SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT 1934 For the quarterly period ended January 31, 2001 Commission File No. 1-11507 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from to JOHN WILEY & SONS, INC. (Exact name of Registrant as specified in its charter) NEW YORK 13-5593032 ------------------------------ ----------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 605 THIRD AVENUE, NEW YORK, NY 10158-0012 ------------------------------ ---------- (Address of principal executive offices) Zip Code Registrant's telephone number, including area code (212) 850-6000 -------------- NOT APPLICABLE -------------- Former name, former address, and former fiscal year, if changed since last report Indicate by check mark, whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] The number of shares outstanding of each of the Registrant's classes of common stock as of January 31, 2001 were: Class A, par value $1.00 - 49,299,643 Class B, par value $1.00 - 11,691,164 This is the first page of a 16 page document
JOHN WILEY & SONS, INC. INDEX PART I - FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements. Condensed Consolidated Statements of Financial Position - Unaudited as of January 31, 2001 and 2000, and April 30, 2000..............3 Condensed Consolidated Statements of Income - Unaudited for the Three and Nine Months ended January 31, 2001 and 2000....4 Condensed Consolidated Statements of Cash Flows - Unaudited for the Nine Months ended January 31, 2001 and 2000..............5 Notes to Unaudited Condensed Consolidated Financial Statements....6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................10-14 Item 3. Quantitative and Qualitative Disclosures About Market Risk.........14 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K...................................15 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995.........................15 SIGNATURES ...................................................................16 EXHIBITS 27 Financial Data Schedule
<TABLE> <CAPTION> JOHN WILEY & SONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In thousands) (UNAUDITED) January 31, April 30, ----------------------------------------- Assets 2001 2000 2000 ------------------- ------------------ ---------------- <S> <C> <C> <C> Current Assets Cash and cash equivalents $ 80,151 82,070 $ 42,299 Accounts receivable 94,145 87,299 68,080 Inventories 49,691 39,884 46,109 Deferred income tax benefits 14,642 3,857 10,999 Prepaid expenses 9,023 6,108 9,624 ------------------ ------------------ ------------------ Total Current Assets 247,652 219,218 177,111 Product Development Assets 41,219 40,310 39,809 Property and Equipment 44,329 35,452 38,226 Intangible Assets 288,249 305,965 297,085 Deferred Income Tax Benefits 3,388 10,144 3,395 Other Assets 14,040 13,374 13,711 -------------------- ------------------ ------------------ Total Assets $ 638,877 624,463 $ 569,337 ==================== ================== ===================== Liabilities & Shareholders' Equity Current Liabilities Notes payable and current portion of long-term debt $ 30,344 30,000 $ 30,000 Accounts and royalties payable 75,634 72,910 45,816 Deferred subscription revenues 134,618 139,343 112,337 Accrued income taxes 13,796 9,921 6,102 Other accrued liabilities 50,838 54,766 59,795 -------------------- ------------------ ------------------ Total Current Liabilities 305,230 306,940 254,050 Long-Term Debt 65,000 95,000 95,000 Other Long-Term Liabilities 34,334 32,372 32,109 Deferred Income Taxes 17,264 16,476 15,440 Shareholders' Equity 217,049 173,675 172,738 -------------------- ------------------ ------------------ Total Liabilities & Shareholders' Equity $ 638,877 624,463 $ 569,337 ==================== ================== ===================== </TABLE> The accompanying Notes are an integral part of the condensed consolidated financial statements.
JOHN WILEY & SONS, INC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED (In thousands except per share information) <TABLE> <CAPTION> Three Months Nine Months Ended January 31, Ended January 31, ---------------------------------------- --------------------------------- 2001 2000 2001 2000 --------------------- ---------------- ---------------- --------------- <S> <C> <C> <C> <C> Revenues $ 160,960 158,394 $ 468,987 445,712 Costs and Expenses Cost of sales 52,442 52,861 149,376 149,675 Operating and administrative expenses 75,143 72,676 221,558 207,995 Amortization of intangibles 4,679 4,371 13,109 12,073 --------------------- ---------------- ---------------- --------------- Total Costs and Expenses 132,264 129,908 384,043 369,743 --------------------- ---------------- ---------------- --------------- Operating Income 28,696 28,486 84,944 75,969 Interest Income and Other 538 478 1,420 1,035 Interest Expense (2,020) (2,192) (6,522) (6,338) --------------------- ---------------- ---------------- --------------- Interest Income (Expense) - Net (1,482) (1,714) (5,102) (5,303) --------------------- ---------------- ---------------- --------------- Income Before Taxes 27,214 26,772 79,842 70,666 Provision For Income Taxes 9,933 10,040 29,142 26,500 --------------------- ---------------- -------------- --------------- Net Income $ 17,281 16,732 $ 50,700 44,166 ===================== ================ ================ =============== Income Per Share Diluted $ 0.27 0.26 $ 0.80 0.68 Basic $ 0.28 0.27 $ 0.84 0.72 Cash Dividends Per Share Class A Common $ 0.04 0.04 $ 0.12 0.11 Class B Common $ 0.04 0.03 $ 0.12 0.10 Average Shares Diluted 63,414 64,242 63,378 64,951 Basic 60,644 61,201 60,484 61,745 </TABLE> The accompanying Notes are an integral part of the condensed consolidated financial statements.
JOHN WILEY & SONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (In thousands) <TABLE> <CAPTION> For The Nine Months Ended January 31, ------------------------------------------ 2001 2000 -------------------- ------------------- <S> <C> <C> Operating Activities Net income $ 50,700 44,166 Noncash items Amortization of intangibles 13,109 12,073 Amortization of composition costs 16,911 17,515 Depreciation of property and equipment 10,019 8,377 Other noncash items 20,805 39,312 Net change in operating assets and liabilities 12,079 22,790 -------------------- ------------------- Cash Provided by for Operating Activities 123,623 144,233 -------------------- ------------------- Investing Activities Additions to product development assets (25,733) (23,592) Additions to property and equipment (16,648) (8,965) Proceeds from sale of publishing assets 2,500 - Acquisition of publishing assets (7,052) (145,092) -------------------- ------------------- Cash Used for Investing Activities (46,933) (177,649) -------------------- ------------------- Financing Activities Repayment of long-term debt (30,000) - Net borrowings of short-term debt 351 - Cash dividends (7,294) (6,477) Purchase of treasury shares (2,694) (27,093) Proceeds from exercise of stock options 1,490 1,147 -------------------- ------------------- Cash Used for Financing Activities (38,147) (32,423) -------------------- ------------------- Effect of Exchange Rate Changes on Cash (691) (1,061) -------------------- ------------------- Cash and Cash Equivalents Increase for Period 37,852 (66,900) Balance at Beginning of Period 42,299 148,970 -------------------- ------------------- Balance at End of Period $ 80,151 82,070 ==================== =================== Cash Paid During the Period for Interest $ 7,169 6,615 Income taxes $ 15,369 12,998 </TABLE> The accompanying Notes are an integral part of the condensed consolidated financial statements.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company's consolidated financial position as of January 31, 2001 and 2000, and April 30, 2000, and results of operations and cash flows for the periods ended January 31, 2001 and 2000. The results for the three and nine months ended January 31, 2001 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the most recent audited financial statements contained in the Company's Form 10-K for the fiscal year ended April 30, 2000. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. A reconciliation of the shares used in the computation of income per share follows: <TABLE> <CAPTION> Three Months Nine Months Ended January 31, Ended January 31, ---------------------------------- --------------------------------- 2001 2000 2001 2000 --------------- --------------- -------------- --------------- (thousands) <S> <C> <C> <C> <C> Weighted average shares outstanding 60,983 61,726 60,821 62,268 Less: Unearned deferred compensation shares (339) (525) (337) (523) --------------- --------------- -------------- --------------- Shares used for basic income per share 60,644 61,201 60,484 61,745 Dilutive effect of stock options and other stock awards 2,770 3,041 2,894 3,206 --------------- --------------- -------------- --------------- Shares used for diluted income per share 63,414 64,242 63,378 64,951 --------------- --------------- -------------- --------------- </TABLE> 3. Inventories were as follows: <TABLE> <CAPTION> January 31, April 30, -------------------------------- 2001 2000 2000 -------------- -------------- ------------- (thousands) <S> <C> <C> <C> Finished goods $45,839 33,107 $40,370 Work-in-process 2,492 4,055 3,537 Paper, cloth and other 4,999 4,836 5,241 -------------- -------------- ------------- 53,330 41,998 49,148 LIFO reserve (3,639) (2,114) (3,039) -------------- -------------- ------------- Total inventories $49,691 39,884 $46,109 -------------- -------------- ------------- </TABLE>
JOHN WILEY & SONS, INC., AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4. Comprehensive income was as follows: <TABLE> <CAPTION> Three Months Nine Months Ended January 31, Ended January 31, --------------------------------- -------------------------------- 2001 2000 2001 2000 -------------- ------------- ------------- -------------- (thousands) <S> <C> <C> <C> <C> Net Income $17,281 16,732 $50,700 44,166 Other Comprehensive Income (Loss) - Foreign Currency Translation Adjustments 1,711 (841) 825 (854) -------------- ------------- ------------- -------------- Comprehensive Income $18,992 15,891 $51,525 43,312 -------------- ------------- ------------- -------------- </TABLE> 5. In August, 2000, the Company entered into an agreement to lease approximately 400,000 square feet of office space in Hoboken, New Jersey. The term of the lease is 15 years and will commence upon completion of construction, as defined in the agreement, which is estimated to occur during fiscal 2003. The future minimum payments under the lease aggregate to approximately $194 million over the term. Annual rent payments during the first five years will amount to approximately $12 million per year. 6. 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:
JOHN WILEY & SONS, INC., AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Segment information was as follows: <TABLE> <CAPTION> Three Months Ended January 31, ------------------------------------------------------------------------------------ 2001 2000 ---------------------------------------- --------------------------------------- (thousands) Inter- Inter- External segment External segment Revenues Customers Sales Total Customers Sales Total -------------- ------------ ------------ ------------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Domestic Segments: Scientific, Technical, and Medical $33,925 2,311 36,236 $34,453 164 34,617 Professional/Trade 39,441 3,707 43,148 35,303 6,334 41,637 Higher Education 32,789 5,384 38,173 32,857 5,371 38,228 European Segment 34,534 3,900 38,434 35,251 3,520 38,771 Other Segments 20,271 242 20,513 20,530 182 20,712 Eliminations - (15,544) (15,544) - (15,571) (15,571) -------------- ------------ ------------ ------------- ------------ ------------ Total Revenues $160,960 - 160,960 $158,394 - 158,394 -------------- ------------ ------------ ------------- ------------ ------------ Direct Contribution to Profit Domestic Segments: Scientific, Technical, and Medical $15,225 $13,779 Professional/Trade 10,181 8,855 Higher Education 14,104 13,545 European Segment 10,923 12,178 Other Segments 6,149 6,203 ------------ ------------ Total Direct Contribution to Profit 56,582 54,560 Shared Services and Admin. Costs (27,886) (26,074) ------------ ------------ Operating Income 28,696 28,486 Interest Expense - Net (1,482) (1,714) ------------ ------------ Income Before Taxes $27,214 $26,772 ------------ ------------ </TABLE> Certain prior year amounts have been reclassified to conform to the current year's presentation.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS <TABLE> <CAPTION> Nine Months Ended January 31, -------------------------------------------------------------------------------------- 2001 2000 ----------------------------------------- ---------------------------------------- (thousands) Inter- Inter- External segment External segment Revenues Customers Sales Total Customers Sales Total -------------- ------------ ------------- -------------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Domestic Segments: Scientific, Technical, and Medical $104,901 5,775 110,676 $102,415 3,149 105,564 Professional/Trade 110,654 11,630 122,284 98,027 12,951 110,978 Higher Education 97,030 18,118 115,148 91,474 16,801 108,275 European Segment 105,021 9,108 114,129 104,781 7,915 112,696 Other Segments 51,381 897 52,278 49,015 460 49,475 Eliminations - (45,528) (45,528) - (41,276) (41,276) -------------- ------------ ------------- -------------- ------------ ------------ Total Revenues $468,987 - 468,987 $445,712 - 445,712 -------------- ------------ ------------- -------------- ------------ ------------ Direct Contribution to Profit Domestic Segments: Scientific, Technical, and Medical $49,735 $43,940 Professional/Trade 24,996 22,154 Higher Education 40,854 37,279 European Segment 35,403 32,922 Other Segments 12,854 11,759 ------------- ------------ Total Direct Contribution to Profit 163,842 148,054 Shared Services and Admin. Costs (78,898) (72,085) ------------- ------------ Operating Income 84,944 75,969 Interest Expense - Net (5,102) (5,303) ------------- ------------ Income Before Taxes $79,842 $70,666 ------------- ------------ </TABLE> Certain prior year amounts have been reclassified to conform to the current year's presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Operating activities provided $123.6 million of cash, or $20.6 million less than the prior year's comparable period. The decrease was primarily due to higher payments of accounts payable and accrued liabilities, higher inventory levels attributable to tighter inventory management by key accounts, and the delayed receipt of certain journal subscriptions which were received in February 2001. Investing activities used $46.9 million during the current year-to-date, or $130.7 million less than the comparable prior year's period. Prior year investing activities included the acquisition of Jossey-Bass and certain higher education titles amounting to $138 million. The increase in additions to property and equipment relates to the planned relocation of the Company's headquarters to Hoboken, New Jersey. Current year financing activities primarily reflect the purchase of treasury shares, dividend payments and the $30 million scheduled repayment of long-term debt. Although the statement of financial condition indicates a negative working capital of $57.6 million, current liabilities include $134.6 million of deferred income related to journal subscriptions for which the cash has been received and which will be recognized in income as the journals are delivered to customers. In addition, the Company believes its cash balances together with existing credit facilities are sufficient to meet its obligations. RESULTS OF OPERATIONS THIRD QUARTER ENDED JANUARY 31, 2001 Revenues for the third quarter were adversely affected by a stronger U.S. dollar and advanced 2% to $161 million compared with $158.4 million in the prior year period. Excluding foreign currency translation effects, revenues increased 4% for the quarter over the prior year. Operating income for the current quarter increased 1% to $28.7 million, compared with $28.5 million in the prior year. Net income advanced 3% to $17.3 million, and income per diluted share increased 4% to $.27 compared with $.26 in the prior year. Third quarter results were tempered somewhat by industry-wide sluggish sales, particularly in the Higher Education and Professional/Trade segments. Scientific, Technical and Medical (STM) achieved solid revenue gains for the quarter. Cost of sales as a percentage of revenues decreased to 32.6% compared with 33.4% in the prior year. Operating expenses as a percentage of revenues were 46.7% in the current quarter, compared with 45.9% in the prior year's third quarter. The increase was primarily due to higher technology related expenses. Operating expenses increased 3% over the prior year, reflecting favorable foreign currency translation effects. The operating margin was approximately 18% in the current quarter, on par with the prior year's third quarter. The effective tax rate was 36.5% in the current quarter, compared with 37.5% in the prior year. The favorability is due to higher foreign sourced income which is taxed at lower rates.
SEGMENT RESULTS Domestic STM revenues of $36.2 million increased 5% over the prior year, with journals, books and online services contributing to the performance. The direct contribution to profit increased 10% to $15.2 million. The direct contribution margin improved to 42.0% in the current quarter compared with 39.8% in the prior year. Journal renewal rates were stronger in calendar year 2000 compared with the prior year. In addition to the revenue growth, improved gross margins on books and journals, primarily reflecting lower composition costs, contributed to the profit increase. Wiley InterScience continues to evolve as a successful online global enterprise. Several enhanced access licenses were signed during the quarter, including multi-year agreements with the NorthEast Research Library Consortium, the Danish Consortium, and Kyoto University. Usage of Wiley InterScience continued to increase during the quarter, as reflected in the 9% growth in the number of registered users and a 12% increase in the average daily user sessions compared with the previous quarter. A number of Wiley InterScience system enhancements were rolled out during the quarter. ArticleSelect provides individual article access to enhanced access license customers. BoldIdeas, an online collection of 40 business and environmental management periodicals, was launched in January. This new initiative is an excellent example of the Company's ability to leverage Wiley InterScience beyond the STM market. In January, the Company published some highly regarded journals as a result of new agreements with scholarly and professional societies, including The Annals of Neurology, published with the American Neurological Society, and Arthritis and Rheumatism and Arthritis Care and Research, published with the American College of Rheumatology. Also, an agreement was reached with the Movement Disorder Society to publish its official journal. Early in the fourth quarter, 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 approximately 150 countries. The Company and IEEE will publish a co-branded series of books and market, sell and distribute IEEE Press' extensive backlist. Domestic Professional/Trade segment revenues of $43.1 million for the third quarter advanced 4% over the comparable prior year period, reflecting the effect of sales 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. The direct contribution to profit advanced 15% to $10.2 million. The direct contribution margin improved from 21.3% in the prior year to 23.6%. The Professional/Trade business continues to take advantage of the dramatic growth of e-commerce. Online selling plays to Wiley's strength as a niche 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. As previously mentioned, BoldIdeas, an online collection of 40 businesses and environmental management periodicals was launched during the quarter on the Wiley InterScience platform.
During the third quarter, 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, 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 quarter, the Company published the first title in our partnership with CNBC, CNBC 24/7 Trading by Barbara Rockefeller. CNBC promoted the title on-air and on CNBC.com. Domestic Higher Education segment revenues of $38.2 million were essentially flat for the quarter primarily due to accelerated ordering by college bookstores earlier in the year. The direct contribution to profit increased 4% to $14.1 million. The direct contribution margin increased to 36.9% compared with 35.4% in the prior year. 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 designed to facilitate teaching and learning. The Higher Education segment business has Web sites serving the needs of professors and students. In the distance learning area, The Higher Education segment is working with Caliber Learning Network to provide online courses for the higher education and corporate lifelong learning markets. Alliances have been formed to provide many of our top-selling textbooks in the eBook format to link course content with interactive tutorial software and simulators. During the quarter, the Company published several e-books for the Higher Education market, including the Interactive Learning Editions of Boyce & DiPrima: Elementary Differential Equations, and Callister: Fundamentals of Materials Science and Engineering. Based on customer feedback, the Higher Education Web site was relaunched with greater e-commerce capabilities. The Company is leveraging the Web in its sales and marketing efforts to reach students and faculty at universities worldwide. Two notable examples include an interactive electronic brochure that was created to drive sales of a leading accounting textbook and a major e-mail campaign promoting upper-level titles to faculty. European segment revenues of $38.4 million for the quarter were adversely affected by the stronger U.S. dollar. Excluding foreign currency translation effects, European revenues advanced 5% over the prior year's third quarter. Growth was driven by a strong publishing program, and growth in online accounts. The direct contribution to profit of $10.9 million decreased 10% compared with the prior year, reflecting the combined effect of product mix related to publication schedules, increased investments in new journals and increased page volume. The direct contribution margin decreased to 28.4% in the current period compared with 31.4% in the prior year. Excluding adverse foreign currency translation effects, the other segment revenues advanced 8% for the quarter led by strong market share gains in Asia, partially offset by industry-wide sluggish sales at a major Canadian account.
RESULTS OF OPERATIONS NINE MONTHS ENDED JANUARY 31, 2001 Revenues for the first nine months were adversely affected by a stronger U.S. dollar and advanced 5% to $469.0 million compared with $445.7 million in the prior year period. Excluding foreign currency translation effects, revenue for the first nine months increased 8%. Operating income increased 12% to $84.9 million, compared with $76.0 million in the prior year. Net income advanced 15% to $50.7 million, and income per diluted share increased 18% to $.80 compared with $.68 in the prior year. Results for the nine months reflected healthy revenue and earnings increases in all of the Company's core businesses. Cost of sales as a percentage of revenues decreased to 31.9% compared with 33.6% in the prior year. The improvement was attributable to lower relative composition costs as a result of technology-driven productivity initiatives, and lower inventory obsolescence reserves. Operating expenses as a percentage of revenues were 47.2%, compared with 46.7% in the prior year's first nine months. Operating expenses increased 7% over the prior year. The operating margin improved to 18.1% for the first nine months, compared with 17.0% for the prior year. The effective tax rate was 36.5% for the first nine months, compared with 37.5% in the prior year, as a result of higher foreign sourced income which is taxed at lower rates. SEGMENT RESULTS Domestic STM revenues of $110.7 million increased 5% over the prior year led by stronger renewal rates in the journal programs. The direct contribution to profit increased 13% to $49.7 million. The direct contribution margin improved to 44.9% compared with 41.6% in the prior year, reflecting lower composition costs. Domestic Professional/Trade segment revenues of $122.3 million for the first nine months advanced 10% over the comparable prior year period, significantly better than industry results. The improvement was due to strong frontlist sales in the business and computer book publishing programs, and increased volume through online accounts. The direct contribution to profit advanced 13% to $25.0 million. The direct contribution margin increased slightly from 20.0% in the prior year to 20.4%. Domestic Higher Education segment revenues of $115.1 million increased 6% over the prior year, which compares favorably with overall market growth. According to the Association of American Publishers (AAP), the Higher Education market reported a sales increase of only 3% in calendar year 2000. The direct contribution to profit increased 10% to $40.9 million, and the direct contribution margin improved to 35.5% compared with 34.4% in the prior year. European segment revenues of $114.1 million for the first nine months were adversely affected by the stronger U.S. dollar. Excluding foreign currency translation effects, European revenues advanced 9% over the prior year, led by strong book sales and higher journal revenues. The direct contribution to profit of $35.4 million increased 8% over the prior year. The direct contribution margin was 31.0% compared with 29.2% in the prior year. The other segment revenues advanced 12% for the first nine months excluding foreign currency translation effects. The improvement was mainly due to market share gains in Asia, partially offset by industry-wide sluggish sales at a major Canadian account.
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. 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. 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. The Financial Accounting Standard Board's Emerging Issues Task Force ("EITF") has reached a conclusion on EITF issue 00-10, "Accounting for Shipping and Handling Fees and Costs" which specifies how these items are to be classified and disclosed in financial statements and will become effective in the Company's fourth quarter of this fiscal year. The adoption of this EITF will require the Company to reclassify certain amounts as revenues which are currently recorded in expenses, as well as restatement of prior period comparable financial statements. It is anticipated that this will not have a material effect on the consolidated financial statements of the Company. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk The Company is exposed to market risk primarily related to interest rates and foreign exchange. It is the Company's policy to monitor these exposures and to use derivative financial instruments from time to time to reduce fluctuation in earnings and cash flow when it is deemed appropriate to do so. The Company does not use derivative financial instruments for trading or speculative purposes. Interest Rates The Company had a $95 million variable rate long-term loan outstanding at January 31, 2001, which approximated fair value. The weighted average interest rate as of January 31, 2001 was approximately 6.7%. The Company did not use any derivative financial instruments to manage this exposure. Foreign Exchange Rates The Company is exposed to foreign currency exchange movements primarily in European, Asian, Canadian and Australian currencies. Consequently, the Company, from time to time, enters into foreign exchange forward contracts as a hedge against its overseas subsidiaries' foreign currency asset, liability, commitment, and anticipated transaction exposures, including intercompany purchases. At January 31, 2001, the Company had open foreign exchange forward contracts expiring through January 2003 as follows: <TABLE> <CAPTION> Average Currency Purchased U.S. $Value Contract Rate ------------------ --------------- ------------- <S> <C> <C> Euro $ 5.2 million $ .91 Pound Sterling $ 16.3 million $ 1.49 </TABLE>
PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 - Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended January 31, 2001 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 - ------------------------------------------------ This report contains certain forward-looking statements concerning the Company's operations, performance and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company, and are subject to change based on many important factors. Such factors include, but are not limited to: (i) the pace, acceptance, and level of investment in emerging new electronic technologies and products; (ii) subscriber renewal rates for the Company's journals; (iii) the consolidation of the retail book trade market; (iv) the seasonal nature of the Company's educational business and the impact of the used book market; (v) worldwide economic and political conditions; and (vi) other factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOHN WILEY & SONS, INC. Registrant By /s/William J. Pesce ______________ William J. Pesce President and Chief Executive Officer By /s/Robert D. Wilder ______________ Robert D. Wilder Executive Vice President and Chief Financial Officer Dated: March 13, 2001
Exhibit 27 FINANCIAL DATA SCHEDULE (Dollars in Thousands Except Per Share Data) THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND THE CONSOLIDATED STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. <TABLE> <CAPTION> <S> <C> PERIOD TYPE 9 MONTHS FISCAL-YEAR-END APR-30-2001 PERIOD-START MAY-01-2000 PERIOD-END JAN-31-2001 CASH $ 80,151 SECURITIES 0 RECEIVABLES 158,425 ALLOWANCES 64,280 INVENTORY 49,691 CURRENT-ASSETS 247,652 PP&E 120,061 DEPRECIATION 75,732 TOTAL-ASSETS 638,877 CURRENT-LIABILITIES 305,230 BONDS 30,344 PREFERRED-MANDATORY 0 PREFERRED 0 COMMON 83,190 OTHERS-SE 133,859 TOTAL-LIABILITY-AND-EQUITY 638,877 SALES 0 TOTAL-REVENUES 468,987 CGS 149,376 TOTAL-COSTS 384,043 OTHER-EXPENSES 0 LOSS-PROVISION 0 INTEREST-EXPENSE 6,522 INCOME-PRETAX 79,842 INCOME-TAX 29,142 INCOME-CONTINUING 50,700 DISCONTINUED 0 EXTRAORDINARY 0 CHANGES 0 NET-INCOME 50,700 EPS-PRIMARY 0.84 EPS-DILUTED 0.80 </TABLE>