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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, 2001
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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
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Address of principal executive offices Zip Code
Registrant's telephone number including area code (212) 850-6000
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Securities registered pursuant
to Section 12(b) of the Act: Name of each exchange
Title of each class on which registered
- --------------------------------------- ------------------------
Class A Common Stock, par value $1.00 per share New York Stock Exchange
Class B Common Stock, par value $1.00 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months(or for such shorter period that the Registrant was
required to file such reports), and (2) has b een subject to such filing
requirements for the past 90 days. Yes___ 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, 2001, was 49,096,280 and
11,668,064 respectively, and the aggregate market value of such shares of Common
Stock held by non-affiliates of the Registrant as of such date was $754,668,689
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, 2001 for the Annual Meeting of Shareholders to be held on
September 20, 2001, (the "2001 Proxy Statement") is, to the extent noted below,
incorporated by reference in Part III.
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 is a global publisher of print and electronic
products, specializing in scientific, technical and medical
journals and books; professional and consumer books and
subscription services; and textbooks and educational materials
for undergraduate and graduate students as well as lifelong
learners. The Company has publishing, marketing and distribution
centers in the United States, Canada, Europe, Asia, and
Australia. Technology is enabling the Company to make its content
more accessible to its global communities of interest.
Scientific, Technical, and Medical (STM) Publishing
The Company is a leading publisher for the scientific, technical
and medical communities worldwide. Its STM programs encompass
journals, encyclopedias, books and other products in subjects
such as the life and medical sciences, chemistry, statistics and
mathematics, electrical and electronics engineering, and select
medical areas with particular emphasis on cancer medicine. The
Company develops products in the United States, the United
Kingdom, and Germany for global distribution. STM publishing
represented 42% of total revenues in fiscal 2001.
Wiley InterScience, the Company's Web-based service, offers fully
searchable online access to several products including more than
300 of the Company's STM journals, major reference works such as
multi-volume encyclopedias, databases, and Current Protocols, the
widely used laboratory manual series. Access to the information
is obtained through subscription licenses designed to meet the
needs of both small and large academic and corporate customers.
The Company continues to add content and features to Wiley
InterScience to add value for customers and to build its revenue
base. Wiley InterScience has developed a new mobile Internet
service to provide tables of contents and abstracts from Wiley
InterScience directly to personal and wireless handheld devices
and web-enabled phones. The MobileEdition service was created
with the initial launch of Cancer MobileEdition, which provides
information related to the latest issues of Cancer and Cancer
Cytopathology, the flagship journals of the American Cancer
Society. The Annals of Neurology MobileEdition was launched at
the end of the fiscal year. In addition, Wiley InterScience
launched BoldIdeas, an online collection of 40 business and
environmental management periodicals. This new initiative is an
excellent example of the Company's ability to leverage Wiley
InterScience beyond the STM market.
Other features of Wiley InterScience include EarlyView, which
provides customers with online access to individual articles well
in advance of the print issue. Wiley InterScience includes
full-text HTML versions of journal content, allowing more
advanced search and navigation options, and providing customers
with greater choice and control over the information they
retrieve. ArticleSelect allows subscribers with Enhanced Access
Licenses to gain access to individual journal articles. The
Company has an alliance with about 70 other publishers called
CrossRef to facilitate the research process. CrossRef is an
electronic linking system that allows a reader to click on a
reference in a journal published by one participant and go
directly to the referenced article, even if it is published by
another participant and located on that publisher's server. An
agreement also exists with Maruzen Knowledge Worker to provide a
Japanese interface to enable searching and browsing Wiley
InterScience in that language.
During the year, the Company entered into a strategic alliance
with LabBook, Inc., an innovative life sciences information
company. The alliance brings together LabBook's desktop data
integration and visualization software with Wiley InterScience's
research content and laboratory protocols. Integration of
targeted information and data is fundamental in the drug
discovery process, and this alliance should result in increased
efficiencies for life science researchers. STM also established
communities of interest in spectroscopy, diabetes, the
pharmaceutical industry and polymer sciences, and announced its
participation in an electronic journal archiving project
sponsored by the Mellon Foundation.
Professional/Trade Publishing
The Company's Professional/Trade program includes books and
subscription products, both print and electronic, for
professionals and business people in specialized markets. Subject
areas include business, accounting, computers, psychology,
architecture, engineering, hospitality and culinary arts,
non-profit institution management and general interest. Products
are developed in the United States, Canada, Europe, Asia, and
Australia for worldwide distribution through multiple channels,
including bookstores, the Internet, and direct marketing.
Professional/trade publishing accounted for 32% of total revenues
in fiscal 2001.
The Professional/Trade business continues to take advantage of
the dramatic growth of e-commerce. Online selling plays to
Professional/Trade's strength as a publisher with a deep backlist
serving the professional needs of its customers. The Company
recently redesigned its website, wiley.com, to improve the ease
with which customers can order books directly and to complement
distribution through other sales channels. There is a growing
demand for electronic products among the professional markets
that Professional/Trade serves, notably computing, accounting,
finance, psychology and architecture. Professional/Trade is
capitalizing on these opportunities with a combination of print
and web-based products and services, as well as through the
formation of strategic alliances. The Professional/Trade segment
has agreements with service providers for online distribution of
about 750 new frontlist titles per year, as well as Internet and
wireless delivery of abstracted versions of many publications.
Professional/Trade licensed the Data Model Resource CD-ROM to
Microsoft for customers to use as a reference with the next
release of the SQL Server Enterprise software. In addition, J.K.
Lasser Your Income Tax was licensed for online excerpting. An
alliance with the Rhode Island School of Design was formed to
create complex architectural graphics for the publication of
Interior Graphic Standards, a major extension of the renowned
Architectural Graphic Standards reference work. As previously
mentioned, BoldIdeas, an online collection of 40 business and
environmental management periodicals was launched on the Wiley
InterScience platform.
Based on the Delaney CPA Examination Review, Virtual CPA Exam
Review, developed in partnership with KeepSmart.com Inc., adds
convenience and value for customers by transforming the product
into a fully interactive course on the Web. The Web-based version
offers CPA candidates the interactivity of a live classroom
experience, with a program that lets them study at their desktop
computers. It features full-streaming audio and video lectures,
online learning and problem-solving, and a discussion forum
monitored by accounting professionals.
Professional/Trade is developing an online version of its
TheraScribe/Practice Planner library, which is used by more than
300,000 behavioral health professionals to improve the quality of
patient care and streamline clinical recordkeeping. Management
training is another area that lends itself to online products.
Professional/Trade is co-developing a new series of
Internet-based courses for business and management professionals.
One of Professional/Trade's key strategies is the maintenance and
expansion of its key alliances and franchise products including
CNBC, American Institute of Architects, the Culinary Institute of
America, the National Restaurant Association Educational
Foundation, Ernst &Young, PricewaterhouseCoopers, the Center for
Creative Leadership, the Peter F. Drucker Foundation, and the
Confederation of British Industry.
To capitalize on its global reach, the Company develops products
with worldwide sales potential. During the year, Wiley Europe
acquired a majority interest in Capstone Publishing Ltd., the
Oxford-based publisher of a broad array of professional business
and management titles. In addition, Wiley Europe entered into an
alliance with the International Securities Market Association
(ISMA) and the University of Reading ISMA Center to create a
series of Internet-based distance learning and classroom-based
educational programs for securities industry professionals. At
the end of the fiscal year, Wiley agreed to acquire Wrightbooks,
a high-quality business publisher in Australia.
Higher Education
The Company publishes English-language textbooks and educational
materials in print and electronic formats, in the United States,
Canada, Europe, and Australia for undergraduate and graduate
students and lifelong learners. Higher Education focuses on the
sciences, mathematics, engineering, and accounting, with growing
positions in business, computer science, psychology, education
and modern languages. In Australia, the Company is also a leading
publisher for the secondary school market. Educational publishing
generated 26% of total revenues in fiscal 2001.
The Higher Education segment continues to invest in technology to
help teachers teach and students learn. Every major Higher
Education textbook now has a technology component and/or websites
designed to facilitate teaching and learning. Wiley continues to
transform its product models along a continuum from a largely
print to all-electronic delivery, publishing a number of
eTextbooks and interactive learning editions. During the year,
Wiley launched a web access licensing program, built on Wiley
InterScience technology, which allows students to purchase access
to the web resources for a text even if they have a used book.
The Company is working with course management providers, to offer
interactive syllabi, chat rooms, and assessment tools including
online quizzing and testing, and recently introduced a
proprietary online course management system for use by professors
to integrate its content with their syllabi. This system offers a
turnkey solution for posting syllabi, schedules, assignments,
grades, and other materials online for students.
One of the trends in higher education is toward distance learning
- students taking online courses either on or off campus. Higher
Education's initial efforts include forming partnerships with
course developers, to provide distance learning courses to the
higher education and corporate lifelong learning markets and to
provide online teaching cases for use in courses in management
science, operations research, operations management, and other
business and engineering areas.
Higher Education is leveraging the web in its sales and marketing
efforts to reach students and faculty at universities worldwide
through the use of interactive electronic brochures and e-mail
campaigns.
Publishing Operations
Journal Products
The Company publishes over 400 journals and other
subscription-based products, which accounted for approximately
35% of the Company's fiscal 2001 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 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
outside independent 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. Printed journals are generally
mailed to subscribers directly from independent printers.
Journal content for virtually all of the journals is also made
available online through subscription licenses, which generally
range from one to three years.
Book Products
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 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 2001 domestic book publishing revenues were from
titles published or revised in that fiscal year.
Professional and consumer books are sold to bookstores and online
booksellers serving the general public; wholesalers who supply
such bookstores; college bookstores for their non-textbook
requirements; individual professional practitioners; and 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, 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,
online access, and advertising and reviews in periodicals.
Adopted textbooks (i.e., textbooks prescribed for course use) are
sold primarily to bookstores, including online bookstores,
serving educational institutions. The Company employs sales
representatives who call on faculty 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
the June through August and November through January periods.
There is an active used textbook market which negatively affects
the sales of new textbooks.
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 on average increased slightly during
fiscal 2001. 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. Printed book products are distributed from
Company operated warehouses.
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, reproductions and electronic uses of its
content.
The Company is increasingly developing content in digital format
that can be used for both online and print products, which
results in productivity and efficiency savings, as well as being
able to offer customized publishing and print-on-demand products.
Book content is increasingly being made available online and in
ebook format through licenses with alliance partners. The Company
is also developing online communities of interest both on its own
and in partnership with others to expand the market for its
products. The Company believes that the demand for new electronic
technology products will increase. Accordingly, to properly
service its customers and to remain competitive, the Company
anticipates it will be necessary to increase its expenditures
related to such new technologies over the next several years.
The Internet not only enables the Company to deliver content
online, but also helps to sell more books. The growth of online
booksellers benefits the Company because they provide unlimited
virtual "shelf space" for the Company's entire backlist.
Approximately 10% of the Company's worldwide sales of books in
fiscal 2001 were through online bookstores.
International Operations
The Company's publications are sold throughout most of the world
through subsidiaries located in Europe, Canada, Australia, and
Asia, through agents, and directly from the United States.
Subsidiaries market their 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 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 43 foreign languages.
Approximately 41% of the Company's fiscal 2001 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 70 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.
Concentration of Credit Risk
The Company's business is not dependent upon a single customer.
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`s credit
risk exposure to these agents was not material, future calendar
year subscription receipts from these agents are highly dependent
on their financial position and liquidity. Subscription agents
account for approximately 24% of total consolidated revenues and
no one agent accounts for more than 8% of total consolidated
revenues. The book publishing business has witnessed a
significant concentration in national, regional and online
bookstore chains in recent years; however, no one customer
accounts for more than 6% of total consolidated revenues.
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, customer service, suitability of format and subject
matter, author reputation, price, timely availability of both new
titles and revisions of existing books, online availability of
published information and, for textbooks and certain trade books,
timely delivery of products to retail outlets and consumers.
Recent years have seen a consolidation trend within the
publishing industry, including several publishing companies
having been acquired by larger publishers and other companies.
The Company 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; one of the leading
publishers of university and college textbooks for the "hardside"
disciplines, i.e., sciences, engineering and mathematics; and a
leading publisher in its targeted professional markets. 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 if
its sales in markets outside the United States is higher than
that of most of the Unites States-based publishers.
Employees
As of April 30, 2001, the Company employed approximately 2,600
persons on a full-time basis worldwide.
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.
Executive Officers
Set forth below as of April 30, 2001 are the names and ages of all
executive officers of the Company, the period during which they
have been officers, and the offices presently held by each of
them.
Name and age Officer since Present office
Bradford Wiley II 1993 Chairman of the Board since January 1993
60 and a Director
William J. Pesce 1989 President and Chief Executive Officer
50 and a Director since May 1, 1998, (previously
Chief Operating Officer; Executive Vice
President, Educational and International
Group; Senior Vice President, Educational and
International Group; and Senior Vice
President, Educational Publishing)
Stephen A. Kippur 1986 Executive Vice President and President,
54 Professional and Trade Publishing
since July 1998 (previously Executive Vice
President and Group President, Professional, Reference & Trade;
Senior Vice President, Professional, Reference & Trade Publishing
Group)
Ellis E. Cousens 2001 Executive Vice President and Chief Financial and
49 Operations Officer since March 2001 (previously Senior Vice
President, Chief Financial Officer of Bookspan, a Bertelsman AG
joint venture, from March 2000; Vice President, Finance and
Strategic Planning of Bertelsman AG from March 1999; Vice President,
Chief Financial Officer of BOL.com, a subsidiary of Bertelsman AG,
from August 1998; Vice President, Financial Planning and Analysis of
Reader's Digest Association, Inc. from May 1997; and Director
Financial Planning and Analysis of Reader's Digest Association, Inc.
from May 1996)
William Arlington 1990 Senior Vice President, Human Resources since
52 June 1996 (previously Vice President, Human Resources)
Peter W. Clifford 1989 Senior Vice President, Finance, Corporate
55 Controller and Chief Accounting Officer
since June 1996 (previously Vice President,
Finance and Controller)
Timothy B. King 1996 Senior Vice President, Planning and Development since
61 June 1996 (previously Vice President Planning and Development)
Richard S. Rudick 1978 Senior Vice President, General Counsel since June 1989
61
Deborah E. Wiley 1982 Senior Vice President, Corporate Communications since June 1996
55 (previously Vice President and Director of Corporate
Communications, and a Director of the Company until September 1998)
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.
Item 2. Properties
The Company occupies office, warehouse, and distribution
facilities 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).
Lease Expiration
Location Purpose Approx. Sq. Ft. Date
Domestic-Leased
New York Executive and 232,000 2003
Editorial Offices
New Jersey Distribution 170,000 2002
Center and Office
New Jersey Warehouses 247,000 2002
California Office 35,000 2112
Foreign-owned
Germany Office 66,000
Foreign-leased
Australia Office 24,000 2002
Warehouse 36,000 2003
Canada Office 20,000 2002
Warehouse 47,000 2002
England Office 48,000 2009
Warehouse 96,000 2012
Singapore Office and Warehouse 45,000 2002
All of the buildings and the equipment owned or leased are
believed to be in good condition and are generally fully utilized.
The schedule above does not include the fifteen year lease on the
Company's new headquarters facility in New Jersey for
approximately 400,000 square feet that will commence upon
completion of construction, as defined, and which is estimated to
occur during calendar year 2002. In addition, the Company has
entered into an agreement to purchase a 50,000 square foot office
building in England upon completion of construction which is
scheduled for calendar year 2002.
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, 2001.
PART II
Item 5. Market for the Company's Common
Equity and Related Stockholder Matters
The Quarterly Share Prices, Dividends and Related Stockholder
Matters listed in the attached index are incorporated herein by
reference.
Item 6. Selected Financial Data
The Selected Financial Data listed in the attached index is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and
Results of Operations listed in the attached index is incorporated
herein by reference.
Item 7A. Quantitative And Qualitative Disclosures About Market Risk
The information appearing under the caption "Market Risk" in
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.
PART III
Item 10. Directors and Executive Officers
The information regarding the Board of Directors on pages 3 to 8
of the 2001 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 9 to 15 of the 2001 Proxy Statement is
incorporated herein by reference.
Item 12. Security Ownership of Certain
Beneficial Owners and Management
The information on pages 2,3,7, and 8 of the 2001 Proxy Statement
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
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, 2001.
(c) Exhibits
2.1 Amendment No. 1 to the Asset Purchase Agreement dated as of April 15,
1999 between the Company and Pearson Inc. (incorporated by reference
to the Company's Report on Form 8-K dated as of May 10, 1999).
2.2 Asset Purchase Agreement dated as of April 15, 1999 between the
Company and Pearson Inc. (incorporated by reference to the Company's
Report on Form 8-K dated as of May 10, 1999).
2.3 Stock Purchase Agreement dated as of May 21, 1999 between the Company
and Pearson Education, Inc. (incorporated by reference to the
Company's Report on Form 8-K dated as of May 21, 1999).
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 Certificate of Amendment of the Certificate of Incorporation dated as
of September 1998 (incorporated by reference to the Company's Report
on Form 10-Q for the quarterly period ended October 31, 1998).
3.4 Certificate of Amendment of the Certificate of Incorporation dated as
of September 1999 (incorporated by reference to the Company's Report
on Form 10-Q for the quarterly period ended October 31, 1999).
3.5 By-Laws as Amended and Restated dated as of September 1998
(incorporated by reference to the Company's Report on Form 10-Q for
the quarterly period ended October 31, 1998).
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 Agreement of Lease dated as of August 4, 2000 between Block A South
Waterfront Development L.L.C., as Landlord, and the Company, as Tenant
(incorporated by reference to the Company's Report on Form 10-Q for
the quarterly period ended July 31, 2000).
10.3 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).
10.4 Long Term Incentive Plan (incorporated by reference to the Company's
Definitive Proxy Statement dated August 6, 1999).
10.5 Executive Annual Incentive Plan (incorporated by reference to the
Company's Definitive Proxy Statement dated August 6, 1999).
10.6 1991 Key Employee Stock Plan (incorporated by reference to the
Company's Definitive Proxy Statement dated August 8, 1991).
10.7 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).
10.8 1987 Incentive Stock Option and Performance Stock Plan (incorporated
by reference to the Company's Definitive Proxy Statements dated August
10, 1987).
10.9 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).
10.10 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).
10.11 Supplemental Executive Retirement Plan (incorporated by reference to
the Company's Report on Form 10-K for the year ended April 30, 1989).
10.12 Form of the Fiscal Year 1999 Executive Long Term Incentive Plan
(incorporated by reference to the ompany's Report on Form 10-K for
the year ended April 30, 1999).
10.13 Form of the Fiscal Year 2000 Qualified Executive Long Term Incentive
Plan (incorporated by reference to the Company's Report on Form 10-K
for the year ended April 30, 2000).
10.14 Form of the Fiscal Year 2000 Qualified Executive Annual Incentive
Plan (incorporated by reference to the Company's Report on Form 10-K
for the year ended April 30, 2000).
10.15 Form of the Fiscal Year 2000 Executive Annual Strategic Milestones
Incentive Plan (incorporated by reference to the Company's Report on
Form 10-K for the year ended April 30, 2000).
10.16 Form of the Fiscal Year 2001 Qualified Executive Long Term Incentive
Plan.
10.17 Form of the Fiscal Year 2001 Qualified Executive Annual Incentive
Plan.
10.18 Form of the Fiscal Year 2001 Executive Annual Strategic Milestones
Incentive Plan.
10.19 Senior Executive Employment Agreement dated as of January 8, 1998
between William J.Pesce and the Company (incorporated by reference to
the Company's Report on Form 10-K for the year ended April 30, 1998).
10.20 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).
10.21 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).
10.22 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).
10.23 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).
10.24 Executive Employment Agreement dated as of February 21, 2001 between
Ellis E. Cousens and the Company.
10.25 Employment Agreement dated as of June 15, 2000 between Robert D.
Wilder and the Company (incorporated by reference to the Company's
Report on Form 10-K for the year ended April 30, 2000).
10.26 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).
10.27 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).
10.28 Employment Agreement letter dated as of January 16, 1997 between
Timothy B. King and the Company (incorporated by reference to the
Company's Report of Form 10-K for the year ended April 30, 1997).
10.29 Employment agreement letter dated as of January 16, 1997 between
William Arlington and the Company.
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.
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, 2001 and 2000............................................17
Consolidated Statements of Income and Retained Earnings
for the years ended April 30, 2001, 2000 and 1999........................18
Consolidated Statements of Comprehensive Income
for the years ended April 30, 2001, 2000 and 1999........................18
Consolidated Statements of Cash Flows for the
years ended April 30, 2001, 2000 and 1999................................19
Notes to Consolidated Financial Statements...............................20 - 31
Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................32 - 37
Results by Quarter (Unaudited)................................................38
Quarterly Share Prices, Dividends and Related Stockholder Matters.............38
Selected Financial Data.......................................................39
Schedule II - Valuation and Qualifying Accounts
for the years ended April 30, 2001, 2000 and 1999........................40
Other schedules are omitted because of absence of conditions under which they
apply or because the information required is included in the Notes to
Consolidated Financial Statements.
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, 2001 and 2000, and the related consolidated statements of income and
retained earnings, comprehensive income, and cash flows for each of the three
years in the period ended April 30, 2001. 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 auditing standards generally accepted
in the United States. 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, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended April 30,
2001, in conformity with accounting principles generally accepted in the United
States.
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 our 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 5, 2001
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statement File Nos. 333-93691, 33-60268, 2-65296, 2-95104, 33-29372
and 33-62605. It should be noted that we have not audited any financial
statements of the company subsequent to April 30, 2001 or performed any audit
procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
New York, New York
July 2, 2001
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
John Wiley & Sons, Inc. and Subsidiaries April 30
Dollars in thousands 2001 2000
--------------------------
Assets
Current Assets
Cash and cash equivalents........................................ $ 52,947 $ 42,299
Accounts receivable............................................... 62,514 68,080
Inventories....................................................... 50,763 46,109
Deferred income tax benefits...................................... 13,331 10,999
Prepaid expenses.................................................. 9,980 8,399
------------------------
Total Current Assets.............................................. 189,535 175,886
-----------------------
Product Development Assets...................................................... 41,191 39,809
Property and Equipment.......................................................... 52,255 38,226
Intangible Assets............................................................... 283,761 297,085
Deferred Income Tax Benefits.................................................... 3,380 3,395
Other Assets.................................................................... 17,880 14,936
------------------------
Total Assets...................................................................$ 588,002 $ 569,337
========================
Liabilities and Sharelholders' Equity
Current Liabilities
Current portion of long-term debt................................$ 30,000 $ 30,000
Accounts and royalties payable.................................... 42,520 45,816
Deferred subscription revenues.................................... 117,103 112,337
Accrued income taxes.............................................. 9,586 6,102
Other accrued liabilities......................................... 47,552 59,795
------------------------
Total Current Liabilities......................................... 246,761 254,050
------------------------
Long-Term Debt.................................................................. 65,000 95,000
Other Long-Term Liabilities..................................................... 34,901 32,109
Deferred Income Taxes........................................................... 21,317 15,440
Shareholders' Equity
Common stock issued
Class A (68,037,102 and 67,891,602 shares)........................ 68,037 67,892
Class B (15,153,160 and 15,298,660 shares)........................ 15,153 15,299
Additional paid-in capital........................................ 18,900 14,178
Retained earnings................................................. 247,731 198,539
Accumulated other comprehensive loss.............................. (3,117) (3,642)
Unearned deferred compensation.................................... (1,755) (1,703)
-------------------------
344,949 290,563
Less Treasury shares at cost (Class A - 18,971,692 and 18,994,081;
Class B - 3,484,096 and 3,484,096)................................(124,926) (117,825)
------------------------
Total Shareholders' Equity...................................................... 220,023 172,738
-------------------------
Total Liabilities and Shareholders' Equity.....................................$ 588,002 $ 569,337
=========================
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
John Wiley & Sons, Inc. and Subsidiaries For the years ended April 30
Dollars in thousands except per share data 2001 2000 1999
------------------------------------
Revenues...................................................................$ 613,790 $ 606,024 $ 519,164
Costs and Expenses
Cost of sales.........................................................199,400 200,050 179,267
Operating and administrative expenses.................................301,470 300,523 266,798
Amoritization of intangibles...........................................17,496 16,447 9,445
-------------------------------------
Total Costs and Expenses..............................................518,366 517,020 455,510
--------------------------------------
Operating Income................................................................95,424 89,004 63,654
Interest Income and Other....................................................... 2,828 2,017 5,713
Interest Expense................................................................(8,025) (8,390) (7,322)
--------------------------------------
Interest Income (Expense) -Net..................................................(5,197) (6,373) (1,609)
--------------------------------------
Income Before Taxes.............................................................90,227 82,631 62,045
Provision for Income Taxes......................................................31,309 30,243 22,336
-------------------------------------
Net Income......................................................................58,918 52,388 39,709
-------------------------------------
Retained Earnings at Beginning of Year.........................................198,539 154,759 122,906
Cash Dividends
Class A Common ($.16, $.14, and $.13 per share) (7,859) (7,075) (6,479)
Class B Common ($.16, $.13, and $.11 per share) (1,867) (1,533) (1,377)
-------------------------------------
Total Dividends........................................................(9,726) (8,608) (7,856)
-------------------------------------
Retained Earnings at End of Year...........................................$ 247,731 $ 198,539 $ 154,759
=====================================
Income Per Share
Diluted................................................................$ 0.93 $ 0.81 $ 0.60
Basic..................................................................$ 0.97 $ 0.85 $ 0.63
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
John Wiley & Sons, Inc. and Subsidiaries For the years ended April 30
---------------------------------------
Dollars in thousands 2001 2000 1999
---------------------------------------
Net Income...................................................................$ 58,918 $ 52,388 $ 39,709
Other Comprehensive Income(Loss)
Foreign currency translation adjustments............................... 525 (3,116) 14
---------------------------------------
Comprehensive Income.........................................................$ 59,443 $ 49,272 $ 39,723
=======================================
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
John Wiley & Sons, Inc. and Subsidiaries For the years ended April 30
Dollars in thousands 2001 2000 1999
--------------------------------------------
Operating Activities
Net Income.....................................................................$ 58,918 $ 52,388 $ 39,709
Noncash Items
Amortization of intangibles............................................ 17,496 16,447 9,445
Amortization of composition costs...................................... 22,583 24,900 21,322
Depreciation of property and equipment................................. 13,802 11,822 9,788
Reserves for returns, doubtful accounts, and obsolescence.............. 7,527 11,211 5,406
Deferred income taxes.................................................. 3,530 1,795 (1,056)
Other 10,185 12,675 10,822
Changes in Operating Assets and Liabilities
Decrease (increase) in receivables..................................... 5,063 (21,611) 1,151
Decrease (increase) in inventories..................................... (9,789) (1,149) 3,032
Increase (decrease) in accounts and royalties payable.................. (2,213) 6,134 (1,917)
Increase in deferred subscription revenues............................. 5,009 3,602 10,413
Increase (decrease) in other accrued liabilities....................... (9,242) 12,100 8,037
Net change in other operating assets and liabilities................... 8,145 3,383 5,079
-------------------------------------------
Cash Provided by Operating Activities.................................. 131,014 133,697 121,231
-------------------------------------------
Investing Activities
Additions to product development assets................................ (36,163) (33,153) (31,998)
Additions to property and equipment.................................... (28,656) (15,804) (10,631)
Proceeds from sale of publishing assets................................ 2,950 - -
Acquisitions of publishing assets...................................... (10,052) (145,111) (10,429)
-------------------------------------------
Cash Used for Investing Activities..................................... (71,921) (194,068) (53,058)
-------------------------------------------
Financing Activities
Purchase of treasury shares............................................ (9,456) (35,317) (38,549)
Repayment of long-term debt............................................ (30,000) - -
Cash dividends......................................................... (9,726) (8,608) (7,856)
Proceeds from issuance of stock on option exercises and other.......... 1,911 2,003 1,826
-------------------------------------------
Cash Used for Financing Activities.............................................. (47,271) (41,922) (44,579)
-------------------------------------------
Effects of exchange rate changes on cash........................................ (1,174) (4,408) (2,029)
-------------------------------------------
Cash and Cash Equivalents
Increase (decrease) for year........................................... 10,648 (106,671) 21,565
Balance at beginning of year........................................... 42,299 148,970 127,405
-------------------------------------------
Balance at end of year................................................$ 52,947 $ 42,299 $ 148,970
===========================================
Cash Paid During the Year for
Interest..............................................................$ 9,033 $ 8,556 $ 7,886
Income taxes..........................................................$ 19,074 $ 21,122 $ 17,201
The accompanying notes are an integral part of the consolidated financial
statements.
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.
Investments in entities in which the Company has less than a 20% ownership and
in which it does not exercise significant influence are accounted for using the
cost method of accounting. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain prior year amounts
have been reclassified to conform to the current year's presentation.
Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States 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.
Revenue Recognition: In accordance with S.E.C. Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements," the Company recognizes
revenue when the following criteria are met: persuasive evidence that an
arrangement exists; delivery has occurred or services have been rendered; the
price to the customer is fixed or determinable; and collectibility is reasonably
assured. If all other criteria have been met, revenues are principally
recognized upon shipment of products or when services have been rendered.
Subscription revenues are generally collected in advance, and are deferred and
recognized as earned when the related issue is shipped or made available online,
or over the term of the subscription as services are rendered.
Shipping and Handling Fees: In the fourth quarter of fiscal year 2001, the
Company implemented the consensus of the Emerging Issues Task Force Issue 00-10,
"Accounting for Shipping and Handling Fees and Costs," and retroactively
reclassified its shipping and handling fee income from cost of sales and
operating and administrative expenses, where it was previously recorded, to
revenues. This reclassification had the effect of increasing revenues and the
respective expenses, by $12, $11.2, and $10.7 million in 2001, 2000, and 1999,
respectively, with no effect on net income for any period. Shipping and handling
costs included in operating and administrative expenses amounted to $12.3,
$11.8, and $9.7 million in 2001, 2000, and 1999, respectively.
Sales Returns and Doubtful Accounts: The Company provides an estimated allowance
for doubtful accounts and for future returns on sales made during the year based
on historical experience. The allowance for doubtful accounts and returns
(estimated returns net of inventory and royalty costs) is shown as a reduction
of accounts receivable in the accompanying consolidated balance sheets and
amounted to $52.8 and $53.4 million at April 30, 2001 and 2000, respectively.
Inventories: Inventories are stated at cost or market, whichever is lower.
Domestic book inventories aggregating $38.4 and $35.4 million at April 30, 2001
and 2000, respectively, are valued using the last-in, first-out (LIFO) method.
All other inventories are valued using the first-in, first-out method.
Capitalized Internal-use Software: Beginning in fiscal year 2000, the Company
adopted the American Institute of Certified Public Accountants' Statement of
Position ("SOP") 98-1," Accounting for the Cost of Computer Software Developed
or Obtained for Internal Use." SOP 98-1 requires that costs incurred during the
application development stage, including external costs of materials and
services, and payroll and payroll related costs for employees who are directly
associated with the internal-use software project, are to be capitalized and
amortized over the expected useful life of the related software. Costs incurred
during the preliminary project stage, as well as maintenance, training and
upgrades that do not result in additional functionality are to be expensed as
incurred. The adoption of SOP 98-1 had the effect of increasing net income in
fiscal years 2001 and 2000 by approximately $2.0 and $1.5 million, 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 fixtures is depreciated principally on the straight-line
method over estimated useful lives ranging from 3 to 10 years. Computer
equipment and capitalized software are amortized on a straight-line basis over
estimated useful lives ranging from 3 to 5 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 on a double-declining basis over estimated useful lives, principally
three years.
Intangible Assets: Intangible assets consist of acquired publication rights,
which are principally amortized on a straight-line basis over periods ranging
from 3 to 30 years; 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.
Estimated fair value is principally determined using the anticipated cash flows
discounted at a rate commensurate with the risk involved. As a result of this
review, approximately $3.6 million of intangibles was written off and charged
against operating income in fiscal year 2000.
Derivative Financial Instruments - Foreign Exchange Contracts: The Company, from
time to time, enters into forward exchange contracts as a hedge against its
overseas subsidiaries' foreign currency asset and liability commitments, and
anticipated transaction exposures. To qualify as a hedge, the financial
instrument must be designated as a hedge against identified items that have a
high correlation with the financial instrument. The Company does not use
financial instruments for trading or speculative purposes. Realized and
unrealized gains and losses are deferred and taken into income over the lives of
the hedged items if permitted by accounting principles generally accepted in the
United States; otherwise, the contracts are marked to market with any gains and
losses reflected in operating expenses. At April 30, 2001, there were open
foreign exchange forward contracts of approximately $15.6 million relating to
hedges of Euro and U.K. pound sterling exposures, and for which $.5 million of
unrealized losses were deferred. There were no open foreign exchange contracts
and no gains or losses were deferred at April 30, 2000. Included in operating
and administrative expenses were net foreign exchange gains (losses) of
approximately $(.3), $.1 and $(.1), million in 2001, 2000, and 1999,
respectively.
Foreign Currency Translation: The Company translates the results of operations
of its foreign subsidiaries using average exchange rates during each period,
whereas balance sheet accounts are translated using exchange rates at the end of
each period. Currency translation adjustments are recorded as a component of
accumulated other comprehensive income(loss) in stockholders' equity.
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 (SFAS) No. 123, "Accounting for
Stock-Based Compensation." 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 generally recognized 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 SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended by SFAS No. 137 and No. 138, which specifies the accounting and
disclosure requirements for such instruments, and is effective for the Company's
fiscal year beginning on May 1, 2001. Under the new standard, all derivatives
will be recognized as assets or liabilities and measured at fair value.
Derivatives that are not determined to be effective hedges will be adjusted to
fair value with a corresponding effect on net income. 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.
Income Per Share
A reconciliation of the shares used in the computation of net income per share
for the years ended April 30, follows:
In thousands 2001 2000 1999
- ----------------------------- ----------- ---------- -----------
Weighted average shares
outstanding 60,813 62,229 63,738
Less: Unearned deferred
compensation shares
(321) (505) (781)
- ----------------------------- ----------- ---------- -----------
Shares used for basic
income per share
60,492 61,724 62,957
Dilutive effect of stock
options and other stock
awards 2,808 3,101 3,556
- ----------------------------- ----------- ---------- -----------
Shares used for diluted
income per share
63,300 64,825 66,513
- ----------------------------- ----------- ---------- -----------
Acquisitions
In fiscal year 2001, the Company acquired interests in certain publishing
properties for approximately $10.1 million including: EnviroGlobe, an
environmental remediation portal and database of technical and regulatory
information; a majority interest in Capstone Publishing, Ltd., an Oxford-based
publisher of professional business and management titles; new agreements with
certain prestigious scholarly and professional societies to publish their
journals; and a strategic investment in LabBook, Inc., an innovative
life-sciences information company. The costs of these investments have been
allocated primarily to investments and to goodwill, acquired publication rights
and noncompete agreements that are being amortized on a straight-line basis over
estimated average lives ranging from 5 to 20 years.
In fiscal year 2000, the Company acquired certain higher education titles and
related assets for approximately $57 million in cash. The higher education
titles included such disciplines as biology/anatomy and physiology, engineering,
mathematics, economics, finance, and teacher education. In addition, the Company
acquired the Jossey-Bass publishing company from Pearson Inc. for approximately
$81 million in cash. Jossey-Bass publishes books and journals for professionals
and executives in such areas as business, psychology and non-profit institution
management. The Company also acquired the J.K. Lasser tax and financial guides
for approximately $5 million in cash and other smaller acquisitions for
approximately $2 million. The acquisitions were financed by available cash
balances and short-term lines of credit. The cost of the acquisitions was
allocated on the basis of the fair values of the assets acquired and the
liabilities assumed. The excess of cost over the fair value of the tangible
assets acquired amounted to approximately $143 million, relating primarily to
acquired publication rights, goodwill, and noncompete agreements that are being
amortized on a straight-line basis over estimated average lives ranging from 3
to 20 years.
In fiscal 1999, the Company acquired various publishing properties for
approximately $10.4 million in cash including the Huthig Publishing Group's
scientific book and journals program; the German Materials Science Society book
program; Chronimed's publishing program in such areas as general health,
cooking, nutrition, diabetes, and other chronic illnesses; Hewin International,
a publisher of technological-commercial reports in the areas of agrochemicals,
biochemistry, oleochemicals, and petrochemicals; and the remaining shares of
Verlag Helvetica Chemica Acta, a scientific publisher of chemistry books and
journals. The excess of cost over the fair value of the tangible assets acquired
amounted to approximately $11.4 million, relating primarily to acquired
publishing rights that are being amortized on a straight-line basis over periods
ranging from 5 to 30 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 acquisition of Jossey-Bass was
considered to be an acquisition of a business, and accordingly, the following
unaudited pro forma information presents the results of operations of the
Company as if the acquisition had been consummated as of May 1, 1998. The
unaudited pro forma financial information is not necessarily indicative of the
actual results that would have been achieved had the acquisition been
consummated as of May 1, 1998, nor is it necessarily indicative of future
results of operations.
Dollars in thousands 2000 1999
except per share data
- ------------------------ --- ------------ --- ------------
Revenues $ 609,603 $ 552,533
Net Income $ 51,197 $ 36,121
Income Per Share $ .79 $ .54
Inventories
Inventories at April 30 were as follows:
Dollars in thousands 2001 2000
- --------------------------- ----------------- ----------------
Finished Goods $46,353 $40,370
Work-in-Process 4,481 3,537
Paper, Cloth, and Other 3,020 5,241
- --------------------------- ----------------- ----------------
53,854 49,148
LIFO Reserve (3,091) (3,039)
- --------------------------- ----------------- ----------------
Total $50,763 $46,109
- --------------------------- ----------------- ----------------
Product Development Assets
Product development assets consisted of the following at April 30:
Dollars in thousands 2001 2000
- ---------------------------------- ------------ -------------
Composition Costs $24,975 $26,753
Royalty Advances 16,216 13,056
- ---------------------------------- ------------ -------------
Total $41,191 $39,809
- ---------------------------------- ------------ -------------
Composition costs are net of accumulated amortization of $52,593 in 2001 and
$48,045 in 2000.
Property and Equipment
Property and equipment consisted of the following at April 30:
Dollars in thousands 2001 2000
- -------------------------------- -------------- ---------------
Land and Land Improvements $ 3,333 $ 1,542
Buildings and Leasehold
Improvements 27,754 19,763
Furniture and Fixtures 31,752 31,846
Computer Equipment and
Capitalized Software 58,104 52,877
- -------------------------------- -------------- ---------------
120,943 106,028
Accumulated Depreciation (68,688) (67,802)
- -------------------------------- -------------- ---------------
Total $ 52,255 $ 38,226
- -------------------------------- -------------- ---------------
Intangible Assets
Intangible assets consisted of the following at April 30:
Dollars in thousands 2001 2000
- -------------------------------- ------------- -------------
Acquired Publication Rights $239,603 $245,219
Goodwill and Other Intangibles 116,466 112,053
Noncompete Agreements 890 2,016
- -------------------------------- ------------- -------------
356,959 359,288
Accumulated Amortization (73,198) (62,203)
- -------------------------------- ------------- -------------
Total $283,761 $297,085
- -------------------------------- ------------- -------------
Other Accrued Liabilities
Included in other accrued liabilities was accrued compensation of approximately
$20.8 and $28.3 million at April 30, 2001 and 2000, respectively.
Income Taxes
The provision for income taxes at April 30, was as follows:
Dollars in thousands 2001 2000 1999
- ---------------------------- ---------- ----------- ----------
Currently Payable
Federal $ 16,606 $ 19,501 $ 16,419
Foreign 10,789 6,181 4,663
State and local 354 2,618 2,249
- ---------------------------- ---------- ----------- ----------
Total Current Provision 27,749 28,300 23,331
- ---------------------------- ---------- ----------- ----------
Deferred Provision (Benefit)
Federal (467) (4,353) (4,060)
Foreign 1,858 4,561 1,922
State and local 2,169 1,735 1,143
- ---------------------------- ---------- ----------- ----------
Total Deferred Provision 3,560 1,943 (995)
- ---------------------------- ---------- ----------- ----------
Total Provision $ 31,309 $ 30,243 $ 22,336
- ---------------------------- ---------- ----------- ----------
Included in the Company's consolidated statements of cash flows as cash provided
by operating activities under the changes in other assets and liabilities
caption are tax benefits related to the exercise of stock options amounting to
$3.5, $3.7 and $2.4 million for 2001, 2000, and 1999, respectively, which serve
to reduce current income taxes payable. Such amounts were previously classified
as cash provided by financing activities, and prior year amounts have been
reclassified to conform to the current year's presentation.
The Company's effective income tax rate as a percent of pretax income differed
from the U.S. federal statutory rate as shown below:
2001 2000 1999
- ------------------------------------- -------- -------- --------
U.S. Federal Statutory Rate 35.0% 35.0% 35.0%
State and Local Income Taxes
Net of Federal Income Tax Benefit 2.0 3.9 3.6
Tax Benefit Derived From FSC Income (3.5) (3.6) (2.5)
Foreign Source Earnings Taxed at
Other Than U.S. Statutory Rate .2 - .1
Nondeductible Amortization of 1.8 2.0 .6
Intangibles
Other-Net (.8) (.7) (.8)
- ------------------------------------- -------- -------- --------
Effective Income Tax Rate 34.7% 36.6% 36.0%
- ------------------------------------- -------- -------- --------
Deferred taxes result from timing differences in the recognition of revenue and
expense for tax and financial reporting purposes. The components of the
provision for deferred taxes were as follows:
Dollars in thousands 2001 2000 1999
- ---------------------------------- --------- -------- ---------
Depreciation and Amortization $ 5,818 $ 177 $(2,356)
Accrued Expenses 3,803 (1,147) 2,500
Provision for Sales Returns and
Doubtful Accounts (3,039) (6,573) (3,414)
Inventory 707 (561) 5
Retirement Benefits (600) 752 (1,454)
Long-Term Liabilities 1,000 67 (1,175)
Alternative Minimum Tax Credit and
Other Carryforwards - 492 288
Net Operating Loss Carryforwards 1,690 17,205 4,500
Valuation Allowance (5,719) (7,079) 245
Other-Net (100) (1,390) (134)
- ---------------------------------- --------- -------- ---------
Total Deferred Provision (Benefit) $ 3,560 $ 1,943 $ (995)
- ---------------------------------- --------- -------- ---------
The significant components of deferred tax assets and liabilities at April 30
were as follows:
2001 2000
----------------- ------------------
Current Long-Term Current Long-Term
Dollars in thousands
- ---------------------------- -------- -------- --------- -------
Deferred Tax Assets
Net Operating Loss
Carryforwards $ - $ 2,736 $ - $ 4,426
Reserve for Sales Returns
and Doubtful Accounts 15,220 - 12,181 -
Costs Capitalized for Taxes - 3,898 - 3,798
Retirement and Post-
Employment Benefits - 4,772 - 4,172
Amortization of Intangibles - - - 4,018
- ---------------------------- -------- -------- --------- --------
Total Deferred Tax Assets 15,220 11,406 12,181 16,414
Less: Valuation Allowance - - - (5,719)
- ---------------------------- -------- -------- --------- --------
Net Deferred Tax Assets 15,220 11,406 12,181 10,695
- ---------------------------- -------- -------- --------- --------
Deferred Tax Liabilities
Inventory (1,889) - (1,182) -
Depreciation and Amortization - (5,431) - (3,631)
Accrued Expenses - (12,158) - (8,355)
Long-Term Liabilities - (11,754) - (10,754)
- ---------------------------- -------- -------- --------- --------
Total Deferred Tax (1,889) (29,343) (1,182) (22,740)
Liabilities
- ---------------------------- -------- -------- --------- --------
Net Deferred Tax Assets
(Liabilities) 13,331 $(17,937) $10,999 $(12,045)
- ---------------------------- -------- -------- --------- --------
Current taxes payable for 2001 and 2000 have been reduced by $1.3 and $5.0
million, respectively, relating to the utilization of net operating loss
carryforwards. At April 30, 2001, the Company had aggregate unused net operating
loss carryforwards of approximately $6.7 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, 2001, the undistributed earnings of foreign subsidiaries approximated $44.1
million and, if remitted currently, would result in additional taxes
approximating $6.8 million.
Notes Payable and Debt
Long-term debt consisted of the following at April 30:
Dollars in thousands 2001 2000
- -------------------------------- ------------- -----------
Term Loan Notes Payable Due
October 2001 Through 2003 $ 95,000 $125,000
Less: Current portion of
long-term debt (30,000) (30,000)
---------- ----------
$ 65,000 $ 95,000
--------- ----------
The weighted average interest rate on the term loan was 6.68% and 5.89% during
2001 and 2000, respectively; and 5.24% and 6.44% at April 30, 2001 and 2000,
respectively.
The Company has a $145 million credit agreement expiring on October 31, 2003,
with eight banks. The credit agreement consists of a term loan of $95 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 2002 2003 2004
- ----------------------- ------- --------- --------
$30,000 $30,000 $35,000
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 $89 million was
available for such restricted payments as of April 30, 2001.
The Company and its subsidiaries have other short-term lines of credit
aggregating $79 million at various interest rates. Information relating to all
short-term lines of credit follows:
Dollars in thousands 2001 2000 1999
- -------------------------------- ---------- --------- ----------
End of Year
Amount outstanding $ -- $ -- $ --
Weighted average interest -- -- --
rate
During the Year
Maximum amount outstanding $48,445 $40,749 $ --
Average amount outstanding $ 9,018 $15,654 $ --
Weighted average interest 6.7% 5.6% --
rate
- -------------------------------- ---------- --------- ----------
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.
Commitments and Contingencies
The following schedule shows the composition of rent expense for operating
leases:
Dollars in thousands 2001 2000 1999
- ------------------------------- ----------- ---------- -----------
Minimum Rental $ 14,948 $ 14,614 $ 13,935
Lease Escalation 2,484 2,352 2,248
Less: Sublease Rentals -- -- (60)
- ------------------------------- ----------- ---------- -----------
Total $ 17,432 $ 16,966 $ 16,123
- ------------------------------- ----------- ---------- -----------
Future minimum payments under operating leases aggregated $58.7 million at April
30, 2001. Annual payments under these leases are $16.9, $16.5, $3.4, $3.2, and
$3.0 million for fiscal years 2002 through 2006, respectively. Such amounts do
not include the fifteen year lease related to the Company's new headquarters
facility that will commence upon completion of construction, as defined, and
which is estimated to occur during calendar year 2002. The future minimum
payments under the lease aggregate to approximately $194 million over the term
with annual rent payments during the first five years of approximately $12
million per year. The Company has also entered into an agreement to purchase an
office building in England upon completion of construction in calendar year 2002
for approximately $15 million.
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.
Retirement Plans
The Company and its principal subsidiaries have contributory and noncontributory
retirement plans that cover substantially all employees. The plans generally
provide for employee retirement between the ages of 60 and 65 and benefits based
on length of service and final average compensation, as defined.
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 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 $1.0 million at
April 30, 2001 and .4 million at 2000, and the amount expensed in 2001 and prior
years was not material.
The Company has a defined contribution 401(k) savings plan. The Company
contribution is based on employee contributions and the level of Company match.
The expense for this plan amounted to approximately $1.7, $1.5, and $1.2 million
in 2001, 2000 and 1999, respectively.
The components of net pension expense for the defined benefit plans were as
follows:
Dollars in thousands 2001 2000 1999
- ---------------------------------- --------- --------- ---------
Service Cost $5,263 $5,535 $4,960
Interest Cost 7,426 7,034 6,498
Expected Return on Plan Assets (7,351) (7,321) (6,684)
Net Amortization of Prior
Service Cost 473 470 356
Net Amortization of Unrecognized
Transition Asset (819) (843) (850)
Recognized Net Actuarial
(Gain) Loss 47 (166) (157)
- ---------------------------------- --------- --------- ---------
Net Pension Expense $5,039 $4,709 $4,123
- ---------------------------------- --------- --------- ---------
In fiscal 1999, the domestic plan was amended to provide that final average
compensation be based on the highest three consecutive years ended December 31,
1995. 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 net pension expense included above for the international plans
amounted to approximately $2.9, $2.9, and $2.6 million for 2001, 2000, and 1999,
respectively.
The following table sets forth the changes in and the status of the plans'
assets and benefit obligations. The unfunded plans primarily relate to a
non-U.S. subsidiary, which is governed by local statutory requirements, and the
domestic supplemental retirement plans for certain officers and senior
management personnel.
2001 2000
---------------------------------- ----------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefit Accumulated Benefit
Dollars in thousands Benefit Obligations Benefit Obligations
Obligations Exceed Assets Obligations Exceed Assets
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
Plan Assets
Fair Value, beginning of year $ 93,779 $ - $ 92,389 $ -
Actual Return on Plan Assets (3,671) - 2,793 -
Employer Contributions 2,336 1,255 2,224 832
Participants' Contributions - - - -
Benefits Paid (2,870) (1,255) (2,637) (832)
Foreign Currency Rate Changes (3,090) - (990) -
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
Fair Value, end of year $ 86,484 $ - $ 93,779 $ -
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
Benefit Obligation
Balance, beginning of year $ (82,757) $ (23,593) $ (74,953) $ (23,342)
Service Cost (4,575) (688) (4,637) (897)
Interest Cost (5,826) (1,600) (5,501) (1,533)
Amendments - - - (81)
Actuarial Gain (638) (762) (1,241) (39)
Benefits Paid 2,870 1,255 2,637 832
Foreign Currency Rate Changes 3,072 275 938 1,467
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
Balance, end of year $ (87,854) $ (25,113) $ (82,757) $ (23,593)
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
Funded Status - Excess (Deficit) (1,370) (25,113) 11,022 (23,593)
Unrecognized Net Transition Asset (305) - (1,165) -
Unrecognized Net Actuarial Loss (Gain) 1,106 3,377 (10,789) 2,944
Unrecognized Prior Service Cost 3,000 267 3,433 421
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
Net Prepaid (Accrued) Pension Cost $ 2,431 $ (21,469) $ 2,501 $ (20,228)
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
--------------------------------------------------------------------------------------------------------------------
The weighted average assumptions used in determining these amounts were as
follows:
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
Discount Rate 7.2% 6.8% 7.2% 6.8%
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
Expected Return on Plan Assets 8.0% - 8.0% -
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
Rate of Compensation Increase 2.4% 5.1% 2.4% 5.0%
---------------------------------------------- ---------------- ----------------- ----------------- ----------------
Stock Compensation Plans
Under the Company's Long Term Incentive 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 600,000 shares of Class A
stock and subject to an overall maximum of 8,000,000 shares through June 22,
2009. As of April 30, 2001, approximately 7,117,400 shares were available for
future grants.
The exercise price of 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 SFAS 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 $2.2 million, or $.04
per diluted share, in 2001; $1.7 million, or $.03 per diluted share, in 2000;
and $1.1 million, or $.02 per diluted share, in 1999. 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 2001, 2000, and 1999: risk-free interest rate of 6.2%, 6.3%, and
5.6%, respectively; dividend yield of .91%, 1.0%, and 1.2%, respectively;
volatility of 28.1%, 25.7%, and 23.2%, respectively; and expected life of seven
to nine years.
A summary of the activity and status of the Company's stock option plans
follows:
2001 2000 1999
---------------------------- --------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
---------------------------------- -------------- ------------- ------------- ------------- ------------- -------------
Outstanding at beginning of year 4,837,693 $ 8.88 4,820,884 $ 7.04 4,207,636 $ 5.18
Granted 663,000 $23.28 517,800 $20.47 958,636 $13.88
Exercised (414,790) $ 3.18 (476,591) $ 2.74 (345,388) $ 3.26
Canceled (5,200) $22.00 (24,400) $12.28 - -
---------------------------------- -------------- ------------- ------------- ------------- ------------- -------------
Outstanding at end of year 5,080,703 $11.21 4,837,693 $ 8.88 4,820,884 $ 7.04
---------------------------------- -------------- ------------- ------------- ------------- ------------- -------------
Exercisable at end of year 2,408,257 $ 5.81 2,245,837 $ 4.66 2,578,964 $ 4.05
---------------------------------- -------------- ------------- ------------- ------------- ------------- -------------
The weighted average fair value of options granted during the year was $9.76,
$8.69, and $5.25 in 2001, 2000, and 1999, respectively.
A summary of information about stock options outstanding and options exercisable
at April 30, 2001, follows:
Options Outstanding Options Exercisable
Weighted Weight-ed Weighted
Number Average Average Number Average
Range of of Remaining Exercise of Exercise
Exercise Prices Options Term Price Options Price
- ------------------ --------- --------- -------- ---------- ---------
$ 1.97 to $ 3.06 704,688 1.3 years $ 2.66 704,688 $ 2.66
$ 5.17 to $ 8.63 2,257,779 4.6 years $ 7.14 1,597,051 $ 6.65
$13.75 to $14.59 950,636 7.1 years $13.88 106,518 $14.12
$17.25 to $23.56 1,167,600 8.7 years $22.07 - -
- ------------------ --------- --------- -------- ---------- ---------
Total 5,080,703 5.6 years $11.21 2,408,257 $ 5.81
- ------------------ --------- --------- -------- ---------- ---------
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 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 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 103,762, 40,869, and
114,400 shares at weighted-average fair values of $19.98, $18.26, and $14.55 per
share in 2001, 2000, and 1999, respectively. Compensation expense charged to
earnings for the above amounted to $2.9, $2.6, and $3.0 million in 2001, 2000,
and, 1999 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 4,949, 14,936 and 15,844 shares were issued in 2001, 2000, and
1999, respectively. Compensation expense related to this plan amounted to
approximately $.5, $.4, and $.5 million in 2001, 2000, and 1999, respectively.
Capital Stock and Changes in Capital Accounts
Preferred stock consists of 2 million authorized shares with $1 par value. To
date, no preferred shares have been issued. Common stock consists of 180 million
authorized shares of Class A Common, $1 par value, and 72 million 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.
Under the Company's current stock repurchase program, up to 4 million shares of
its Class A common stock may be purchased from time to time in the open market
and through privately negotiated transactions. Through April 30, 2001, the
Company repurchased 2,655,350 shares at an average price of $16.70 per share for
a total cost of approximately $44.3 million under the program.
Accumulated other comprehensive income balances consist solely of cumulative
foreign currency translation adjustments.
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 May 1, 1998 $67,106 $15,869 $5,624 $(47,499)
Director Stock Plan Issuance - - 207 46
Executive Long-Term Incentive Plan Issuance - - 233 52
Purchase of Treasury Shares - - - (38,549)
Restricted Share Issuance - - 2,754 349
Issuance of Shares Under Employee Savings Plan - - 461 86
Exercise of Stock Options 215 - 3,766 373
Other 227 (227) - -
------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Balance at May 1, 1999 $67,548 $15,642 $13,045 $(85,142)
Director Stock Plan Issuance - - 192 68
Executive Long-Term Incentive Plan Issuance - - (188) (6)
Purchase of Treasury Shares - - - (35,317)
Restricted Share Issuance - - (48) 120
Issuance of Shares Under Employee Savings Plan - - 368 139
Exercise of Stock Options - - 809 2,314
Other 344 (343) - (1)
------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Balance at May 1, 2000 $67,892 $15,299 $14,178 $(117,825)
Director Stock Plan Issuance - - 79 26
Executive Long-Term Incentive Plan Issuance - - 542 272
Purchase of Treasury Shares - - - (9,456)
Restricted Share Issuance - - 986 (284)
Issuance of Shares Under Employee Savings Plan - - 361 127
Exercise of Stock Options - - 2,754 2,214
Other 145 (146) - -
------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Balance at April 30, 2001 $68,037 $15,153 $18,900 $(124,926)
------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Segment Information
The Company is a global publisher of print and electronic products, specializing
in scientific, technical and medical journals and books; professional and
consumer books and subscription services; and textbooks and educational
materials for undergraduate and graduate students as well as lifelong learners.
The Company has publishing, marketing, and distribution centers in the United
States, Canada, Europe, Asia, and Australia. The Company's reportable segments
are based on the management reporting structure used to evaluate performance.
Segment information is as follows:
Dollars In thousands 2001
- ----------------------- ------------------------------------------------------------------------------------------------------------
Eliminations
European Other & Corporate
Domestic Segments Segment Segments Items Total
------------------------------------------------------ --------- ---------- ----------- -----------
Scientific,
Technical, Professional/ Higher Total
and Medical Trade Education Domestic
----------- ----------- ---------- ----------
Revenues
- - External Customers $148,452 $146,480 $112,863 $407,795 $142,798 $63,197 $ - $613,790
- - Intersegment Sales 7,667 15,623 20,218 43,508 12,488 1,133 (57,129) -
----------- ----------- ---------- ---------- --------- ---------- ----------- -----------
- - Total Revenues $156,119 $162,103 $133,081 $451,303 $155,286 $64,330 $ (57,129) $613,790
----------- ----------- ---------- ---------- --------- ---------- ----------- -----------
Direct Contribution
to Profit $71,475 $33,479 $41,872 $146,826 $50,122 $14,730 - $211,678
----------- ----------- ---------- ---------- --------- ---------- -----------
Shared Services &
Admin. Costs 116,254)
-----------
Operating Income 95,424
Interest Expense-Net (5,197)
-----------
Income Before Taxes $90,227
-----------
Assets $56,801 $172,364 $84,462 $313,627 $157,436 $19,521 $97,418 $588,002
Expenditures for
Long-Lived Assets
$13,430 $17,841 $8,108 $39,379 $13,005 $2,751 $19,736 $74,871
Depreciation &
Amortization
$7,305 $15,256 $10,216 $32,777 $11,868 $1,976 $7,260 $53,881
Dollars In thousands 2000
- ------------------------ -----------------------------------------------------------------------------------------------------------
Eliminations
European Other & Corporate
Domestic Segments Segment Segments Items Total
----------------------------------------------------- --------- ---------- ----------- ----------
Scientific,
Technical, Professional/ Higher Total
and Medical Trade Education Domestic
------------ ----------- ---------- ----------
Revenues
- - External Customers $143,329 $146,571 $110,755 $400,655 $143,046 $62,323 $ - $606,024
- - Intersegment Sales 7,115 16,065 18,366 41,546 10,869 743 (53,158) -
------------ ----------- ---------- ---------- --------- ---------- ----------- ----------
- - Total Revenues $150,444 $162,636 $129,121 $422,201 $153,915 $63,066 $ (53,158) $606,024
----------- ----------- ---------- ---------- --------- ---------- ----------- -----------
Direct Contribution
to Profit $63,754 $37,416 $37,585 $138,755 $47,914 $13,269 - $199,938
------------ ----------- ---------- ---------- --------- ---------- -----------
Shared Services &
Admin. Costs (110,934)
----------
Operating Income 89,004
Interest Expense-Net (6,373)
----------
Income Before Taxes $82,631
----------
Assets $52,896 $179,590 $89,101 $321,587 $152,603 $20,954 $74,193 $569,337
Expenditures for
Long-Lived Assets $6,381 $102,705 $65,834 $174,920 $7,405 $2,867 $8,876 $194,068
Depreciation &
Amortization $8,708 $14,858 $10,769 $34,335 $11,663 $1,905 $5,266 $53,169
Dollars In thousands 1999
- ------------------------ ----------------------------------------------------------------------------------------------------------
Eliminations
European Other & Corporate
Domestic Segments Segment Segments Items Total
---------------------------------------------------- --------- --------- ----------- ----------
Scientific,
Technical, Professional/ Higher Total
and Medical Trade Education Domestic
----------- ----------- ---------- ----------
Revenues
- - External Customers $136,356 $106,891 $85,520 $328,768 $140,332 $50,064 $ - $519,164
- - Intersegment Sales 7,375 13,587 14,141 35,103 11,396 466 (46,965) -
---------- ----------- ---------- ---------- --------- ---------- ----------- ----------
- - Total Revenues $143,731 $120,478 $99,661 $363,871 $151,728 $50,530 $(46,965) $519,164
---------- ----------- ---------- ---------- --------- ---------- ----------- ----------
Direct Contribution
to Profit
$59,403 $30,275 $23,426 $113,103 $42,899 $10,126 - $166,128
---------- ----------- ---------- ---------- --------- ---------- -----------
Shared Services &
Admin. Costs
(102,474)
---------
Operating Income 63,654
Interest Expense-Net (1,609)
----------
Income Before Taxes $62,045
----------
Assets $62,250 $87,130 $24,107 $173,487 $162,379 $17,919 $174,767 $528,552
Expenditures for
Long-Lived Assets $7,826 $14,047 $6,686 $28,559 $18,906 $2,444 $3,149 $53,058
Depreciation &
Amortization $6,664 $9,288 $7,138 $23,090 $13,061 $945 $3,459 $40,555
Intersegment sales are generally made at a fixed discount from list price.
Shared services and administrative costs include costs for such services as
information technology, distribution, occupancy, human resources, finance, and
administration. These costs are not allocated as they support the Company's
worldwide operations. Corporate assets primarily consist of cash and cash
equivalents, deferred tax benefits, and certain property and equipment. Export
sales from the United States to unaffiliated international customers amounted to
approximately $66.0, $62.1, and $60.5 million in 2001, 2000, and 1999,
respectively. The pretax income for consolidated international operations was
approximately $30.0, $25.5 and $17.3 million in 2001, 2000, and 1999,
respectively.
Worldwide revenues for the Company's core businesses were as follows:
Dollars in thousands Revenues
- --------------------------------------------------- ---------------------------------------------------------------
2001 2000 1999
------------------ ------------------- ------------------
Scientific, Technical, and $259,094 $253,683 $244,323
Medical
Professional/Trade 196,787 197,790 156,050
Higher Education 157,909 154,551 118,791
------------------ ------------------- ------------------
Total $613,790 $606,024 $519,164
------------------ ------------------- ------------------
Revenues from external customers and long-lived assets by geographic area were
as follows:
Dollars in thousands Revenues Long-Lived Assets
--------------------
------------------------------------------- ------------------------------------------
2001 2000 1999 2001 2000 1999
------------- ----------- ----------- ----------- ------------ ------------
Domestic $364,559 $357,365 $284,760 $262,821 $257,041 $121,643
International 249,231 248,659 234,404 132,266 131,790 137,938
------------- ----------- --------- --------- --------- ---------
Total $613,790 $606,024 $519,164 $395,087 $388,831 $259,581
============= =========== ========== ========= ========= =========
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Results of Operations:
Fiscal 2001 Compared to Fiscal 2000
The Company continued to expand its alliances and invest in new technologies to
create additional avenues to distribute its "must have" content. Results also
benefited from continued productivity improvements and prudent expense
management.
The Company had a strong start in the first half of the year, however, the
latter half of the year was marked by industry-wide sluggish sales in the
domestic Higher Education and Professional/Trade segments. Revenues were also
adversely affected by a stronger U.S. dollar. Revenues for the year of $613.8
million, advanced 4% in real terms excluding foreign currency translation
effects, or 1% including those effects. Revenue gains were led by the global STM
businesses attributable to solid performances in the journals program, online
services, and a revitalized book program in Europe. In addition, the Company's
operations in Asia and Australia reported strong results.
Costs of sales as a percentage of revenues was 32.5% in 2001 compared with 33.0%
in the prior year reflecting lower relative composition and production costs as
a result of technology-driven productivity initiatives.
Operating and administrative costs were essentially flat with the prior year,
but increased 3% excluding foreign exchange translation effects. Expenses as a
percentage of revenues were 49.1%, compared with 49.6% in the prior year. The
decrease was attributable to lower expenses in the current year related to a
small STM newsletter program which was divested during the year.
Operating income increased 7% over the prior year and the operating margin
improved to 15.5%, compared with 14.7% in the prior year, due to productivity
gains and gross margin improvements.
Interest expense net of interest income of $5.2 million declined compared with
the prior year due to higher levels of cash investments.
The effective tax rate declined to 34.7%, compared with 36.6% in the prior year,
attributable to lower relative state income taxes resulting from settlement of
open tax issues.
Net income increased 12% to $58.9 million, and diluted earnings per share,
advanced 15% to $0.93 per share.
During the year, the Company repurchased approximately 359,000 shares at an
average price of $19.19 per share for a total cost of $6.9 million.
Fiscal 2001 Segment Results
Domestic STM revenues of $156.1 million increased 4% over the prior year led by
a strong journal program and offset to some degree by the divestment during the
year of a small newsletter program. Journal growth resulted from higher renewal
rates, increased sales of Enhanced Access Licenses for Wiley InterScience, which
increased fourfold over the prior year, and the signings of three prestigious
society journals. Direct contribution to profit increased 12% to $71.5 million.
Margins continued to improve as a result of lower composition and production
costs as a percentage of revenues, as well as lower expenses in the current year
related to the divested newsletter program.
Wiley InterScience continued to evolve as a successful online global enterprise.
Many more Enhanced Access Licenses were signed during the year, including
multi-year agreements. Usage continued to increase during the year as reflected
in the over 50% growth in the number of registered users compared with the
previous year.
During the year, in addition to the over 300 journals offered online, Wiley
InterScience enhanced its online product offerings to include major reference
works, such as multi-volume encyclopedias, databases and Current Protocols, the
widely used laboratory manual series. Other system enhancements included:
ArticleSelect, providing individual article access; Early View, wherein
customers can access individual articles online well in advance of the print
issue; MobileEdition, providing table of contents and abstracts directly to
personal and wireless handheld devices and web-enabled phones; and an alliance
with Maruzen KnowledgeWorker, providing a Japanese interface to enable searching
and browsing in that language.
The Company signed a multi-year agreement with IEEE, the premier society for
electrical, electronics, and computer engineers with more than 360,000 members
in 150 countries, whereby the Company and IEEE will publish a co-branded series
of books. During the year, the Company also entered into a strategic alliance
with LabBook, Inc., an innovative life-sciences information company. The
alliance brings together LabBook's desktop data integration and visualization
software with Wiley InterScience's research content and laboratory protocols.
Integration of targeted information and data is fundamental in the drug
discovery process, and this alliance should result in increased efficiencies for
life-science researchers. During the year, STM established communities of
interest in spectroscopy, diabetes, the pharmaceutical industry and polymer
sciences, and announced its participation in an electronic journal archiving
project sponsored by the Mellon Foundation.
Domestic Higher Education revenues advanced 3% over the prior year. Growth was
inhibited by disruption in the wholesaler intermediary chain resulting from the
bankruptcy of a major account, as well as the shift away from the higher
education market by some online accounts. Direct contribution to profit
increased 11% to $41.9 million, and the direct contribution margin improved to
31.5% compared with 29.1% in the prior year, as a result of prudent expense
management.
The demographic trends in the higher education market remain very healthy with
enrollments increasing steadily and online and lifelong learning markets growing
dramatically. The Higher Education segment continued to invest in technology to
help teachers teach and students learn. Every major college textbook now has a
technology component and/or website designed to facilitate teaching and
learning. Alliances have been formed to provide many of our top-selling
textbooks in the eBook format. The Company is working with course management
providers to offer interactive syllabi, chat rooms, and assessment tools
including online quizzing and testing. The Company will also package XanEdu's
MBA ReSearch Engine with the print editions of some of Higher Education's
leading textbooks.
Domestic Professional/Trade revenues of $162.1 million were essentially flat for
the year, reflecting the effect of industry-wide softness at some key retail
accounts, as well as tighter inventory management practices adopted by major
wholesalers. Sales through online accounts continued to grow around the world.
Direct contribution to profit of $33.5 million was 11% below the prior year, as
expenses grew at a 5% rate.
The Professional/Trade business continues to take advantage of the dramatic
growth of e-commerce. Online selling plays to Professional/Trade's strength as a
publisher with a deep backlist serving the professional needs of its customers.
There is a growing demand for electronic products among the professional markets
that it serves, notably computing, accounting, finance, psychology and
architecture. Professional/Trade is capitalizing on these opportunities with a
combination of print and web-based products and services, as well as through the
formation of strategic alliances. Recent electronic licensing agreements include
Professional/Trade's leadership and management titles to Books24X7 for their new
Business Pro subscription database; the JK Lasser tax guide to CPAdirectory.com,
a Web portal, for use in a syndicated database; and the licensing of content to
Digital Cement, a B2B service that provides content packages to corporate
clients. During the year, BoldIdeas, an online collection of 40 business and
environmental management periodicals was launched on the Wiley InterScience
platform.
The Power of Gold, The Ernst & Young Tax Guide 2001, and J.K. Lasser's Income
Tax Guide 2001 appeared on best seller lists in the The Wall Street Journal, The
New York Times, and Business Week.The 2000 editions of the J.K. Lasser and Ernst
& Young tax guides were listed as bestsellers for the year by USA Today. The
Association of American Publishers cited the WAIMH Handbook of Infant Mental
Health as the year's best social science reference book. Secrets and Lies was
selected as a finalist for one of Software Development Magazine's Jolt Product
Excellence and Productivity Awards in the books and computer-based training
category. During the year, the Company published the first title in its
partnership with CNBC, CNBC 24/7 Trading.
European segment revenues of $155.3 million for the year were adversely affected
by the stronger U.S. dollar. Excluding foreign currency translation effects,
European revenues advanced 7% over the prior year. Direct contribution to profit
of $50.1 million increased 5% over the prior year, and the direct contribution
margin increased to 32.3% compared with 31.1% in the prior year. Performance was
driven by a revitalized STM book program, higher journal revenues, and an
expanding professional/trade book program.
During the year, the European segment continued to expand its publishing
programs by acquiring a majority stake in the Oxford-based business publisher
Capstone Publishing, Ltd. Capstone, with annual revenues of approximately $2
million, publishes a broad array of professional business and management titles.
New journal launches, in conjunction with European chemistry societies, included
ChemPhysChem, ChemBioChem, and Chemistry - A European Journal.
Other segment revenues of $64.3 million advanced 8% over the prior year,
excluding the adverse foreign currency translation effects related to the
stronger U.S. dollar. The improvement in the Other segment results was mainly
due to market share gains in Asia and a strong school program in Australia,
offset to some degree by industry-wide sales shortfalls at a key Canadian
account, which was recently acquired and is in the process of being reorganized.
Wiley Australia won all of the education categories in the Australian Publishers
Association Design Awards and dominated the Awards for Excellence in Education
Publishing. Wiley's Australian school business won the Publisher of the Year
Award.
Fiscal 2000 Compared to Fiscal 1999
The Company continued to grow its revenue base through both internal development
and acquisitions while improving operating margins. The Company continued to
invest in new technologies as it accelerated its migration to the digital world.
In the first quarter of fiscal year 2000, the Company acquired certain higher
education titles for approximately $57 million in cash, and Jossey-Bass for
approximately $81 million in cash, from Pearson Inc. The higher education titles
include such disciplines as biology/anatomy and physiology, engineering,
mathematics, economics, finance and teacher education. Jossey-Bass publishes
books and journals for professionals and executives in such areas as business,
psychology, and non-profit institution management. The Company also acquired the
J.K. Lasser tax and financial guides for approximately $5 million in cash, and
other smaller acquisitions for approximately $2 million.
Revenues for the year increased 17% to $606 million reflecting improvement in
all of the Company's core businesses. The Company continued to gain market share
through the strength of its frontlist and backlist titles, as well as through
the successful integration of its acquisitions. Revenue growth for the year was
8% excluding the current year acquisitions and the foreign exchange translation
effect of weaker European currencies.
Cost of sales as a percentage of revenues was 33.0% in 2000 compared with 34.5%
in the prior year reflecting lower composition costs and paper, printing, and
binding costs.
Operating and administrative costs increased 13% over the prior year, of which
7% was due to the acquisitions. Expenses as a percentage of revenues declined to
49.6% compared with 51.4% in the prior year, as the rate of growth in expenses
was contained at less than the revenue growth rate.
Operating income increased 40% over the prior year. The operating income margin
reached 14.7%, compared with 12.3% in the prior year.
Interest expense net of interest income of $6.4 million was $4.8 million higher
than the prior year due to the financing costs related to the acquisitions. The
effective tax rate was 36.6% compared with 36% in the prior year.
Net income increased 32% to $52.4 million, and diluted earnings per share
increased 35% to $0.81 per share. Current year acquisitions were accretive to
earnings by approximately $0.03 per diluted share.
Fiscal 2000 Segment Results
Domestic Professional/Trade revenues of $162.6 million advanced 35% over the
prior year, benefiting from recent acquisitions of Jossey-Bass and the J.K.
Lasser tax and financial guides, as well as a strong frontlist and backlist,
including increased demand from online Internet suppliers. Excluding the
acquisitions completed during fiscal 2000, revenue growth was 10% for the year.
Direct contribution to profit advanced 24% to $37.4 million. Direct contribution
margin declined from 25.1% in the prior year to 23%, as a result of the one-time
integration costs related to the year's acquisitions. During the year, the
domestic Professional/Trade business launched Wiley Virtual CPA Exam Review, an
interactive multimedia course on the web that is based on the Company's
well-known Delaney CPA Examination Review. This subscription-based 24/7 learning
environment uses streaming video and audio lectures with self-assessment tests
and extensive graphics. Professional/Trade also recently entered into an
agreement with CNBC, a world leader in business news, to publish a series of
books that will provide insight into personal investing.
Domestic Higher Education revenues of $129.1 million increased 30% over the
prior year, primarily related to increased market share due to the acquisition
of certain higher education titles during the year, as well as a strong
frontlist. Revenue growth for the year was 11% excluding the fiscal 2000
acquisition. Direct contribution to profit increased 60% to $37.6 million, and
the direct contribution margin improved to 29.1% during the current year
compared with 23.5% in the prior year, as a result of revenue growth
attributable to the acquisition coupled with lower relative expense growth.
Domestic STM revenues of $150.4 million increased 5% over the prior year mainly
due to the subscription journals business. Direct contribution to profit
increased 7% to $63.8 million. The direct contribution margin was 42.4% in the
current year compared with 41.3% in the prior year. During the year, STM formed
an alliance with other publishers to launch and operate CrossRef to facilitate
the research process. CrossRef is an electronic linking system that allows a
reader to click on a reference in a journal published by one participant and go
directly to the referenced article, even if it is published by another
participant and located on that publisher's server.
European segment revenues of $153.9 million were up 5% for the year excluding
the adverse translation effects of a stronger U.S. dollar. Direct contribution
to profit of $47.9 million increased 12% over the prior year. The direct
contribution margin was 31.1% in the current year compared with 28.3% in the
prior year. During the year, the European segment entered into a transatlantic
alliance with the International Securities Market Association of Switzerland to
create Internet-based finance courses. It also acquired an equity interest in
InPharm-Internet Services, Ltd., the Oxford based business-to-business portal
site and online information resource for the pharmaceutical industry.
The improvement in the Other segment's results of operations was due to strong
local product revenues in Canada and Australia and the strengthening of many of
the Asian economies.
Liquidity and Capital Resources
The Company's cash and cash equivalents balance was $52.9 million at the end of
fiscal 2001, compared with $42.3 million at the end of the prior year. Cash
provided by operating activities was $131 million in fiscal 2001, a decrease of
$2.7 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. Sales in the
domestic higher education market tend to be concentrated in June through August,
and again in November through January. 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.
Although the statement of financial condition indicates a negative working
capital of $57.2 million at April 30, 2001, current liabilities include $117.1
million of deferred subscription revenues related to journals for which the cash
has been received and will be recognized into income as the journals are shipped
or made available online to the customer, or over the term of the subscription
as services are rendered. Excluding this deferred income item, working capital
at April 30, 2001 is a positive $59.9 million.
To finance its short-term seasonal working capital requirements, including the
$30 million scheduled debt repayment, 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
2002 are expected to increase approximately 45% over 2001, of which 30% relates
to facilities and leasehold improvements due to the relocation of certain
operations and the remainder representing increased investments in product
development, including electronic media products, and computer equipment
upgrades and software in support of the higher volume of business to ensure
efficient, quality-driven customer service. These investments will be funded
primarily from internal cash generation, the liquidation of cash equivalents,
and the use of short-term lines of credit.
Market Risk
The Company is exposed to market risk primarily related to interest rates,
foreign exchange and credit risk. It is the Company's policy to monitor these
exposures and to use derivative financial investments and/or insurance contracts
from time to time to reduce fluctuations in earnings and cash flows when it is
deemed appropriate to do so. The Company does not use derivative financial
investments for trading or speculative purposes.
Interest Rates
The Company had a $95 million variable rate long-term loan outstanding at April
30, 2001, which approximated fair value. The Company did not use any derivative
financial investments to manage this exposure. A hypothetical 10% adverse change
in interest rates for this variable rate debt would negatively affect net income
and cash flow by approximately $.2 million.
Foreign Exchange Rates
The Company is exposed to foreign exchange movements primarily in European,
Asian, Canadian, and Australian currencies. Consequently, the Company, from time
to time, enters into forward exchange contracts as a hedge against its overseas
subsidiaries' foreign currency asset, liability, commitment, and anticipated
transaction exposures, including intercompany purchases. At April 30, 2001, the
Company had open foreign exchange forward contracts, expiring through January
2003 relating to hedges of foreign currency exposures as follows:
Currency Purchased U.S. $ Value Average Contract Rate
- ------------------ ------------ ---------------------
Euro $ 3,735 $ .9121
UK Pound Sterling $11,844 $1.4993
A hypothetical 10% change in exchange rates would have the effect of
approximately $.9 million. There were no open foreign exchange contracts at
April 30, 2000.
Credit Risk
The Company's business is not dependant upon a single customer, however, the
book publishing business has witnessed a significant concentration in national,
regional and online bookstore chains in recent years. Although no one of such
customers accounts for more than 6% of total consolidated revenues, to mitigate
its credit risk exposure the Company obtains credit insurance where available.
In the journal-publishing business, subscriptions are 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 24% of total consolidated revenues and no one agent accounts for
more than 8% of total consolidated revenues. Insurance for these accounts is not
commercially feasible and/or available.
Effects of Inflation and Cost Increases
The Company, from time to time, does experience 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 such as substitution of paper grades.
In addition, selling prices have been selectively increased as competitive
conditions permitted. The Company anticipates that it will be able to continue
this approach in the future.
New Accounting Standards
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by SFAS No. 137 and No. 138, which specifies the
accounting and disclosure requirements for such instruments, and is effective
for the Company's fiscal year beginning on May 1, 2001. Under the new standard,
all derivatives will be recognized as assets or liabilities and measured at fair
value. Derivatives that are not determined to be effective hedges will be
adjusted to fair value with a corresponding effect on net income. 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.
"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 level of investment in new technologies
and products; (ii) subscriber renewal rates for the Company's journals; (iii)
the financial stability and liquidity of journal subscription agents; (iv) the
consolidation of book wholesalers and retail accounts; (v) the market position
and financial stability of key online retailers; (vi) the seasonal nature of the
Company's educational business and the impact of the used book market; (vii)
worldwide economic and political conditions; and (viii) 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.
Results by Quarter (Unaudited)
John Wiley & Sons, Inc. and Subsidiaries
Dollars in thousands except per share data
2001 2000
- ------------------- ------------------- -----------------------
Revenues(a)
First quarter $ 153,928 $ 139,442
Second quarter 160,561 153,344
Third quarter 163,798 161,081
Fourth quarter 135,503 152,157
- ------------------- ------------------- -----------------------
Fiscal year $ 613,790 $ 606,024
- ------------------- ------------------- -----------------------
Operating Income
First quarter $ 27,943 $ 22,569
Second quarter 28,305 24,914
Third quarter 28,696 28,486
Fourth quarter 10,480 13,035
- ------------------- ------------------- -----------------------
Fiscal year $ 95,424 $ 89,004
- ------------------- ------------------- -----------------------
Net Income
First quarter $ 16,474 $ 13,350
Second quarter 16,945 14,084
Third quarter 17,281 16,732
Fourth quarter 8,218 8,222
- ------------------- ------------------- -----------------------
Fiscal year $ 58,918 $ 52,388
- ------------------- ------------------- -----------------------
Income Per Share Diluted Basic Diluted Basic
--------- ----------- --------- -----------
First quarter $.26 $.27 $.20 $.22
Second quarter .27 .28 .22 .23
Third quarter .27 .28 .26 .27
Fourth quarter .13 .14 .13 .14
Fiscal year .93 .97 .81 .85
- ------------------- --------- ----------- --------- -----------
(a) Revenues have been restated to include shipping and handling fee income in
accordance with the new accounting standard. Previously, such amounts were
classified as offsets to cost of sales and operating and administrative
expenses.
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
---------------------- ----------------------
Divi- Market Price Divi- Market Price
--------------- --------------
dends High Low dends High Low
---------------- ------ ------- ------- ------- ------ -------
2001
First quarter $.04 $25.69 $17.56 $.04 $25.50 $17.44
Second quarter .04 23.25 19.88 .04 23.21 19.88
Third quarter .04 22.50 18.75 .04 22.00 19.00
Fourth quarter .04 21.47 18.15 .04 21.45 18.25
---------------- ------ ------- ------- ------- ------ -------
2000
First quarter $.04 $22.75 $16.88 $.03 $22.81 $17.00
Second quarter .04 18.50 15.69 .03 18.38 15.56
Third quarter .04 18.50 14.88 .03 18.38 14.88
Fourth quarter .04 18.00 13.88 .03 17.56 13.75
As of April 30, 2001, the approximate number of holders of the Company's Class A
and Class B Common Stock were 1,217 and 158, 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 $89 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.
Selected Financial Data
John Wiley & Sons, Inc. and Subsidiaries
Dollars in thousands except per share data For the years ended April 30
----------------------------------------------------------------------------
2001 2000 1999 1998 1997
- --------------------------------------------------- --------------- -------------- --------------- --------------- --------------
Revenues (a) $613,790 $606,024 $519,164 $478,075 $442,928
Operating Income 95,424 89,004 63,654 40,864 34,797
Gain on Sale of Publishing Assets -- -- -- 21,292 --
Net Income 58,918 52,388 39,709 36,588 (b) 20,340
Working Capital (57,226) (76,939) 60,870 59,257 39,783
Total Assets 588,002 569,337 528,552 506,914 457,944
Long-Term Debt 65,000 95,000 125,000 125,000 125,000
Shareholders' Equity 220,023 172,738 162,212 160,751 128,983
- --------------------------------------------------- --------------- -------------- --------------- --------------- --------------
Per Share Data
Income Per Share
Diluted .93 .81 .60 .55(b) .31
Basic .97 .85 .63 .58(b) .32
Cash Dividends
Class A Common .16 .14 .13 .11 .10
Class B Common .16 .13 .11 .10 .09
Book Value-End of Year 3.62 2.85 2.60 2.51 2.03
(a) Revenues have been restated to include shipping and handling fee
income in accordance with the new accounting standard. Previously,
such amounts were classified as offsets to cost of sales and operating
and administrative expenses.
(b) Fiscal 1998 includes unusual items amounting to $9,713 after tax,
equal to $.14 per diluted share ($.15 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, net income would have been $26,875, or $.41 per diluted
share and $.43 per basic share.
Schedule II
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 2001, 2000 AND 1999
(Dollars in Thousands)
Additions
------------------------------
Balance at Charged to Deductions Balance at
Description Beginning Cost & From From Reserves End of
of Period Expenses Acquisitions Period
- --------------------------------------------- ------------- -------------- --------------- ---------------- ------------
Year Ended April 30, 2001
Allowance for sales returns(1) $43,960 $43,118 $ - $43,960 $43,118
Allowance for doubtful accounts $ 9,414 $ 2,268 $ - $ 1,998 (2) $ 9,684
Year Ended April 30, 2000
Allowance for sales returns(1) $34,213 $43,960 $ 2,110 $36,323 $43,960
Allowance for doubtful accounts $ 7,611 $ 2,666 $ - $ 863 (2) $ 9,414
Year Ended April 30, 1999
Allowance for sales returns(1) $33,411 $34,213 $ - $33,411 $34,213
Allowance for doubtful accounts $ 8,165 $ 2,053 $ - $ 2,607(2) $ 7,611
(1) Allowance for sales returns represents anticipated returns net of
inventory and royalty costs.
(2) Accounts written off, less recoveries.
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/ Ellis E. Cousens
----------------------------------------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial & Operations Officer
By: /s/ Peter W. Clifford
----------------------------------------------------
Peter W. Clifford
Senior Vice President, Finance
Corporate Controller
& Chief Accounting Officer
Dated: June 28, 2001
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 22, 2001.
/s/ Warren J. Baker /s/ John L. Marion, Jr.
---------------------------------- -----------------------------------------
Warren J. Baker John L. Marion, Jr.
/s/ H. Allen Fernald /s/ William J. Pesce
---------------------------------- -----------------------------------------
H. Allen Fernald William J. Pesce
/s/ Larry Franklin /s/ Naomi O. Seligman
---------------------------------- -----------------------------------------
Larry Franklin Naomi O. Seligman
/s/ Henry A. McKinnell /s/ William R. Sutherland
----------------------------------- -----------------------------------------
Henry A. McKinnell William R. Sutherland
/s/ Peter Booth Wiley /s/ Bradford Wiley II
---------------------------------- ----------------------------------------
Peter Booth Wiley Bradford Wiley II
Exhibit - 22
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)
Capstone Publishing Ltd. England (3)
Academy Group Limited England (2)
Chancery Law Publishing Limited England (2)
Wiley Distribution Services Limited England (2)
Wiley Europe (S.A.R.L.) France (2)
John Wiley & Sons Australia, LTD. 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
Wiley-VCH Verlag GmbH Germany (4)
Wilhelm Ernst & Sohn, Verlag fur
Architektur und technische
Wissenschaften, GmbH Germany (5)
Wiley-VCH Berlin GmbH Germany (5)
VCH Publishers (U.K.) Limited England (5)
Wiley-VCH Verlags Basel AG Switzerland (5)
Verlag Helvetica Chemica Acka Switzerland (5)
Verlag Chemie GmbH Germany (5)
Physik-Verlag GmbH Germany (5)
WWL, Inc. Delaware
Wiley-Japan Y.K. Japan (6)
- ------------------------------------------------
(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) 80% owned subsidiary of John Wiley & Sons Limited
(4) Subsidiary of John Wiley & Sons GmbH.
(5) Subsidiary of Wiley-VCH Verlag GmbH.
(6) Subsidiary of WWL, Inc.
Exhibit 10.16
JOHN WILEY & SONS, INC.
FY 2001 QUALIFIED EXECUTIVE LONG TERM INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
MAY 1, 2000
CONTENTS
Section Subject Page
------- ------- ----
I. Definitions 2
II. Plan Objectives 4
III. Eligibility 4
IV. Performance Measurement and Objectives 4
V. Performance Evaluation 5
VI. Restricted Performance Shares Award Provisions 6
VII. Stock Option 7
VIII. Administration and Other Matters 7
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) 2001 Qualified Executive Long Term
Incentive Plan as set forth in this document.
shareholder plan The company's Long Term Incentive Plan.
plan cycle The three year period from May 1, 2000 to April 30, 2003.
Governance and Compensation Committee (the Committee) The committee of the
company's Board of Directors (Board) responsible for reviewing executive
compensation.
award period objectives The company's objectives to achieve specific financial
results in terms of income, cash flow and earnings per share, for the plan
cycle, as determined by the the Committee, and confirmed in writing.
financial results The company's actual achievement against the award period
objectives set for the plan cycle, as reflected in the company's audited
financial statements and other financial records.
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 the
Committee at the committee meeting held on June 22, 2000 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
award period objectives are achieved and the participant remains an employee of
the company through April 30, 2005, 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 share issued pursuant to this plan and the shareholder
plan that is subject to forfeiture. In the shareholder plan, such stock is
referred to as "Performance-Based 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 the Committee acts at the beginning of the plan cycle (June 22, 2000). In
the event the stock is not traded on June 22, 2000 or the date the the Committee
acts, whichever is later, the closing sales price shall be the price of the
stock on the next day after June 22, 2000 or the date the Committee 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.
a stock option issued under this plan and the shareholder plan is a right
granted to a participant, as more fully described under Section VII, 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 award period objectives, 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 award period
objectives, a participant may earn 25% of the target incentive amount for
which he/she is eligible.
target Achievement of the financial goal for a measure. Each individual
financial goal is set at a level which is both challenging and achievable.
outstanding Superior achievement of the award period objectives. If
outstanding performance is achieved against all award period objectives, the
maximum amount a participant may earn is 200% of the target incentive amount
for which he/she is eligible.
payout factor The percentage of award period objectives deemed achieved applied
to the target incentive amount, exclusive of the stock option portion, if any,
to determine the payout amount.
cash flow Net income, excluding unusual items not related to the period being
measured, plus/minus any non-cash items included in net income and changes in
operating assets and liabilities, minus normal investments in product
development assets and property and equipment for the final year of the plan
cycle.
earnings per share Earnings per share, excluding unusual items not related to
the period being measured 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 items, for the
final year of the plan cycle.
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.
GPC operating income divisional operating income as adjusted for the
intercompany profit earned by other divisions.
GPC cash flow divisional cash flow as adjusted for the intercompany profit
earned by other divisions.
II. PLAN OBJECTIVES
The plan is intended to provide the officers and other key employees of the
Company and of its subsidiaries, affiliates and certain Joint Venture Companies,
upon whose judgement, initiative and efforts the Company depends for its growth
and for the profitable conduct of its business, with additional incentive to
promote the success of the Company and to that end to encourage such employees
to acquire or increase their proprietary interest in the Company.
III. ELIGIBILITY
The participant is selected by the Committee 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. The
President and CEO of the company is a participant.
IV. PERFORMANCE MEASUREMENT AND OBJECTIVES
A. Award period objectives are determined by the Committee at its sole
discretion. Award period objectives are set at a level that is
challenging and achievable.
B. Award period objectives established for each participant may include one
or more organizational level's award period objectives (e.g., company and
division), and one or more award period objectives for a particular
organizational unit (e.g., divisional cash flow, divisional operating
income). The weighting of and between the organizational levels' award
period objectives may vary, depending upon the participant's position.
Weighting of the participant's award period objectives is determined by
the committee in its sole discretion.
V. PERFORMANCE EVALUATION
A. Financial Results
1. The attainment of any award period objectives established by the
Committee shall be determined by the Committee at the end of the
plan cycle.
2. In determining the attainment of award period objectives, the
impact of any acquistion or divestiture which closes in the final
year of a plan cycle and which is valued at greater than
$5,000,000, will be excluded in determining the financial results
for the company or a division.
3. In determining the attainment of award period objectives, all
identifiable items related to the relocation of the Company's
headquarters and the purchase of a new building in the UK will be
added back to actual published results. These adjusted results will
be compared to the award period objectives to determine the payout,
if any. Expenses that will be added back are listed in Appendix A
of this Plan Document.
B. Award Determination
1. At least threshold performance, in aggregate, of a participant's
organizational level's financial goal is necessary for the
participant to receive a payout for that financial goal. The
achievement of threshold for any single measure will result in a
payout to the participant.
2. If the participant has more than one organizational level's award
period objectives, the achievement of a threshold performance level
of any of the organizational level's award period objectives will
result in a payout for that organizational level award period
objective.
3. The following details the effect of the financial results
performance levels on a participant's payout amount. The actual
payout factors will be determined by the Committee, in accordance
with the following:
a. For below threshold performance, the payout factor is zero.
b. For threshold performance, the payout factor is 25%.
c. For between threshold and target performance, the payout
factor is determined as follows:
(T% - Th% / 1 - ThAch%) x Act% - ThAch% x 100) / 100
+ Th% where,
T% = target payout percentage (100%)
Th% = threshold payout percentage (25%)
ThAch% = threshold achievment level
Act% = actual achievement level
d. For target performance, the payout factor is 100%.
e. For between target and outstanding performance, the payout
factor is determined as follows:
1 + (O% - T%) / (OAch% - 1) x (Act% - 1)
where,
O% = outstanding payout percentage (200%)
T% = target payout percentage (100%)
OAch% = Outstanding achievment level
Act% = actual achievement level
f. For outstanding performance, the payout factor is 200%.
5. Notwithstanding anything to the contrary, the maximum payout
amount, if any, a participant may receive is 200% of the target
incentive.
VI. RESTRICTED PERFORMANCE SHARES AWARD PROVISIONS
A. Restricted performance shares, if any, shall be awarded at the
beginning of the plan cycle, after the June 22, 2000 the Committee
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 Committee. The
value of each share will be determined based on the stock closing sale
price, as reported by the NYSE, on the date the the Committee acts at
the beginning of the plan cycle (June 22, 2000). In the event the
stock is not traded on June 22, 2000 or the date the Committee acts,
whichever is later, the closing sales price shall be the price of the
stock on the next day after June 22, 2000 or the date the the
Committee acts on which the stock trades, whichever is later. The
restricted performance shares awarded at the beginning of the plan
cycle are subject to adjustment at the end of the plan cycle as set
forth in Sections VI (B) below. Restricted performance shares, if any,
shall be awarded pursuant to the shareholder plan, as approved by the
the Committee. In addition to the terms and conditions set forth in
the shareholder plan, 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, the lapse of
restrictions on one-half of the restricted performance shares awarded
will occur on the first anniversary (April 30, 2004) 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, 2005) 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.
B. The final amount of restricted performance shares will be determined
as follows: The restricted performance shares established by the the
Committee at the beginning of the plan cycle multiplied 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.
VII. 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
terms and conditions of the award of the stock option are contained in the
shareholder plan and in the stock option award. Minimum 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.
VIII. ADMINISTRATION AND OTHER MATTERS
A. This plan will be administered by the Committee, which 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 the Committee 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
Committee.
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.
Exhibit 10.17
JOHN WILEY & SONS, INC.
FY 2001 QUALIFED EXECUTIVE ANNUAL INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
MAY 1, 2000
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 5
VII. Status Changes 5
VIII. Administration and Other Matters 5
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 Executive Annual Incentive Plan.
plan year The twelve month period from May 1, 2000 to April 30, 2001.
Governance and Compensation Committee (the Committee) The committee of the
company's Board of Directors (Board) responsible for reviewing executive
compensation.
Performance targets A participant's objective to achieve specific financial
results for FY 2001, as approved and communicated in writing, as described in
Sections IV and V below.
financial results Total company or division achievement against performance
targets set for FY 2001.
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 base salary as of July 1, 2000, or the date of
hire, or promotion into the plan, if later, adjusted for any increases or
decreases during FY 2001, 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 performance target, 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 performance target. The
incentive for performance target 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. If threshold performance is achieved against all performance target,
a participant may earn 25% of the target incentive amount for which he/she
is eligible.
target Achievement in aggregate of target performance target. Each
individual financial goal is set at a level which is both challenging and
achievable.
outstanding Superior achievement of performance target, both in quality
and scope, with limited time and resources. If outstanding performance is
achieved against all performance target and, the maximum amount a
participant may earn is 200% of the target incentive amount for which
he/she is eligible.
payout factor Percentage of performance target deemed achieved, applied to the
target incenive amount, used to determine the payout for which a participant is
eligible.
business criteria measures selected from the Plan for the company or division.
For the FY2001 Plan, the business criteria are:
revenue Gross annual revenue, net of provision for returns.
cash flow Net income, excluding unusual items not related to the period
being measured, plus/minus any non-cash items included in net income
and changes in operating assets and liabilities, minus normal
investments in product development assets and property and equipment.
earnings per share Earnings per share, excluding unusual items not
related to the period being measured.
divisional operating income Operating income before allocations for
corporate support services and taxes, excluding the effects of any
unusual items.
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. Controllable assets
and liabilities are inventory, composition, author advances, other
deferred publication costs, and deferred subscription revenues
II. PLAN OBJECTIVES
The plan is intended to provide the officers and other key employees of the
Company and of its subsidiaries, affiliates and certain Joint Venture Companies,
upon whose judgement, initiative and efforts the Company depends for its growth
and effort the profitable conduct of its business, with additional incentive to
promote the success of the Company
III. ELIGIBILITY
The Committee in its discretion, may grant target awards to key corporate
management executives for each fiscal year of the Company as it shall determine.
For purposes of the Plan, key corporate management executives shall be defined
as those persons designated as such from time to time by the Committee.
IV. PERFORMANCE TARGETS AND MEASUREMENT
A. Performance targets are determined by the Committee in writing, not later
than 90 days after the commencement of the fiscal year.
B. Performance targets are set for the company as a whole and for each
division, and are comprised of one or more business criteria for each
unit. The participant will be given specific performance targets, based
on an appropriate mix of company and/or division objectives.
C. Performance target include defining levels of performance (threshold,
target and outstanding) for each business critieria and the measures of
each.
V. PERFORMANCE EVALUATION
A. Actual financial results achieved by the company and by each division
will be determined at the end of the plan year, and will compared with
previously set performance target by the Committee to determine a payout
factor for each participant.
B. Award Determination
1. A performance target, established for each participant, may include
one or more organizational unit's performance targets (e.g. company
and division), and one or more business criteria for an
organizational unit. At least threshold performance, in aggregate,
for each organizational unit is necessary for the participant to
receive a payout for that organizational unit. The achievement of
threshold for any single buisiness criteria will result in a payout
to the participant
2. Payout eligibility will be determined by calculating the amount for
achievement of performance target, as follows:
Base Salary x Target Incentive Percent x Weighting of Financial
Goal x Payout Factor = Financial Goals Payout Eligibility
3. The following details the effect of the financial results
performance levels on a participant's payout amount. The actual
payout factors will be determined by the Committee, in accordance
with the following:
a. For below threshold performance, the payout factor is zero.
b. For threshold performance, the payout factor is 25%.
c. For between threshold and target performance, the payout
factor is determined as follows:
(T% - Th% / 1 - ThAch%) x Act% - ThAch% x 100) / 100
+ Th% where,
T% = target payout percentage (100%)
Th% = threshold payout percentage (25%)
ThAch% = threshold achievment level
Act% = actual achievement level
d. For target performance, the payout factor is 100%.
e. For between target and outstanding performance, the payout
factor is determined as follows:
1 + (O% - T%) / (OAch% - 1) x (Act% - 1)
where,
O% = outstanding payout percentage (200%)
T% = target payout percentage (100%)
OAch% = Outstanding achievment level
Act% = actual achievement level
f. For outstanding performance, the payout factor is 200%.
4. Notwithstanding anything to the contrary, the maximum payout
amount, if any, a participant may receive is 200% of the target
incentive.
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 Committee
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 GCC, 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 performance target
established for the position in each division.
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
performance target 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 GCC, in
its sole discretion.
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 GCC who will have authority to
interpret and administer this plan, including, without limitation, all
questions regarding eligibility and status of the participant.
C. This plan may be withdrawn, amended or modified at any time, for any
reason, in writing, by the company.
D. The determination of an award and payout under this plan, if any, is
subject to the approval of the GCC, 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.
Exhibit 10.18
JOHN WILEY & SONS, INC.
FY 2001 EXECUTIVE ANNUAL STRATEGIC MILESTONES INCENTIVE PLAN
ADMINISTRATIVE DOCUMENT
CONFIDENTIAL
MAY 1, 2000
CONTENTS
Section Subject Page
------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Objectives and Measurement 3
V. Performance Evaluation 3
VI. Payouts 4
VII. Status Changes 4
VIII. Administration and Other Matters 5
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 Fiscal Year 2001 Executive Annual Strategic Milestones
Incentive Plan described in this document and any written amendments to this
document.
plan year The twelve month period from May 1, 2000 to April 30, 2001.
Governance and Compensation Committee (the Committee) The committee of the
company's Board of Directors (Board) responsible for reviewing executive
compensation.
strategic milestone A participant's objective to achieve specific results for FY
2000, 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 base salary as of July 1,2000, or the date of
hire, or promotion into the plan, if later, adjusted for any increases or
decreases during FY 2001, 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 strategic
milestones. If threshold performance is achieved against all strategic
milestones, a participant may earn 25% of the target incentive amount for
which he/she is eligible.
target Achievement in aggregate of target strategic milestones. Each
individual strategic milestone is set at a level which is both challenging
and achievable.
outstanding Superior achievement of strategic milestones, both in quality
and scope, with limited time and resources. If outstanding performance is
achieved against strategic milestones, the maximum amount a participant
may earn is 175% of the target incentive amount.
payout factor Percentage of strategic milestones deemed achieved, applied to the
target incenive amount, used to determine the payout for which a participant is
eligible.
II. PLAN OBJECTIVES
The purpose of the FY 2001 Executive Annual Strategic Milestones Incentive Plan
is to enable the company to reinforce and sustain a culture devoted to excellent
performance, 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 Committee. The President and CEO of the company is a
participant.
IV. PERFORMANCE OBJECTIVES AND MEASUREMENT
A. 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.
B. The strategic milestones for the President and CEO are reviewed and
approved by the Committee.
C. 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.
D. 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. 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.
B. 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 Committee and the
Board. The Committee 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 Committee's evaluation of his/her achievement
compared with the previously set objectives.
C. Award Determination
STRATEGIC MILESTONES PAYOUT AMOUNT
Base Salary X Target Incentive Percent
X Weighting of Strategic Milestones X Payout Factor
= Strategic Milestones Payout Eligibility
1. Notwithstanding anything to the contrary, the maximum payout, if
any, a participant may receive is 175% of the target incentive
amount.
2. The foregoing Strategic Milestones 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
Committee and the Board.
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 Committee 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 Committee, 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 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 Committee.
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.
C. 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 Committee required under this
plan or the by-laws of the company.
C. This plan may be withdrawn, amended or modified at any time, for any
reason, in writing, by the company.
D. The determination of an award and payout under this plan, if any, is
subject to the approval of the President and CEO, the Committee, 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.
Exhibit 10.24
January 16, 1997
Mr. William Arlington
155 Rutherford Road
Mahwah, N.J. 07430
Dear Bill:
This letter, when signed by both of us, will confirm our understanding as
follows regarding certain matters relating to your employment.
Your employment as a Senior Vice President of the Company is "at will", and may
be terminated by the Company or by you at any time, for any reason, subject
however to the provisions of this agreement.
If your employment is terminated by the Company other than for cause as defined
below, you shall be entitled to severance as follows:
- - Continuation of base salary then in effect for 15 months ("the
Severance Period") from the date of termination. If during the
Severance Period you obtain regular employment, you agree to promptly
notify the Company, and the payments due hereunder shall be reduced
dollar for dollar by the amount of cash compensation in excess of
$90,000 from such employment during the Severance Period. If as a
result of any such offset, the Company has overpaid you, you agree to
promptly reimburse the Company.
- - Coverage during the Severance Period (at the levels in effect for
comparable employees from time to time,) under the following employee
benefit plans or provisions for comparable benefits outside such plans,
but only to the extent comparable coverage is not provided by any new
employer: (1) Group Health Insurance Program; (2) Group Life and
Accidental Death and Dismemberment Insurance, taking into account any
waiver of coverage under the Supplemental Executive Retirement Plan
("SERP") in which you participate.
- - Outplacement services, in accordance with the policy of the Company
for senior executives at the time of termination.
If within 18 months following a "change of control" as defined in the SERP, you
are terminated by the Company other than for cause as defined below, or elect to
terminate your contract for "good reason" as defined in the SERP, in either case
you shall, in addition to the amounts specified above, be entitled to your
"target incentive amount" under the Executive Annual Incentive Plan ("EAIP") for
a fiscal year ending during the Severance Period, (and if not otherwise
determined prior to termination, for any prior fiscal year) and the same amount
(pro-rated to the end of the Severance Period), for the EAIP for a fiscal year
beginning during the Severance Period, or the equivalent under any comparable
bonus or variable compensation plan which may hereafter be adopted by the
Company in lieu of the EAIP.
You agree that the payments and benefits set forth above shall be full and
adequate compensation for all damages you may suffer as result of termination of
your employment.
If, without cause or your consent, or other than on account of disability as
defined in the Company's programs, your cash compensation is reduced from the
current levels (other than as a result of targets not being met in any EAIP or
equivalent program) and within 30 days thereafter you elect to terminate your
employment by written notice, or if you elect to terminate your employment for
"good reason" within 18 months following a "change of control", in either case
such termination shall be treated as a termination by the Company without cause
for purposes of this agreement.
Notwithstanding the foregoing, any rights or benefits you may have under the
employment and benefit plans and programs of the Company (other than for
severance, which shall be determined hereunder), including without limitation
the SERP shall be determined in accordance with such plans and programs, and
nothing in this agreement shall modify or reduce any rights you may have
resulting from a "change of control" as defined in the SERP.
For purposes of this agreement, "cause" shall be limited to:
- - a substantial failure or refusal to devote your full business time, and
your knowledge and skills, to the best of your ability, to the
performance of your duties, after notice by the Company, or serious
willful misconduct relating to your duties and obligations as an
employee.
- - Conviction of a crime, perpetuation of a fraud, habitual intoxication
or illegal use of controlled or habit forming substances, or knowingly
making a material false statement to the Company's board or management.
In consideration of our entering into this agreement, you agree that for period
of five months after termination of your employment for any reason other than
termination by the Company without cause, or termination by you for "good
reason" following a "change of control" as defined in the SERP, you will not
directly or indirectly be employed by, render services to, or participate in the
management, operation or control (as a consultant or otherwise), of a business
of the same nature as that carried on by the Company or any of its subsidiaries.
You further agree that for one year after termination of your employment for any
reason (including termination by the company without cause) except for a
termination by the company, or by you for "good reason within 18 months
following a change of control", you will not directly or indirectly solicit for
employment or hire any employee of the company, without our prior written
consent.
Except as otherwise provided above, this is our entire agreement concerning your
employment, and no modification shall be binding unless it is in writing and
signed by the party against whom enforcement is sought. This agreement shall be
interpreted and construed in accordance with the laws of the State of New York,
without giving effect to its conflict of laws provisions, and shall be binding
upon the Corporation and its successors and assigns.
Please sign and return the enclosed copy of this letter to confirm our
agreement.
Sincerely,
JOHN WILEY & SONS, INC.
By: ______________________
Charles R. Ellis
President & Chief Executive
Officer
Agreed:
________________________