SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended January 31, 1999 Commission File No. 1-11507
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from to
JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5593032
- ----------------------- ----------------------------------
(State or other jurisdiction of I.R.S. Employer Identification No.)
incorporation or organization)
605 THIRD AVENUE, NEW YORK, NY 10158-0012
- --------------------------------------- ----------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, (212) 850-6000
including area code ----------------------------------
NOT APPLICABLE
Former name, former address, and former fiscal year,
if changed since last report
Indicate by check mark, whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
The number of shares outstanding of each of the Registrant's classes of common
stock as of January 31, 1999 were:
Class A, par value $1.00 - 25,379,412
Class B, par value $1.00 - 6,101,068
This is the first page of a twelve page document
<PAGE>
JOHN WILEY & SONS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements.
Condensed Consolidated Statements of Financial Position - Unaudited
as of January 31, 1999 and 1998 and April 30, 1998................. 3
Condensed Consolidated Statements of Income - Unaudited
for the Three and Nine Months ended January 31, 1999 and 1998...... 4
Condensed Consolidated Statements of Cash Flow - Unaudited
for the Three and Nine Months ended January 31, 1999 and 1998...... 5
Notes to Unaudited Condensed Consolidated Financial Statements...... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................11
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995.......................11
SIGNATURES..................................................................12
EXHIBITS
27 Financial Data Schedule
<PAGE>
<TABLE>
<CAPTION>
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
(UNAUDITED)
January 31, April 30,
-----------------------------------
Assets 1999 1998 1998
------------------- ----------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents..........$ 182,700 141,227 127,405
Accounts receivable................. 80,129 79,563 56,147
Inventories......................... 41,306 46,755 44,912
Deferred income tax benefits........ 446 7,130 456
Prepaid expenses.................... 6,254 6,297 8,690
--------- --------- ---------
Total Current Assets........ 310,835 280,972 237,610
Product Development Assets............... 36,938 37,108 36,039
Property and Equipment................... 33,792 32,759 34,310
Intangible Assets........................ 177,531 177,516 172,798
Deferred Income Tax Benefits............. 14,180 16,077 15,593
Other Assets............................. 11,296 10,733 10,564
--------- ---------- ---------
Total Assets............................$ 584,572 555,165 506,914
========= ========== =========
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable.......................$ - 751 -
Accounts and royalties payable...... 60,048 58,891 36,854
Deferred subscription revenues...... 139,327 124,454 99,225
Accrued income taxes................ 4,369 10,501 1,174
Other accrued liabilities........... 44,101 36,938 41,100
--------- --------- --------
Total Current Liabilities............... 247,845 231,535 178,353
Long-Term Debt........................... 125,000 125,000 125,000
Other Long-Term Liabilities.............. 28,843 26,337 26,663
Deferred Income Taxes.................... 16,770 15,391 16,147
Shareholders' Equity..................... 166,114 156,902 160,751
--------- -------- --------
Total Liabilities & Shareholders' Equity $ 584,572 555,165 506,914
========= ======== ========
</TABLE>
The accompanying Notes are an integral part of the condensed
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
JOHN WILEY & SONS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands except per share information)
Three Months Nine Months
Ended January 31, Ended January 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues...........................$ 137,976 124,350 $ 383,707 352,322
Costs and Expenses
Cost of sales................. 48,592 45,304 133,162 123,230
Operating and administrative
expenses.................. 65,671 63,055 189,843 184,786
Amortization of intangibles... 2,431 5,477 7,048 9,755
-------- -------- -------- --------
Total Costs and Expenses...... 116,694 113,836 330,053 317,771
-------- -------- -------- --------
Gain on Sale of Publishing Assets - 21,292 - 21,292
Operating Income................... 21,282 31,806 53,654 55,843
Interest Income and Other.......... 1,260 895 3,838 2,246
Interest Expense................... (1,671) (1,887) (5,622) (5,836)
-------- --------- -------- -------
Interest Income (Expense) - Net (411) (992) (1,784) (3,590)
-------- --------- -------- -------
Income Before Taxes................ 20,871 30,814 51,870 52,253
Provision For Income Taxes......... 7,513 12,176 18,673 19,894
-------- --------- -------- -------
Net Income........................ $ 13,358 18,638 $ 33,197 32,359
======== ========= ======== =======
Income Per Share
Diluted.......................$ 0.40 0.56 $ 1.00 0.98
Basic.........................$ 0.43 0.59 $ 1.05 1.03
Cash Dividends Per Share
Class A Common................$ 0.06375 0.05625 $ 0.19125 0.16875
Class B Common................$ 0.05625 0.05000 $ 0.16875 0.15000
Average Shares
Diluted....................... 33,025 33,206 33,246 32,864
Basic......................... 31,095 31,577 31,512 31,525
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW - UNAUDITED
For The Nine Months
Ended January 31,
--------------------------
1999 1998
--------- ---------
<S> <C> <C>
Operating Activities
Net income.................................... $ 33,197 32,359
Non-cash items................................ 54,102 25,440
Net change in operating assets and liabilities 38,063 44,197
-------- -------
Cash Provided by Operating Activities 125,362 101,996
-------- -------
Investing Activities
Additions to product development assets....... (22,719) (22,473)
Additions to property and equipment........... (6,671) (8,122)
Acquisition of publishing assets.............. (10,437) (30,438)
Proceeds from sale of publishing assets....... - 26,500
-------- --------
Cash Used for Investing Activities (39,827) (34,533)
-------- --------
Financing Activities
Purchase of treasury shares................... (25,055) (1,942)
Net borrowings of short-term debt............. - 632
Cash dividends................................ (5,919) (5,259)
Proceeds from exercise of stock options....... 1,191 1,742
-------- -------
Cash Used for Financing Activities............ (29,783) (4,827)
-------- -------
Effects of Exchange Rate Changes on Cash (456) (525)
-------- -------
Cash and Cash Equivalents
Increase for Period........................... 55,296 62,111
Balance at Beginning of Period................ 127,404 79,116
------- -------
Balance at End of Period...................... $ 182,700 141,227
======= =======
Cash Paid During the Period for
Interest.......................................$ 5,895 6,008
Income taxes...................................$ 13,264 6,286
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the Company's
consolidated financial position as of January 31, 1999 and 1998, and April
30, 1998, and results of operations and cash flows for the periods ended
January 31, 1999 and 1998. These statements should be read in conjunction
with the most recent audited financial statements contained in the
Company's Form 10-K for the fiscal year ended April 30, 1998.
2. The results for the three and nine months ended January 31, 1999 are not
necessarily indicative of the results to be expected for the full year.
3. Income for the third quarter and nine months of the prior fiscal year
includes unusual items amounting to a pretax gain of $16.9 million, or $9.7
million after taxes, equal to $0.29 per diluted share ($0.31 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 gain, fiscal 1998 third quarter operating income
would have been $14.9 million and net income would have been $8.9 million,
or $0.27 per diluted share ($0.28 per basic share); fiscal 1998 nine month
operating income would have been $39.0 million and net income would have
been $22.6 million, or $0.69 per diluted share ($0.72 per basic share).
4. Share data has been restated to reflect the 2-for-1 stock split in October
1998. A reconciliation of the shares used in the computation of income per
share follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended January 31, Ended January 31,
----------------- -----------------
1999 1998 1999 1998
------- -------- ------- -------
<S> <C> <C> <C> <C>
(thousands)
Weighted average shares outstanding 31,497 31,972 31,905 31,914
Less: Unearned deferred compensation
shares......................... (402) (395) (393) (389)
------- ------- ------- ------
Shares used for basic income per share 31,095 31,577 31,512 31,525
Dilutive effect of stock options and
other stock awards........... 1,930 1,629 1,734 1,339
-------- ------- ------ ------
Shares used for diluted income
per share................... 33,025 33,206 33,246 32,864
-------- ------- ------- ------
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
5. Inventories were as follows:
January 31, April 30,
----------------------------------
1999 1998 1998
-------- -------- -------
<S> <C> <C> <C>
(thousands)
Finished goods.................... $ 34,317 $ 37,070 $ 38,039
Work-in-process................... 5,621 7,019 6,864
Paper, cloth and other............ 3,743 5,056 2,084
--------- ---------- ---------
43,681 49,145 46,987
LIFO reserve...................... (2,375) (2,390) (2,075)
--------- ---------- ---------
Total inventories................. $ 41,306 $ 46,755 44,912
--------- ---------- ---------
</TABLE>
6. In the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income", which requires disclosure of comprehensive income and its
components, as defined. Comprehensive income was as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended January 31, Ended January 31,
------------------ -----------------
1999 1998 1999 1998
-------- -------- ------- --------
<S> <C> <C> <C> <C>
(thousands)
Net Income $ 13,358 $ 18,638 $ 33,197 $ 32,359
Other Comprehensive Income (Loss) -
Foreign Currency Translation
Adjustments 62 (1,396) (1,099) (964)
------- ------- -------- -------
Comprehensive Income $ 13,420 $ 17,242 $ 32,098 $ 31,395
------- ------- -------- -------
</TABLE>
<PAGE>
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JANUARY 31, 1999
FINANCIAL CONDITION
Operating activities for the first nine months of fiscal 1999 provided
$125.4 million of cash compared with $102.0 million in the prior year. The
generation of cash during this period is consistent with the seasonality of
the journal receipts cycle which occurs, for the most part, in the third
quarter of the fiscal year. The increase over the prior year was primarily
due to higher journal receipts, lower inventory levels and higher net
income excluding the unusual gain in the prior year as disclosed in Note 3
to the Condensed Financial Statements.
Investing activities used $39.8 million during the current period, or $5.3
million more than the comparable prior year's period, primarily as a result
of the proceeds from the sale of the domestic law publishing program in the
prior year.
Financing activities in the current year primarily reflect dividend
payments and purchases of treasury shares during the period.
RESULTS OF OPERATIONS
THIRD QUARTER ENDED JANUARY 31, 1999
Net income for the third quarter of fiscal 1999, advanced 50% to $13.4
million, or $0.40 per diluted share, compared with $8.9 million, or $0.27
per diluted share, in the prior year's third quarter, excluding the unusual
gain in the prior year as noted below.
Income for the third quarter and first nine months of the prior fiscal year
included unusual items amounting to a pretax gain of $16.9 million, or $9.7
million after taxes, equal to $0.29 per diluted share, relating to the gain
on the sale of Wiley's domestic law publishing program, net of a writedown
of certain intangible assets and other items.
Revenues for the quarter increased 11% to $138.0 million from $124.4
million in the prior year's third quarter.
Revenue and operating income gains reflected improvement in all of the
Company's core publishing programs - professional and trade; scientific,
technical and medical; and college. Revenue growth continued to outpace the
overalll growth of our markets. Revenue and operating income were adversely
effected somewhat during the quarter by the strong U.S. dollar in some of
our overseas markets.
Cost of sales as a percentage of revenues decreased from 36.4% in the prior
year to 35.2%. Operating expenses as a percentage of revenues were 47.6% in
the current quarter compared with 50.7% in the prior year's third quarter.
The improvement is a result of cost containment measures.
Interest income increased $.4 million compared with the prior year due to
higher cash balances. The effective tax rate was 36.0% in the current
quarter compared with 39.5% in the prior year. The decrease was
attributable to higher state and local income taxes on the unusual gain in
the prior year.
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED JANUARY 31, 1999
Excluding the unusual gain in the prior year, operating income increased
38% and net income increased 47% over the prior year. Revenues for the
first nine months of fiscal 1999 of $383.7 million, were up 9% over the
comparable prior year period.
Results for the nine months also reflect improvement in all of the
company's core publishing programs - professional and trade; scientific,
technical and medical; and college. Professional and trade and college
publishing registered double-digit revenue growth for the first nine months
of the year. Revenues for the year-to-date were adversely affected somewhat
by the lingering effects of the economic downturn in Asia, which appears to
be stabilizing, as well as the strong U.S. dollar in some of our overseas
markets.
For the year-to-date, costs of sales as a percentage of revenues decreased
from 35.0% to 34.7%. Operating expenses declined from 52.4% to 49.5% due to
cost containment measures. Operating margins continue to run well ahead of
the prior year.
Interest income increased $1.6 million due to higher cash balances. The
effective tax rate was 36% in the current year, or 2% lower than the prior
year due to higher state and local income taxes on the unusual gain in the
prior year.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities", which specifies the accounting and
disclosure requirements for such instruments, and is effective for the
Company's fiscal year beginning on May 1, 2000. In the opinion of the
Company's management, it is anticipated that the adoption of this new
accounting standard will not have a material effect on the consolidated
financial statements of the Company.
YEAR 2000 ISSUES
The Company has essentially completed the review of its systems and
products to determine the extent and impact of the year 2000 issues. Many
of the systems are new and were designed to accommodate the year 2000 issue
when originally installed. The Company is well along in the process of
implementing the needed changes, and systems testing has begun. The Company
currently anticipates substantially completing corrective measures to its
systems and products by mid-year of calendar 1999. The total cost to remedy
the situation is currently estimated to be approximately $2.5 million, of
which $1.7 million has been expended to date.
The Company is in the process of communicating with its customers and
suppliers in an effort to assess how they intend to resolve their year 2000
issues. The Company at this time is not able to form an opinion as to
whether its customers or suppliers will be able to resolve their year 2000
issues in a satisfactory and timely manner, or the magnitude of the adverse
impact it would have on the Company's operations, if they fail to do so.
<PAGE>
EURO CONVERSION ISSUES
Effective January 1, 1999, eleven member countries of the European union
established fixed conversion rates between their existing legal currencies,
the Euro, and adopted the Euro as their common legal currency beginning
January 1, 2002.
The Company is in the process of assessing the impact that the conversion
to the Euro will have on its operations and the modifications that will be
required to its systems. The Company believes that the Euro conversion
should not have a material effect on its operations.
* * * * *
The anticipated costs and timing of resolving the year 2000 and Euro issues
are based on numerous assumptions and estimates relating to future events
including the continued availability and cost of the personnel required to
modify the systems, the timely resolution of the third party customer and
supplier interface issues, and other similar uncertainties. The Company is
in the process of developing contingency plans in the event remediation
measures will not be completed on a timely basis.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
January 31, 1999
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995
This report contains certain forward-looking statements concerning the Company's
operations, performance and financial condition. Reliance should not be placed
on forward-looking statements, as actual results may differ materially from
those in any forward-looking statements. Any such forward-looking statements are
based upon a number of assumptions and estimates that are inherently subject to
uncertainties and contingencies, many of which are beyond the control of the
Company, and are subject to change based on many important factors. Such factors
include, but are not limited to: (i) the pace, acceptance, and level of
investment in emerging new electronic technologies and products; (ii) subscriber
renewal rates for the Company's journals; (iii) the consolidation of the retail
book trade market; (iv) the seasonal nature of the Company's educational
business and the impact of the used book market; (v) the ability of the Company
and its customers and suppliers to satisfactorily resolve the year 2000 and Euro
issues in a timely manner; (vi) worldwide economic and political conditions; and
(vii) other factors detailed from time to time in the Company's filings with the
Securities and Exchange Commission. The Company undertakes no obligation to
update or revise any such forward-looking statements to reflect subsequent
events or circumstances.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JOHN WILEY & SONS, INC.
Registrant
By /s/William J. Pesce
-------------------
William J. Pesce
President and
Chief Executive Officer
By /s/Robert D. Wilder
-------------------
Robert D. Wilder
Executive Vice President and
Chief Financial Officer
Dated: March 10, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
(Dollars in Thousands Except Per Share Data)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND THE CONSOLIDATED STATEMENT OF
INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000107140
<NAME> JOHN WILEY & SONS, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 182,700
<SECURITIES> 0
<RECEIVABLES> 133,162
<ALLOWANCES> 53,033
<INVENTORY> 41,306
<CURRENT-ASSETS> 310,835
<PP&E> 89,242
<DEPRECIATION> 55,450
<TOTAL-ASSETS> 584,572
<CURRENT-LIABILITIES> 247,845
<BONDS> 125,000
0
0
<COMMON> 41,593
<OTHER-SE> 124,521
<TOTAL-LIABILITY-AND-EQUITY> 584,572
<SALES> 0
<TOTAL-REVENUES> 383,707
<CGS> 133,162
<TOTAL-COSTS> 330,053
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,622
<INCOME-PRETAX> 51,870
<INCOME-TAX> 18,673
<INCOME-CONTINUING> 33,197
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,197
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.00
</TABLE>
