the payment of dividends and share repurchases. Under the most
restrictive covenant, approximately $71 million was available for such
restricted payments. Subject to the foregoing, the Board of Directors considers
quarterly the payment of cash dividends based upon its review of earnings, the
financial position of the Company, and other relevant factors.
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
John Wiley & Sons, Inc. and Subsidiaries
Dollars in thousands except per share data For the years ended April 30
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------- ------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues $467,081 $431,974 $362,704 $331,091 $294,289
Operating Income 62,156 (a) 34,797 32,955 26,879 18,883
Net Income 36,588 (a) 20,340 24,680 (b)) 18,311 12,117
Working Capital 59,257 39,783 31,515 11,241 35,059
Total Assets 506,914 457,944 284,501 247,481 243,940
Long-Term Debt 125,000 125,000 -- -- 26,000
Shareholders' Equity 160,751 128,983 117,982 98,832 82,330
- ----------------------------------------- ------------- -------------- -------------- -------------- --------------
Per Share Data
Income Per Share
Diluted 2.22 (a) 1.24 1.49 1.12 .76
Basic 2.32 (a) 1.29 1.55 1.16 .78
Cash Dividends
Class A Common .45 .40 .35 .31 .275
Class B Common .40 .35 .31 .275 .245
Book Value-End of Year 10.05 8.11 7.32 6.21 5.23
- --------------------------------------------------
</TABLE>
(a) Fiscal 1998 includes unusual items amounting to a pretax gain of $16,893,
or $9,713 after tax, equal to $0.59 per diluted share ($0.62 per basic
share) relating to the gain on the sale of the domestic law publishing
program, net of a write-down of certain intangible assets and other items.
Excluding the unusual items, operating income would have been $45,263 and
net income would have been $26,875, or $1.63 per diluted share and $1.70
per basic share.
(b) Fiscal 1996 net income includes interest income after taxes of $2.6
million, or $0.16 per diluted and basic share, received on the favorable
resolution of amended tax return claims.
<PAGE>
Schedule II
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 1998, 1997 AND 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additions
------------------------------
Balance at Charged to Deductions Balance at
Description Beginning Cost & From From End of
of Period Expenses Acquisitions Reserves Period
- ------------------------------------------- ------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Year Ended April 30, 1998
Allowance for sales returns(1) $ 27,099 $ 32,945 $ $ 26,633 $ 33,411
Allowance for doubtful accounts $ 7,414 $ 3,445 $ $ 2,694(2) $ 8,165
Year Ended April 30, 1997
Allowance for sales returns(1) $ 20,786 $ 26,396 $ 357 $ 20,440 $ 27,099
Allowance for doubtful accounts $ 6,049 $ 2,591 $ 1,548 $ 2,774(2) $ 7,414
Year Ended April 30, 1996
Allowance for sales returns(1) $ 17,519 $ 17,744 $ 14,477 $ 20,786
Allowance for doubtful accounts $ 5,114 $ 5,499 $ 4,564(2) $ 6,049
- ------------------------------------------------
</TABLE>
(1) Allowance for sales returns represents anticipated returns net of inventory
and royalty costs.
(2) Accounts written off, less recoveries.
<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/ William J. Pesce
-----------------------------------
William J. Pesce
President and Chief Executive
Officer
By: /s/ Robert D. Wilder
-----------------------------------
Robert D. Wilder
Executive Vice President and
Chief Financial & Support
Operations Officer
By: /s/ Peter W. Clifford
-----------------------------------
Peter W. Clifford
Senior Vice President, Finance
Corporate Controller
& Chief Accounting Officer
Dated: June 25, 1998
<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 25, 1998.
/s/ Franklin E. Agnew /s/ Henry A. McKinnell, Jr.
- ---------------------------------- -------------------------------------
Franklin E. Agnew Henry A. McKinnell, Jr.
/s/ Warren J. Baker /s/ William J. Pesce
- ---------------------------------- -------------------------------------
Warren J. Baker William J. Pesce
/s/ H. Allen Fernald /s/ William R. Sutherland
- ---------------------------------- -------------------------------------
H. Allen Fernald William R. Sutherland
/s/ Gary J. Fernandes /s/ Thomas M. Taylor
- ---------------------------------- -------------------------------------
Gary J. Fernandes Thomas M. Taylor
/s/ Larry Franklin
- ---------------------------------- -------------------------------------
Larry Franklin Leo J. Thomas
/s/ John S. Herrington /s/ Bradford Wiley II
- ---------------------------------- -------------------------------------
John S. Herrington Bradford Wiley II
/s/ Deborah E. Wiley
- ---------------------------------- -------------------------------------
Chester O. Macey Deborah E. Wiley
/s/ Peter Booth Wiley
-------------------------------------
Peter Booth Wiley
JOHN WILEY & SONS, INC.
FY 1998 EXECUTIVE LONG TERM INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
MAY 1, 1997
<PAGE>
CONTENTS
Section Subject Page
I. Definitions 2
II. Plan Objectives 4
III. Eligibility 4
IV. Incentive 4
V. Performance Measurement and Objectives 5
VI. Performance Evaluation 5
VII. Payouts 7
VIII. Restricted Performance Shares 7
IX. Stock Option 9
X. Administration and Other Matters 10
<PAGE>
I. DEFINITIONS
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
company
John Wiley & Sons, Inc.
plan
The company's FY (Fiscal Year) 1998 Executive Long Term Incentive Plan as
set forth in this document.
shareholder plan
The company's 1991 Key Employee Stock Plan.
plan cycle
The three year period from May 1, 1997 to April 30, 2000.
executive compensation and development committee (ECDC) The committee of the
company's Board of Directors (Board) responsible for reviewing executive
compensation.
financial goals
The company's objectives to achieve specific financial results
in terms of EBITDA and earnings per share as defined below, for the plan cycle,
including interim revised financial goals, if any, as determined by the ECDC,
the Finance Committee and the Board, and confirmed in writing.
financial results
The company's actual achievement against the financial goals
set for the plan cycle, as reflected in the company's audited financial
statements.
participant
Any person who is eligible and is selected to participate in the
plan, as defined in Section III.
target incentive
The target incentive as determined and authorized by the ECDC at the committee
meeting held on June 19, 1997 is a restricted performance shares award, which
represents the number of restricted performance shares that a participant is
eligible to receive if 100% of his/her applicable financial goals are achieved
and the participant remains an employee of the company through April 30, 2002,
except as otherwise provided in Section VIII. The target incentive is based on
the participant's position and is described in Section IV.
stock
Class A Common Stock of the company.
restricted performance shares
Stock issued pursuant to this plan and the shareholder plan that is subject to
forfeiture. In the shareholder plan, such stock is referred to as "Restricted
Stock." The value of each share of restricted performance shares under this plan
will be determined by reference to the stock closing sale price, as reported by
New York Stock Exchange (NYSE), on the date the ECDC acts at the beginning of
the plan cycle (June 19, 1997). In the event the stock is not traded on June 19,
1997 or the date the ECDC acts, whichever is later, the closing sales price
shall be the price of the stock on the next day after June 19, 1997 or the date
the ECDC acts on which the stock trades.
restricted period
The period during which the shares of restricted performance
shares shall be subject to forfeiture in whole or in part, as defined in the
shareholder plan, in accordance with the terms of the award.
plan end adjusted restricted performance shares award. The final amount of
restricted performance shares awarded to a participant, at the end of the plan
cycle after adjustments, if any, are made, as set forth in Section VIII.
stock option
A right granted to a participant, as more fully described under Section IX, to
purchase a specific number of shares of stock at a specified price. The stock
option granted under this plan will be non-qualified (i.e. is not intended to
comply with the terms and conditions for a tax-qualified option, as set forth in
Section 422A of the Internal Revenue Code of 1986).
grant date
The date on which a participant is granted the stock option. This is also the
date on which the exercise price of the stock option is based.
payout amount
Cash, if any, plus plan end adjusted restricted performance shares award, as set
forth in Section VIII, to a participant under this plan, if any, for achievement
of the financial goals, as further discussed in this plan.
performance levels
threshold
The minimum acceptable level of achievement for each financial goal. If
threshold performance is achieved against all company financial goals, a
participant may earn 25% of the target incentive amount for which he/she is
eligible. If threshold performance is achieved against all divisional financial
goals, a participant may earn 25% of the target incentive amount for which
he/she is eligible.
target
Achievement in aggregate of the financial goals. Each individual financial goal
is set at a level which is both challenging and achievable.
outstanding
Superior achievement of the financial goals. If outstanding performance is
achieved against all financial goals, the maximum amount a participant may earn
is 200% of the target incentive amount for which he/she is eligible.
payout factor
The percentage applied to the target incentive amount exclusive of the stock
option portion, if any, to determine the payout amount based on the percentage
of financial goals deemed achieved.
EBITDA Income before interest, taxes, depreciation and amortization for the
final year of the plan cycle.
earnings per share
Earnings per share, as reported in the company's annual report for the final
year of the plan cycle.
divisional operating income
Operating income before allocations for corporate support services and taxes,
excluding the effects of any unusual activity, for the final year of the plan
cycle.
divisional cash flow from operations after investing activities (divisional cash
flow) operating income before allocations and taxes, excluding unusual items not
related to the period being measured, plus/minus any non-cash items included in
divisional operating income (other than provisions for bad debts), and changes
in controllable assets and liabilities, less normal investments in product
development assets and direct property and equipment additions, for the final
year of the plan cycle. Controllable assets and liabilities are inventory,
composition, author advances, other deferred publication costs, and deferred
subscription revenues.
II. PLAN OBJECTIVES
The purpose of this plan is to enable the company to reinforce and sustain a
culture devoted to excellent performance, emphasize long term financial
performance at the corporate and division levels, reward significant
contributions to the success of the company, attract and retain highly qualified
executives, and provide an opportunity for each participant to acquire equity in
the company.
III. ELIGIBILITY
The participant is selected by the ECDC in its sole discretion, from among those
employees in key management positions deemed able to make the most significant
contributions to the growth and profitability of the company. An employee must
be a participant of the FY 1998 Executive Annual Incentive Plan to be eligible
to participate in this plan. The President and CEO of the company is a
participant.
IV. INCENTIVE
A. The participant's target incentive is determined based on the participant's
position in the company and the contributions the position is deemed able
to make in achieving the financial goals of the company.
B. The participant's target incentive is recommended by the President and CEO
to the ECDC for its and the Board's approval. In the case of the President
and CEO, the target incentive is recommended by the ECDC for the Board's
approval.
<PAGE>
V. PERFORMANCE MEASUREMENT AND OBJECTIVES
A. The objectives for the financial goals are recommended by the ECDC with
the advice of the Finance Committee to the Board for its approval. The
financial goals performance objectives are set at a level which are
challenging and achievable.
B. Financial goals established for each participant may include one or more
organizational level's financial goals (e.g. company and division), and
one or more financial goals for a particular organizational unit (e.g.
cash flow, income, divisional operating income). The weighting of and
between the two organizational levels' financial goals may vary,
depending upon the participant's position. Weighting of the participant's
financial goals is recommended by the President and CEO to the ECDC. In
the case of the President and CEO, the financial goals are EBITDA and
earnings per share..
C. Threshold, target and outstanding performance levels for the financial
goals are recommended by the President and CEO for approval by the ECDC,
and the Board.
VI. PERFORMANCE EVALUATION
A. Financial Results
1. Actual financial results achieved by the company and by each
division will be calculated at the end of the plan cycle, subject
to adjustment for audited results, and will be compared with the
previously set financial goals.
2. The financial results will be reviewed by the President and CEO to
determine proposed payout factors for the company and for the
divisions.
3. The President and CEO will provide to the ECDC a view of the
company's achievement of its financial goals, as well as divisional
achievement of like objectives, if any, and will recommend payout
factors to be used for the company and divisional objectives.
B. Award Determination
1. At least threshold performance, in aggregate, of a participant's
particular organizational level's objectives is necessary for the
participant to receive a payout for the particular organizational
level. However, once the overall threshold is achieved for any single
measure the non-achievement of any one particular goal's target
objective does not preclude a payout.
2. The determination of the performance level achievement (threshold,
target and outstanding, or points in between) for each organizational
level's financial goals will be made independently of any other
organizational level's financial goals a participant may have.
3. If the participant has more than one organizational level's financial
goals, the non-achievement of a threshold performance level of one
organizational level's financial goals does not preclude a payout for
the other organizational level's financial goals.
4. The following details the effect of the financial results performance
levels on a participant's payout amount. The actual payout factors
will be in the sole judgment and discretion of the ECDC, taking into
account the following guidelines:
a. For below threshold performance in aggregate, the payout amount
is zero.
b. For company threshold performance in aggregate, 25% of the target
incentive may be recommended. For divisional threshold
performance in aggregate, 25% of the target incentive may be
recommended
c. For between company threshold and target performance in
aggregate, at minimum 25% of the target incentive and up to 100%
of the target incentive may be recommended. For between
divisional threshold and target performance in aggregate, at
minimum 25% of the target incentive and up to 100% of the target
incentive may be recommended.
d. For target performance in aggregate, 100% of the target incentive
may be recommended.
e. For between target and outstanding performance in aggregate,
at minimum 100% of the target incentive and up to 200% of
the target incentive may be recommended.
f. For outstanding performance in aggregate, 200% of the target
incentive may be recommended.
5. Notwithstanding anything to the contrary, the maximum payout
amount, if any, a participant may receive is 200% of the target
incentive.
<PAGE>
VII PAYOUTS
A. The restricted performance shares payout amount, if any, will be made as
set forth in Section VIII below. The determination by the ECDC of plan end
adjusted restricted performance shares shall constitute payout of this
portion of the award.
B. The ECDC, in its sole discretion, may direct that the payout be made wholly
or partly in cash.
C. In the event of a participant's death, permanent disability, retirement or
leave of absence prior to the end of the plan cycle, restricted performance
shares awarded at the beginning of the plan cycle, if any, are forfeited,
and the payout amount, if any, will be determined by the ECDC in its sole
discretion.
D. A participant who resigns, or whose employment is terminated by the
company, with or without cause, prior to the end of the plan cycle, is not
eligible for a payout amount and shall forfeit any restricted performance
shares awarded at the beginning of the plan cycle.
VIII. RESTRICTED PERFORMANCE SHARES AWARD PROVISIONS
A. Since one of the objectives of this plan is to provide the participant with
an equity stake in the company and align management and shareholder
interests, the target incentive will be awarded as restricted performance
shares .
B. Restricted performance shares, if any, shall be awarded at the beginning of
the plan cycle, after the June, 1997 ECDC meeting. The amount of restricted
performance shares awarded shall be based on the proportion of the target
incentive allocated to restricted performance shares, as determined by the
ECDC. The value of each share will be determined based on the stock closing
sale price, as reported by the NYSE, on the date the ECDC acts at the
beginning of the plan cycle (June 19, 1997). In the event the stock is not
traded on June 19, 1997 or the date the ECDC acts, whichever is later, the
closing sales price shall be the price of the stock on the next day after
June 19, 1997 or the date the ECDC acts on which the stock trades,
whichever is later. The restricted performance shares awarded at the
beginning of the plan cycle also are subject to adjustment at the end of
the plan cycle as set forth in Sections VIII (C) and (D) below. Restricted
performance shares, if any, shall be awarded pursuant to the shareholder
plan, as approved by the ECDC. In addition to the terms and conditions set
forth in the shareholder plan and Section VII (D) and (E) below, the
following conditions shall apply:
1. During the plan cycle, the participant shall not have the right to
receive dividends or - other distributions with respect to restricted
performance shares received at the beginning of the plan cycle and
shall not have the right to vote such shares. After the end of the
plan cycle, and after all adjustments to the amount of restricted
performance shares are made by the ECDC as set forth in Section VII(D)
and (E) below, the participant shall have the right to receive
dividends or other distributions with respect to the final amount of
restricted performance shares issued and shall have the right to vote
such shares. The date on which the dividend and voting rights shall
commence is the date on which the ECDC makes its determination of the
final number of restricted performance shares awarded after the plan
cycle ends pursuant to Section VII(D) and (E) below. 2. During the
restricted period, the restricted performance shares may not be sold
or transferred. Restricted performance shares shall be legended and
held by the Company.
3. Withholding taxes relating to restricted performance shares awarded
may be satisfied by surrendering shares to the company, in lieu of
cash, upon lapse of the restrictions.
4. The restricted period for restricted performance shares awarded shall
be as follows: subject to continued employment except as otherwise set
forth in the shareholder plan or Sections VII and VIII of this plan,
the lapse of restrictions on one-half of the restricted performance
shares awarded will occur on the first anniversary (April 30, 2001) of
the plan end date at which time the participant will receive a new
stock certificate in a number of shares equal to one-half of the
restricted performance shares awarded with the restrictive legend
deleted, and the lapse of restrictions on the remaining half will
occur on the second anniversary (April 30, 2002) of the plan end date
at which time the participant will receive a new stock certificate in
a number of shares equal to the remaining half with the restrictive
legend deleted.
5. If the participant dies or becomes permanently disabled during the
restricted period, the restrictions on the restricted performance
shares will lapse on the date of such event.
6. If the participant retires during the restricted period at or after
his/her normal retirement date, the restrictions on the restricted
performance shares will lapse on the date of such event.
7. If the participant takes early retirement during the restricted
period, the restrictions on the restricted performance shares will not
lapse until the restricted period expires. If the participant dies
between the time the participant takes early retirement and the end of
the restricted period (April 30, 2002), the lapse of restrictions on
the restricted performance shares will occur on the date of such
event.
8. The restricted performance shares may be adjusted by the ECDC for any
change in the capital stock of the company, as provided in Section II
of the shareholder plan and are in all respects subject to the
provisions of that plan.
9. In the event of a change of control, whether before or after the end
of the plan cycle, as defined in the shareholder plan, all shares of
restricted performance shares which would otherwise remain subject to
restrictions under the plan shall be free of such restrictions.
C. The number of shares of restricted performance shares awarded at the
beginning of the plan cycle, may be adjusted at the end of the plan cycle
based on actual achievement of target objectives.
D. The final amount of restricted performance shares will be determined as
follows: The restricted performance shares established by the ECDC at the
beginning of the plan cycle times the payout factor equals the number of
shares for the plan end adjusted restricted performance shares award. The
result of this calculation will be compared to the restricted performance
shares awarded at the beginning of the plan cycle, and the appropriate
amount of restricted performance shares will be awarded or forfeited, as
required, to bring the restricted performance shares award to the number
of shares designated as the plan end adjusted restricted performance
shares award.
IX. STOCK OPTION
The participant may be granted a stock option pursuant to the shareholder plan
at the beginning of the plan cycle, representing another incentive vehicle by
which the participant is able to share in the equity growth of the company. The
number of shares in the stock option granted to a participant under this plan is
based on a set of variables and assumptions, applied consistently to all
participants, regarding the monetary value a participant might receive upon
exercise of the stock option. The terms and conditions of the award of the stock
option are contained in the shareholder plan and in the stock option award.
Withholding taxes relating to the gain realized on the exercise of an option may
be satisfied by surrendering to the company the equivalent value of the taxes,
or a portion thereof, in option shares in lieu of cash.
<PAGE>
X. ADMINISTRATION AND OTHER MATTERS
A. This plan will be administered by the ECDC, who will have authority in its
sole discretion to interpret and administer this plan, including, without
limitation, all questions regarding eligibility and status of any
participant, and no participant shall have any right to receive any
restricted performance shares or payment of any kind whatsoever, except as
determined by the ECDC hereunder.
B. The company will have no obligation to reserve or otherwise fund in advance
any amount which may become payable under the plan.
C. Restricted performance shares, stock options awarded and any cash paid out
under this plan shall not be considered as compensation for purposes of
defining compensation for retirement, savings or supplemental executive
retirement plans, or similar type plans.
D. This plan may not be modified or amended except with the approval of the
ECDC. Notwithstanding the foregoing, Section VIII B (8) shall not be
amended.
E. In the event of a conflict between the provisions of this plan and the
provisions of the shareholder plan, the provisions of the shareholder plan
shall apply.
JOHN WILEY & SONS, INC.
FY 1998 EXECUTIVE ANNUAL INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
MAY 1, 1997
<PAGE>
CONTENTS
Section Subject Page
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Objectives and Measurement 3
V. Performance Evaluation 4
VI. Payouts 6
VII. Status Changes 6
VIII. Administration and Other Matters 6
<PAGE>
I. DEFINITIONS
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
company
John Wiley & Sons, Inc.
plan
The company's FY (Fiscal Year) 1998 Executive Annual Incentive Plan
described in this document and any written amendments to this document.
plan year
The twelve month period from May 1, 1997 to April 30, 1998.
executive compensation and development committee (ECDC)
The committee of the company's Board of Directors (Board) responsible for
reviewing executive compensation.
financial goals
A participant's objective to achieve specific financial results for FY 1998,
including interim revised financial goals, if any, as approved and communicated
in writing, as described in Sections IV and V below.
financial results
Total company or division achievement against financial goals
set for FY 1998.
strategic milestone
A participant's objective to achieve specific results for FY
1998, including interim revised strategic milestones, if any, as approved and
communicated in writing, as described in Sections IV and V below.
Strategic milestones are leading indicators of performance.
participant
Any person who is eligible to and is selected to participate in the
plan, as defined in Section III.
base salary
The participant's total amount of base salary, calculated as follows: base
salary as of June 2,1997, or the date of hire, or promotion into the plan, if
later, adjusted for any increases or decreases during FY 1998, on a prorated
basis and adjusted for any amount of time the participant may not be in the plan
for reasons of hire, promotion, death, disability, retirement and/or
termination.
payout
Actual gross dollar amount paid to a participant under the plan, if any, for
achievement of financial goals and strategic milestones, as further discussed in
this plan.
target incentive percent
The percent applied to the participant's base salary to determine the target
incentive amount.
target incentive amount
The amount, if any, that a participant is eligible to receive if a participant
achieves 100% of his/her financial goals and strategic milestones. The incentive
for financial goals should constitute at least 70% of the target incentive
amount for the participant.
performance levels
threshold The minimum acceptable level of achievement of each financial goal and
strategic milestone. If threshold performance is achieved against all financial
goals and strategic milestones, a participant may earn 25% of the target
incentive amount for which he/she is eligible.
target Achievement in aggregate of target financial goals and strategic
milestones. Each individual financial goal and strategic milestone is set at a
level which is both challenging and achievable.
outstanding Superior achievement of financial goals and strategic milestones,
both in quality and scope, with limited time and resources. If outstanding
performance is achieved against all financial goals and strategic milestones,
the maximum amount a participant may earn is 175% of the target incentive
amount.
payout factor Percentage of financial goals and strategic milestones deemed
achieved, used to determine the payout for which a participant is eligible.
II. PLAN OBJECTIVES
The purpose of the FY 1998 Executive Annual Incentive Plan is to enable the
company to reinforce and sustain a culture devoted to excellent performance,
emphasize performance at the corporate and division levels, reward significant
contributions to the success of Wiley, and attract and retain highly qualified
executives.
III. ELIGIBILITY
The participant is selected by the President and CEO of the company, from among
those employees in key management positions deemed able to make the most
significant contributions to the growth and profitability of the company, with
the approval of the ECDC. The President and CEO of the company is a participant.
IV. PERFORMANCE OBJECTIVES AND MEASUREMENT
The plan employs two categories of objectives for performance measurement:
financial goals and strategic milestones. The weighting of and between the two
measures may vary, depending upon the participant's position. Weighting is
recommended by the participant's manager and approved by the President and CEO,
if the President and CEO is not the participant's manager.
A. Financial Goals
1. Financial goals for the company are determined near the beginning of
the plan year by the President and CEO. The President and CEO's goals
are reviewed and approved by the Finance Committee of the Board and
ECDC, and approved by the Board.
2. Financial goals are set for the company as a whole and for each
division and may be revised in the interim, as appropriate. The
participant will be given specific financial goals, based on an
appropriate mix of company and/or division objectives.
3. Financial goals include defining levels of performance (threshold,
target and outstanding) and the measures of each.
B. Strategic Milestones
1. Strategic milestones are non-financial individual objectives over
which the participant has a large measure of control, which lead to,
or are expected to lead to improved performance for the company in
the future. Strategic milestones are determined near the beginning of
the plan year by the participant, and approved by the participant's
manager, if the President and CEO is not the participant's manager.
2. The strategic milestones for the President and CEO are reviewed and
approved by the Executive and Policy Committee of the Board and by
the Board.
3. The strategic milestones for the President and CEO should be
appropriately reflected in those of all other employees at all levels.
Each participant collaborates with his/her manager in setting
strategic milestones. The strategic milestones may be revised in the
interim, as appropriate.
4. The determination of strategic milestones includes defining a target
level of performance and the measure of such, and may include defining
threshold and outstanding levels of performance and the measures of
such.
V. PERFORMANCE EVALUATION
A. Financial Results
1. Actual financial results achieved by the company and by each group
and division will be calculated at the end of the plan year,
subject to adjustment for audited results, and will be compared
with previously set financial goals.
2. Actual financial results will be reviewed by the participant's
manager and the President and CEO and a payout factor determined.
The payout factor is based on a judgment of the relative importance
of financial results and the achievement compared to the financial
goals. This payout factor is subject to the review and approval of
the President and CEO. The ECDC will evaluate the President and
CEO's financial results and will recommend to the Board his/her
financial results payout factor.
B. Strategic Milestones
1. Achievement of a participant's strategic milestones will be
determined at the end of the plan year by comparing results
achieved to previously set objectives.
2. Each participant's manager will recommend a payout factor for
achievement of all strategic milestones compared with the
previously set objectives. In determining the payout factor, the
overall performance on all strategic milestones will be considered.
This payout factor is subject to the review and approval of the
President and CEO, the ECDC and the Board. The ECDC will recommend
to the Board for approval the payout factor for the President and
CEO's achievement of his/her strategic milestones based on the
Executive and Policy Committee of the Board's evaluation of his/her
achievement compared with the previously set objectives.
C. Award Determination
1. Financial goals, established for each participant, may include one
or more organizational level's financial goals (e.g. company and
division), and one or more financial goal for a particular
organizational unit. At least threshold performance, in aggregate,
of a participant's particular organizational level is necessary for
the participant to receive a payout for the particular
organizational level. However, once the overall threshold is
achieved, the non-achievement of any one particular financial
goal's target objective does not preclude a payout for all the
participant's financial goals.
2. At least threshold performance of a financial goal for any of the
operating units for which he/she is responsible is required for a
payout of strategic milestones to be made to the participant. The
CEO has the right to override this provision if he feels such
action is warranted.
3. Payout eligibility will be determined by calculating the amount for
achievement of financial goals and strategic milestones and adding
the two together, as follows:
===============================================================================
EAIP PAYOUT ELIGIBILITY CALCULATION
FINANCIAL RESULTS PAYOUT AMOUNT
Base Salary X Target Incentive Percent
X Weighting of Financial Goals X Payout Factor
= Financial Goals Payout Eligibility
STRATEGIC MILESTONES PAYOUT AMOUNT
Base Salary X Target Incentive Percent
X Weighting of Strategic Milestones X Payout Factor
= Strategic Milestones Payout Eligibility
EAIP PAYOUT ELIGIBILITY
Financial Goals Payout Amount + Strategic Milestones Payout Amount
= EAIP Payout Eligibility
===============================================================================
4. Notwithstanding anything to the contrary, the maximum payout, if any, a
participant may receive is 175% of the target incentive amount.
5. The foregoing EAIP payout eligibility calculation is intended to set forth
general guidelines on how awards are to be determined. The purpose of this
plan is to motivate the participant to perform in an outstanding manner.
The President and CEO has discretion under this plan to take into
consideration the contribution of the participant, the participant's
management of his/her organizational unit and other relevant factors,
positive or negative, which impact the company's, the participant's
organizational unit(s), and the participant's performance overall in
determining whether to recommend granting or denying an award, and the
amount of the award, if any. If the participant is the President and CEO,
such discretion is to be exercised by the ECDC and the Board.
<PAGE>
VI. PAYOUTS
Payouts will be made within 90 days after the end of the plan year and will be
based on audited financial results.
VII. STATUS CHANGES
A. In the event of a participant's death, disability, retirement or leave of
absence prior to payout from the plan, the payout, if any, will be
determined by the President and CEO in his/her sole discretion, subject
to any approval of the ECDC in its sole discretion, subject to any
required Board approvals. If the participant is the President and CEO,
such approval is required by the Board, in its sole discretion.
B. A participant who resigns, or whose employment is terminated by the
company, with or without cause, before payout from the plan is
distributed, will not receive a payout. Exception to this provision shall
be made only with the approval of the ECDC, in its sole discretion,
subject to any required Board approvals. If the participant is the
President and CEO, such approval is required by the Board in its sole
discretion.
C. A participant who transfers between divisions of the company, will have
his/her payout prorated to the nearest fiscal quarter for the time spent
in each division, based on the achievement of financial goals and
strategic milestones established for the position in each division, and
based upon a judgment of the participant's contribution to the
achievement of goals in each position, including interim revisions, if
appropriate.
D. A participant who is appointed to a position with a different target
incentive percent will have his/her payout prorated to the nearest fiscal
quarter for the time spent in each position, based on the achievement of
financial goals and strategic milestones established for each position.
E. A participant who is hired or promoted into an eligible position during
the plan year may receive a prorated payout as determined by the
President and CEO, in his/her sole discretion, subject to the approval of
the ECDC.
VIII. ADMINISTRATION AND OTHER MATTERS
A. The plan is effective for the plan year. It will terminate, subject to
payout, if any, in accordance with and subject to the provisions of this
plan unless renewed by the company in writing in its sole discretion.
B. This plan will be administered by the President and CEO, who will have
authority to interpret and administer this plan, including, without
limitation, all questions regarding eligibility and status of the
participant, subject to the approval of the ECDC required under this plan
or the by-laws of the company.
C. This plan may be withdrawn, amended or modified at any time, and for any
reason, in writing, in the company's sole discretion.
D. The determination of an award and payout under this plan, if any, is
subject to the approval of the President and CEO, the ECDC, and the Board
in their sole discretion. This plan does not confer upon any participant
the right to receive any payout, or payment of any kind whatsoever.
E. No participant shall have any vested rights under this plan. This plan does
not constitute a contract.
F. All deductions and other withholdings required by law shall be made to the
participant's payout, if any.
SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT made as of the 8th day of January, 1998, by and
between John Wiley & Sons, Inc., a New York corporation, with offices at 605
Third Avenue, New York, New York 10158 (hereinafter referred to as the
"Corporation"), and William J. Pesce presently residing at 2 Heath Drive,
Basking Ridge, New Jersey 07920 (hereinafter referred to as the "Executive").
W I T N E S S E T H :
Executive is presently employed as Chief Operating Officer of the
Corporation. The Corporation and Executive desire to enter into an agreement of
employment on the terms and subject to the conditions hereinafter set forth,
contingent on the election of the Executive, by the Board of Directors of the
Company ("Board"), as President and Chief Executive Officer of the Corporation
NOW THEREFORE, the parties agree as follows:
1. Employment.
1.1 Effective May 1, 1998 or on such other date as the Board may
determine (the "Effective Date") and contingent on the election of Executive by
the Board, the Corporation hereby employs Executive as President and Chief
Executive Officer.
1.2 Executive hereby accepts such employment and shall devote his
full business time, attention, knowledge and skills faithfully, diligently and
to the best of his ability to the performance of his duties. Executive shall do
such traveling as may be reasonably required of him in the performance of his
duties. Executive shall be subject to and shall observe and carry out such
reasonable rules, regulations, policies, directions and restrictions consistent
with the duties to be performed by him hereunder as the Corporation shall from
time to time establish.
1.3 If at any time during the term of employment the Board of
Directors of the Corporation shall, without his consent, and other than for
cause or on account of death, disability or retirement, fail to re-elect
Executive as President and Chief Executive Officer or shall remove him from such
office, Executive shall have the right, exercisable by written notice to the
Corporation within ten business days after the occurrence of such failure to
re-elect or removal, to terminate his services hereunder, effective as of the
last day of the month of receipt by the Corporation of any such written notice,
and Executive shall have no further obligation under this Agreement. Termination
of Executive's services under this Section shall be treated as a termination of
employment by the Corporation other than for cause and shall be governed by the
provisions of Section 5.2 of this Agreement.
1.4 Executive shall not be entitled to compensation other than
the compensation provided for (or otherwise referred to) in this Agreement for
any services he may render as a director or officer of any of the Corporation's
subsidiaries.
1.5 Executive shall not without the prior written approval of the
Corporation accept employment or compensation from or perform services of any
nature for any business enterprise other than the Corporation or any of its
subsidiaries or joint-venture entities.
1.6 Executive shall not without the prior written approval of the
Corporation invest in any business enterprise -
1.6.1 if such enterprise engages in or involves a "Restricted
Business" as that term is hereinafter defined in Section 7.1;
1.6.2 if such investment interferes with the performance of
Executive's duties hereunder; or
1.6.3 if such investment would violate the Corporation's
announced business policy with respect to employee interests in suppliers of
goods or services to the Corporation or any of its subsidiaries.
Notwithstanding the foregoing, Executive may invest in securities
of any company if such securities are listed for trading on a national stock
exchange or traded on the over-the-counter market and Executive's investment
therein represents less than one percent (1%) of the total number of outstanding
shares of the class of shares or outstanding principal amount of the class of
other securities of such company, as the case may be.
1.7 Executive shall not without the prior written approval of the
Corporation serve on the board of directors of any business enterprise other
than the Corporation or any of its subsidiaries.
2. Term.
2.1 Executive's term of employment hereunder shall commence as of
the Effective Date and shall continue through April 30, 2001, unless sooner
terminated in accordance with this Agreement, and thereafter as herein provided.
Executive's term of employment shall automatically renew for subsequent three
year terms, the first of which would begin on May 1, 2001, subject to the terms
of this Agreement, unless either party gives written notice 30 days or more
prior to the expiration of the then existing term of his or its decision not to
renew. Failure by the Corporation to renew, although not a termination by the
Corporation without cause or for cause, shall for purposes of the benefits
intended to be provided to Executive (and the obligations of Executive under
Section 5.5) be deemed to constitute a termination without cause.
3. Compensation.
3.1 As compensation for his services hereunder, the Corporation
shall pay Executive a base salary at the rate of four hundred fifty thousand ($
450,000) Dollars per annum, subject to increase as hereinbelow provided, payable
in equal installments no less frequently than monthly.
3.2 Executive shall be eligible to participate in all of the
Corporation's executive compensation plans in which senior executives are
eligible to participate, including but not limited to the Executive Annual
Incentive Plan ("EAIP"), the Executive Long Term Incentive Plan ("ELTIP"), or
equivalents, for so long as such plans remain in effect and shall also be
entitled to all of his other presently existing employment benefits and
perquisites or equivalents.
3.3 Executive's compensation shall be reviewed periodically in
accordance with procedures and policies established by the Corporation for
salary review of its officers.
3.4 To the extent coverage is not duplicative of that provided
under an executive compensation plan in which Executive is eligible to
participate, Executive shall be included to the extent eligible under any and
all plans providing benefits generally for the Corporation's employees,
including, but not limited to, pension, group life insurance, hospitalization,
medical and disability plans. The Corporation shall not, however, be under any
obligation to continue the existence of any executive compensation or other
employee benefit plan referred to in Section 3.2 or this Section 3.4.
3.5 The Governance and Compensation Committee (the "Committee")
intends, at a meeting or by unanimous written consent of the Committee on or
about the Effective Date, to grant to Executive under the 1991 Key Employee
Stock Plan, an option to purchase 75,000 shares of Class A Common Stock of the
Corporation, at the market price on the date of grant, vesting as to all such
shares on the fifth anniversary of the date of grant, and otherwise in the form
of grant customarily used by Company for such options (the "Option"). The Option
is in addition to, and shall not be part of or affect the ELTIP, as applicable
to Executive.
3.6 Subject to the next sentence of this Section 3.6, (i) should
the Option not be timely granted, or should the Corporation cease to provide
incentive compensation plans in which Executive is eligible to participate,
substantially similar to those described in Section 3.2 above, and of a value,
in the aggregate, to Executive substantially similar to that of the present
plans, Executive shall have the right to terminate his services hereunder,
exercisable by written notice to the Corporation within ten business days after
the Effective Date, or after the cessation of such plans, as applicable,
effective as of the last day of the month of receipt by the Corporation of any
such notice, and Executive shall have no further obligation of any kind under or
arising out of this Agreement. Should a circumstance or event not within the
reasonable contemplation of the parties at the date hereof arise on or before
the Effective Date that makes it inadvisable or undesirable in the reasonable
judgment of the Committee to grant the Option to Executive and should the
Committee and/or the Board (as may be required) on or about such date, because
of such intervening circumstance or event, instead bestow upon Executive
benefits of reasonably equivalent value and having a comparable vesting date,
Executive shall thereupon forego his right of termination under the preceding
sentence. Termination of Executive's services under this Section 3.6 shall be
treated as a termination of employment by the Corporation other than for cause
and shall be governed by the provisions of Section 5.2.
4. Vacation.
Executive shall be entitled to four weeks of paid vacation, or such greater
amount, if any, as provided in the policies of the Corporation then applicable
to Executive, each calendar year during the period of his employment hereunder,
to be taken at times mutually agreeable to Executive and the Corporation.
5. Termination of Employment By Corporation.
5.1 The Corporation may terminate Executive's employment
hereunder at any time for cause without further obligation or liability except
as hereinbelow stated in this Section 5.1. For purposes of this Agreement, the
term "cause" shall be limited to the following grounds:
5.1.1 Executive's refusal to substantially perform his duties or
otherwise fulfill his material obligations under this Agreement (for reasons
other than death or disability), in any such case after due written notice
thereof, or serious willful misconduct in respect of his obligations hereunder;
5.1.2 Conviction of a felony crime;
5.1.3 Perpetration of a fraud against the Corporation or
misappropriation of the Corporation's property;
5.1.4 Habitual intoxication or illegal use of habit forming
substances; or
5.1.5 Knowingly making a material false statement to the
Corporation's Board of Directors or management regarding the affairs of the
Corporation.
In the event Executive's employment is terminated for cause, no
further payments of salary or benefits of any kind or nature (except to the
extent accrued to the date of termination) shall be paid to Executive, and
Executive shall have no further claim against the Corporation under the terms of
this Agreement or otherwise relating to his employment.
5.2 Corporation may terminate Executive's employment hereunder at
any time without cause. In the event of such termination the obligations of the
Corporation to Executive shall be limited to the following:
5.2.1 Salary accrued to the effective date of such termination;
5.2.2 Continuation of base salary at the per annum rate then in
effect, for a period of 36 months from the effective date of such termination
(hereinafter "the Severance Period");
5.2.3 The "target incentive amount" under any executive annual
incentive plan established by the Corporation for a fiscal year ending during
the Severance Period, and the same "target incentive amount" for any such
executive annual incentive plan, pro-rated to the end of the Severance Period,
for a fiscal year commencing during but ending after the Severance Period, or
the equivalent under any bonus or variable compensation plan which may hereafter
be adopted by the Corporation in lieu of such executive annual incentive plan;
5.2.4 The value of the "payout amount," in cash, for any
executive long term incentive plan established by the Corporation, the plan
cycle of which ends within 12 months after the effective date of termination,
pro-rated to the date of termination;
5.2.5 Lapse of restrictions on any outstanding restricted stock
awards not vested on the effective date of termination, or at the Corporation's
option, the cash value of the restricted stock forfeited under such awards based
on "fair market value" on the effective date of termination; and
5.2.6 Coverage during such Severance Period 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) Long-Term Disability Plan (as provided
under such Plan, the Executive shall be required to pay the premium); (3) Group
Life and Accidental Death and Dismemberment Insurance (at the levels in effect
at the date of termination of employment, taking into account any waiver of
coverage under the Corporation's Supplemental Executive Retirement Program).
For purposes of Section 5.2.5, the "fair market value" shall be
the mean between the highest and lowest prices at which the Common Stock is
traded on the effective date of termination as reported by the New York Stock
Exchange or any successor thereto. If there is no sale of the Common Stock on
such exchange on such date, the mean between the bid and asked prices on such
exchange at the close of the market on such date shall be deemed to be the fair
market value of the Common Stock.
Executive shall not be required to seek other employment during
such Severance Period, but in the event Executive renders personal services
during such period to any person or firm other than the Corporation, whether as
an employee, a partner or as a self-employed individual and earns income
(whether or not then payable) attributable to the performance of such personal
services during either the 12 month period commencing on the date of termination
of employment or the next two succeeding 12 month periods in excess of $ 100,000
per such 12 month period, (i) Executive shall notify the Corporation, in
accordance with Section 9.3 hereof, within 15 days of the commencement of such
employment, and (ii) the amount of salary which the Corporation would otherwise
be required to pay Executive during such 12 month period shall be reduced dollar
for dollar by such excess amount. If as a result of Executive's accruing such
income, the Corporation has overpaid Executive, Executive shall promptly
reimburse the Corporation for the amount of such overpayment.
5.3 Executive agrees that the payments described in Section 5.2
shall be full and adequate compensation to Executive for all damages he may
suffer as a result of the termination of his employment pursuant to Section 5.2,
and hereby waives and releases the Corporation from any and all obligations or
liabilities to Executive arising from or in connection with Executive's
employment with the Corporation or the termination of his employment including,
without limitation, all rights and claims Executive may have under the
Corporation's severance policy and federal, state or local statutes, regulations
or ordinances or under any common law principles of breach of contract or the
covenant of good faith and fair dealing, defamation, wrongful discharge,
intentional infliction of emotional distress or promissory estoppel; provided,
however, that any rights and benefits Executive may have under the employment
benefit plans and programs of the Corporation, including, without limitation,
the Corporation's Supplemental Executive Retirement Program, in which Executive
is a participant, shall be determined in accordance with the terms and
provisions of such plans and provisions.
5.4 If Executive voluntarily resigns, the Corporation shall have
no further obligation to Executive except for salary accrued to the effective
date of such resignation.
5.5 In the event the Corporation terminates Executive's
employment, whether with or without cause, or in the event of Executive's
voluntary resignation, Executive if so requested by the Corporation shall assist
in the orderly transfer of authority and responsibility to his successor.
6. Death or Disability.
6.1 In the event of the death of Executive during the term of
employment under this Agreement or during the period when payments are being
made pursuant to Section 5.2.2, this Agreement shall terminate and all
obligations to Executive shall cease as of the date of death except that the
Corporation will pay the then base salary under Section 3.1 until the end of the
month in which Executive dies, and except for any rights and benefits of
Executive under the benefit plans and programs of the Corporation including,
without limitation, the Supplemental Executive Retirement Plan in which
Executive is a participant, as determined in accordance with the terms and
provisions of such plans and programs. The payout under the EAIP, or equivalent,
for the fiscal year in which Executive's death occurs, shall be annualized and
paid at the normal time to Executive's estate pro rata to the date of death. The
value of the "payout amount," in cash, for any executive long term incentive
plan established by the Corporation, the plan cycle of which ends within 12
months after the date of Executive's death, shall be paid at the normal time to
Executive's estate. This Section 6.1 shall not affect any outstanding stock
options or stock awards, whether made under a long term incentive plan or
otherwise, before or after the date of this agreement, which options or awards
shall then be governed according to their terms.
6.2 In the event that Executive shall become entitled to salary
continuation payments under the Corporation's Group Long-Term Disability
Insurance Plan or under any generally similar plan then in effect, the
Corporation may, at its option, terminate the employment of Executive hereunder
without further obligation or liability on the part of the Corporation under the
terms of this Agreement.
7. Restrictive Covenant.
7.1 In consideration of the Corporation entering into this
Agreement, Executive shall not, directly or indirectly, for a period of 12
months after termination of such employment, whether because the term of
employment has ended by its terms or otherwise (unless such termination is by
the Corporation without cause or compliance herewith is excused pursuant to
Section 7.2), be employed by, render services to or participate in the
management, operation or control of, or serve as advisor or consultant to or
otherwise become financially interested in any business of the same nature as
that now (or hereafter during the term of this Agreement) carried on by the
Corporation or any of its subsidiaries (a "Restricted Business").
7.2 Should a Change of Control (as defined in the Corporation's
Supplemental Executive Retirement Plan) occur during the term of employment and
should the Executive terminate his employment for "Good Reason" (as defined in
said Plan) within a period of 18 months following such Change of Control such
termination by Executive shall constitute a waiver by the Corporation of the
restrictive covenant set forth in Section 7.1 and Executive shall have no
further obligation to comply with its terms.
7.3 Executive acknowledges and agrees that in the event of any
violation of the restrictive covenant set forth in Section 7.1, the Corporation
shall be authorized and entitled to obtain from any court of competent
jurisdiction temporary, preliminary or permanent injunctive relief as well as an
equitable accounting of all profits or benefits arising out of such violation
and any damages for the breach of this Agreement which may be applicable. The
aforesaid rights and remedies shall be independent, severable and cumulative and
shall be in addition to any other rights or remedies to which the Corporation
may be entitled.
7.4 The restrictions contained in this Section 7 are intended to
be reasonable. In the event that any restriction contained herein is held by any
court of competent jurisdiction or arbitrator to be in any respect unreasonable,
the court so holding may limit the territory to which it pertains or the period
of time in which it operates, or affect any other change to the extent necessary
to make it enforceable. The remaining provisions shall not be affected, but
shall, subject to the discretion of such court, remain in full force and effect
and any invalid and unenforceable provision shall be deemed without further
action on the part of the parties hereto modified, amended and limited to the
extent necessary to render the same valid and enforceable to the maximum extent
permissible.
7.5 Executive shall hold in a fiduciary capacity for the benefit
of the Corporation all confidential information, knowledge and data relating to
or concerned with the Corporation's products, operations, sales, business and
affairs which are proprietary and not readily ascertainable from trade sources
or other publicly available data, and he shall not, at any time hereafter, use,
disclose or divulge any such confidential information, knowledge or data to any
person, firm or corporation other than to the Corporation, its subsidiaries or
its designees or except as may otherwise be required in connection with the
business and affairs of the Corporation. A breach of Executive's obligations
hereunder shall entitle the Corporation to seek injunctive or equitable relief
and/or damages from any court of competent jurisdiction.
8. Change of Control Agreements.
It is understood and agreed that none of the benefits accruing to
Executive under the 1991 Key Employee Stock Option Plan or Supplemental
Executive Retirement Plan resulting from a "change of control" shall derogate
from the rights granted to Executive under this Agreement, and the rights
granted to him thereunder shall, subject to the triggering events thereof, be
supplementary to and not in substitution for his rights hereunder.
9. General.
9.1 Subject to Section 7.2 and Section 8 hereof, this Agreement
constitutes the entire agreement concerning Executive's employment, and no
amendment or modification hereof shall be valid or binding unless made in
writing and signed by the party against whom enforcement thereof is sought. This
agreement supersedes the 1994 Senior Executive Employment Agreement between the
Corporation and Executive.
9.2 The provisions of Section 7 hereof shall survive the
termination or expiration of this Agreement.
9.3 Any notice required, permitted, or desired to be given
pursuant to any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or sent by
registered or certified mail, return receipt requested, postage and fees
prepaid, as follows:
If to the Corporation, at:
605 Third Avenue New York, New York 10158 Attention: Bradford
Wiley II with a copy to:
Richard S. Rudick, Esq.
John Wiley & Sons, Inc.
605 Third Avenue
New York, New York 10158
If to Executive, at:
2 Heath Drive
Basking Ridge, New Jersey 07920
Either of the parties hereto may at any time and from time to
time change the address to which notices shall be sent hereunder by notice to
the other party.
9.4 No course of dealing or any delay on the part of the
Corporation or Executive in exercising any rights hereunder shall operate as a
waiver of any such rights. No waiver of any default or breach of this Agreement
shall be deemed a continuing waiver of any other breach or default.
9.5 This Agreement relates to services to be performed
principally in, and accordingly shall be governed, interpreted and construed in
accordance with the laws of the State of New York.
9.6 If any provision or part of this Agreement shall be held or
declared to be void, invalid or illegal for any reason by any court of competent
jurisdiction, such provision or part shall be ineffective but shall not in any
way invalidate or affect any other provision or part of this Agreement.
9.7 This Agreement, and the respective rights and obligations of
the parties hereunder, shall inure to the benefit of, and shall be binding upon,
the Corporation and its successors and assigns.
9.8 Should there arise any claim, dispute or controversy relating
to this Agreement, or the breach thereof, the parties shall use their best
efforts and good will to settle such claim, dispute or controversy by amicable
negotiations. Except as provided in Sections 7.2 and 7.4, any such claim,
dispute or controversy that arises between the parties relating to this
Agreement that is not amicably settled shall be resolved by arbitration, as
follows.
9.8.1 Any such arbitration shall be heard in New York, New York,
before a panel consisting of one (1) to three (3) arbitrators, each of whom
shall be impartial. Except as the parties may otherwise agree, all arbitrators
shall be appointed in the first instance by the President of the Association of
the Bar of the City of New York or, in the event of his unavailability by reason
of disqualification or otherwise, by the Chairman of the Executive Committee of
the Association of the Bar of the City of New York. In determining the number
and appropriate background of the arbitrators, the appointing authority shall
give due consideration to the issues to be resolved, but his decision as to the
number of arbitrators and their identity shall be final. Except as otherwise
provided in this Section 9.8, or as the parties may otherwise agree, arbitration
hereunder shall be governed by the rules of the American Arbitration
Association, as they then exist.
9.8.2 An arbitration may be commenced by any party to this
Agreement by the service of a written Request for Arbitration upon the other
affected parties. Such Request for Arbitration shall summarize the controversy
or claim to be arbitrated, and shall be referred by the complaining party to the
appointing authority for appointment of arbitrators ten (10) days following such
service or thereafter. If the panel of arbitrators is not appointed by the
appointing authority within thirty (30) days following such reference, any party
may apply to any court within the State of New York for an order appointing
arbitrators qualified as set forth below. No Request for Arbitration shall be
valid if it relates to a claim, dispute, disagreement or controversy that would
have been time barred under the applicable statute of limitations had such
claim, dispute or controversy been submitted to the Supreme Court of the State
of New York.
9.8.3 All attorneys' fees and costs of the arbitration shall in
the first instance be borne by the respective party incurring such costs and
fees, but the arbitrators shall have the discretion to award costs and/or
attorneys' fees as they deem appropriate under the circumstances. In addition to
the waiver set forth in Section 5.3 above, the parties hereby expressly waive
punitive damages, and under no circumstances shall an award contain any amount
that in any way reflects punitive damages.
9.8.4 Judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
9.8.5 It is intended that claims, disputes or controversies
submitted to arbitration under this Section 9.8 shall remain confidential, and
to that end it is agreed by the parties that neither the facts disclosed in the
arbitration, the issues arbitrated, nor the views or opinions of any persons
concerning them, shall be disclosed to third persons at any time, except to the
extent necessary to enforce an award or judgment or as required by law or in
response to legal process or in connection with such arbitration.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
JOHN WILEY & SONS, INC.
Date: ___________________
By_______________________
Charles R. Ellis
President and Chief
Executive Officer
------------------------
William J. Pesce
SUBSIDIARIES OF JOHN WILEY & SONS, INC.(1)
Jurisdiction
In Which
Incorporated
-------------
Wiley Europe Limited England
Wiley Heyden Limited England (2)
John Wiley & Sons Limited England (2)
Academy Group Limited England (2)
Chancery Law Publishing Limited England (2)
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 (3)
Wilhelm Ernst & Sohn, Verlag fur
Architektur und technische
Wissenschaften, GmbH Germany (4)
Akademie Verlag GmbH Germany (4)
Chemical Concepts Gesellschaft fur
Chemie-Informationssysteme mbH Germany (4)
VCH Publishers (U.K.) Limited England (4)
VCH Verlags AG Switzerland (4)
Verlag Chemie GmbH Germany (4)
Physik-Verlag GmbH Germany (4)
- --------------------------------------
(1) The names of other subsidiaries which would not constitute a significant
subsidiary in the aggregate have been omitted.
(2) Subsidiary of Wiley Europe Limited.
(3) Subsidiary of John Wiley & Sons GmbH.
(4) Subsidiary of VCH Verlagsgesellschaft mbH.
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