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 October 31, 1997 Commission File No. 1-11507 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from to JOHN WILEY & SONS, INC. (Exact name of Registrant as specified in its charter) NEW YORK 13-5593032 - --------------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 605 THIRD AVENUE, NEW YORK, NY 10158-0012 - --------------------------------------- ------------------------------------ (Address of principal executive offices) Zip Code Registrant's telephone number, (212) 850-6000 including area code ------------------------------------ NOT APPLICABLE Former name, former address, and former fiscal year, if changed since last report Indicate by check mark, whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] The number of shares outstanding of each of the Registrant's classes of common stock as of July 31, 1997 were: Class A, par value $1.00 - 12,828,623 Class B, par value $1.00 - 3,137,658 This is the first of a nine 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 October 31, 1997 and 1996 and April 30, 1997 3 Condensed Consolidated Statements of Income - Unaudited for the Six Months ended October 31, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flow - Unaudited for the Six Months ended October 31, 1997 and 1996 5 Notes to Unaudited Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 8 Item 6. Exhibits and Reports on Form 8-K 8 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 9 SIGNATURES 9 EXHIBITS 27 Financial Data Schedule
JOHN WILEY & SONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINAN (In thousands) (UNAUDITED) October 31, April 30, ---------------------------------- Assets 1997 1996 1997 ---------------------------------- Current Assets Cash and cash equivalents $ 38,500 1,290 79,116 Accounts receivable 66,545 71,786 61,841 Inventories 51,295 59,995 49,100 Deferred income tax benefits 7,139 7,683 7,143 Prepaid expenses 6,080 4,337 6,935 ---------------------------------- Total Current Assets 169,559 145,091 204,135 Product Development Assets 35,059 31,680 31,683 Property and Equipment 33,511 28,778 32,699 Intangible Assets 158,676 169,442 165,147 Deferred income tax benefits 17,081 13,308 13,004 Other Assets 11,236 13,552 11,276 ---------------------------------- Total Assets $425,122 401,851 457,944 ---------------------------------- Liabilities & Shareholders' Equity Current Liabilities Notes payable and curr.port.of L/T Debt 163 4,062 172 Accounts and royalties payable 48,896 41,274 30,988 Deferred subscription revenues 29,633 30,520 94,419 Accrued income taxes 6,662 7,165 3,825 Other accrued liabilities 33,536 36,345 34,948 ---------------------------------- Total Current Liabilities 118,890 119,366 164,352 Long-Term Debt 125,000 121,000 125,000 Other Long-Term Liabilities 26,169 25,812 24,907 Deferred Income Taxes 15,199 12,211 14,702 Shareholders' Equity 139,864 123,462 128,983 ---------------------------------- Total Liabilities & Shareholders' Equity $425,122 401,851 457,944 ---------------------------------- 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 Six Months Ended October 31, Ended October -------------------------------------------- <S> <C> <C> <C> <C> 1997 1996 1997 1996 -------------------------------------------- Revenues $ 115,886 107,070 $ 227,972 206,287 Costs and Expenses Cost of sales 39,776 37,490 77,926 71,172 Operating and administrative exp. 63,570 60,171 121,731 112,499 Amortization of intangibles 2,214 2,220 4,278 3,711 -------------------------------------------- Total Costs and Expenses 105,560 99,881 203,935 187,382 -------------------------------------------- Operating Income 10,326 7,189 24,037 18,905 Interest Income and Other 474 21 1,351 344 Interest Expense (1,989) (1,750) (3,949) (2,494) -------------------------------------------- Interest Income (Expense) - Net (1,515) (1,729) (2,598) (2,150) -------------------------------------------- Income Before Taxes 8,811 5,460 21,439 16,755 Provision For Income Taxes 3,172 1,966 7,718 6,032 -------------------------------------------- Net Income $ 5,639 3,494 $ 13,721 10,723 -------------------------------------------- Net Income Per Share Primary $ 0.34 0.21 $ 0.84 0.65 Fully Diluted $ 0.34 0.21 $ 0.83 0.65 Cash Dividends Per Share Class A Common $ 0.1125 0.1000 $ 0.2250 0.2000 Class B Common $ 0.1000 0.0875 $ 0.2000 0.1750 Average Shares Primary 16,401 16,447 16,355 16,486 Fully Diluted 16,498 16,492 16,478 16,507 </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 FLOW - UNAUDITED (In thousands) Six Months Ended October 31, --------------------- 1997 1996 --------------------- Operating Activities Net income $ 13,721 10,723 Non-cash items 28,748 23,235 Net change in operating assets and liabilities (56,652) (72,917) --------------------- Cash Used for Operating Activities (14,183) (38,959) --------------------- Investing Activities Additions to product development assets (15,512) (13,327) Additions to property and equipment (5,236) (4,409) Acquisition of publishing assets (1,295) (103,968) --------------------- Cash Used for Investing Activities (22,043) (121,704) --------------------- Financing Activities Purchase of treasury shares (1,888) (5,505) Additions to long-term debt -- 121,000 Repayment of acquired debt -- (10,542) Net borrowings of short-term debt 9 4,062 Cash dividends (3,504) (3,139) Proceeds from exercise of stock options 1,043 509 --------------------- Cash Provided by (Used for) Financing Activ (4,340) 106,385 --------------------- Effects of Exchange Rate Changes on Cash (50) 284 Cash and Cash Equivalents Decrease for Period (40,616) (53,994) Balance at Beginning of Period 79,116 55,284 --------------------- Balance at End of Period $ 38,500 1,290 --------------------- Cash Paid During the Period for Interest $ 3,902 2,179 Income taxes $ 4,066 4,415 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 OCTOBER 31, 1997 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 October 31, 1997 and 1996, and April 30, 1997, and results of operations and cash flows for the periods ended October 31, 1997 and 1996. 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, 1997. Certain prior year amounts have been reclassified to conform to the current year's presentation. 2. The results for the three months ended October 31, 1997 are not necessarily indicative of the results to be expected for the full year. 3. Income per share is determined by dividing income by the weighted average number of common shares outstanding and common stock equivalents resulting from the assumed exercise of outstanding dilutive stock options and other stock awards, less shares assumed to be repurchased with the related proceeds at the average market price for the period for primary earnings per share, and at the higher of the average or end of period market price for fully diluted earnings per share. 4. Inventories were as follows: October 31 April 30, -------------------- --------- 1997 1996 1997 -------- -------- -------- (Thousands) Finished goods $ 39,639 $ 49,335 $ 40,859 Work-in-process 8,775 9,350 7,475 Paper, cloth and other 4,872 5,166 2,559 -------- -------- -------- 53,286 63,851 50,893 LIFO reserve (1,991) (3,856) (1,793) -------- -------- -------- Total inventories $ 51,295 $ 59,995 $ 49,100 -------- -------- -------- 5. In November 1997, subsequent to the end of the second quarter, the Company sold its Wiley Law Publications division for $26.5 million which will result in an estimated pre-tax gain of approximately $21 million in the third quarter. Also in November 1997, the Company acquired the publishing assets of Van Nostrand Reinhold (VNR) for approximately $28.5 million in cash. VNR publishes in such areas as architecture/design, environmental/industrial sciences, culinary arts/hospitality and business technology. This acquisition will be accounted for by the purchase method, and the financial statements will include the net assets acquired and results of operations since the date of acquisition. The cost of the acquisition will be allocated on the basis of the fair values of the assets acquired and the liabilities assumed.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OCTOBER 31, 1997 FINANCIAL CONDITION During this seasonal period of cash usage, operating activities used $14.2 million of cash, or $24.8 million less than the prior year's comparable period. The decrease was primarily due to the higher levels of payables in the current year resulting from the increased volume of business. The use of cash during this period is consistent with the seasonality of the journal subscription and the educational sector's receipts cycles which occur, for the most part, in the second half of the fiscal year. Investing activities used $22.0 million during the current year-to-date, or $99.7 million less than the comparable prior year period primarily due to the VCH acquisition in the prior year. Financing activities primarily reflect dividend payments and purchases of treasury shares during the period. RESULTS OF OPERATIONS SECOND QUARTER ENDED OCTOBER 31, 1997 Revenues for the second quarter advanced 8% to $115.9 million compared with $107.1 million in the prior year. Operating income for the current quarter increased 44% to $10.3 million compared with $7.2 million in the prior year. Net income increased to $5.6 million from $3.5 million in the prior year. Revenue and operating income gains reflected improvement in all of the Company's core businesses-college publishing, professional/trade publishing and the worldwide scientific, technical and medical program. Cost of sales as a percentage of revenues decreased from 35.0% in the prior year to 34.3% due to product mix. Operating expenses as a percentage of revenues were 54.9% in the current quarter compared with 56.2% in the prior year's second quarter. The improvement is a result of cost containment measures. The effective tax rate of 36% in the current quarter was the same as the prior year. RESULTS OF OPERATIONS SIX MONTHS ENDED OCTOBER 31, 1997 Revenues for the first six months of fiscal 1998 were $228.0 million, or 11% ahead of the $206.3 million in the comparable prior year period. Operating income of $24.0 million increased 27% over of the prior year period. Net income of $13.7 million for the current year increased 28% over the prior year. The improvements in revenues and operating income for the period are attributable to the same factors noted in the results of operations for the second quarter. Wiley-VCH, which was acquired in fiscal 1997, was a positive contributor to operating income in the current year but was dilutive to earnings for the year-to-date by approximately $1.1 million, or $0.7 per share, due to interest costs related to the acquisition. For the year-to-date, costs of sales as a percentage of revenues decreased from 34.5% to 34.2%, and operating expenses declined from 54.5% to 53.4%. Interest expense increased by $1.5 million due to a full six months of financing costs in the current year related to the VCH acquisition. The effective tax rate of 36% was the same for both periods.
PART II - OTHER INFORMATION Item 4. Submission of Matters To a Vote of Security Holders The following matters were voted upon at the annual meeting of shareholders of the Company on September 8, 1997. Election of Directors Fifteen directors as indicated in the Proxy Statement were elected to the Board, five of whom were elected by the holders of Class A Common Stock, and ten by the holders of Class B Common Stock. Ratification of Appointment of Arthur Andersen LLP, as Independent Public Accountants for the Fiscal Year Ending April 30, 1998 The appointment was ratified as follows: Votes for 3,866,270 Votes Against 38 Abstentions 4,363 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3(ii)- By-Laws as Amended Dated as of December 1997 27 - Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended October 31, 1997 "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 which 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) the consolidation of the retail book trade market; (iii) the seasonal nature of the Company's educational business and the impact of the used book market; (iv) worldwide economic and political conditions; and (v) other factors detailed from time to time in the Company's filings with the Securities and Exchange Commission.
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/Charles R. Ellis -------------- Charles R. Ellis President and Chief Executive Officer By /s/Robert D. Wilder -------------- Robert D. Wilder Executive Vice President and Chief Financial Officer Dated: December 12, 1997