-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DvOQ8FX3FTi9xXazt2+9ThqH6W5Qgv9Nrca4mxetKtn3W8tqKlkvRh/huwzhBpvR Oni2Zdw3oQq7QCyKWsJkkQ== 0000107140-99-000016.txt : 19991215 0000107140-99-000016.hdr.sgml : 19991215 ACCESSION NUMBER: 0000107140-99-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WILEY JOHN & SONS INC CENTRAL INDEX KEY: 0000107140 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 135593032 STATE OF INCORPORATION: NY FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11507 FILM NUMBER: 99774411 BUSINESS ADDRESS: STREET 1: 605 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10158 BUSINESS PHONE: 2128506000 MAIL ADDRESS: STREET 1: 605 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10158 10-Q 1 10Q FY2000 2ND QUARTER 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, 1999 Commission File No. 1-11507 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from to JOHN WILEY & SONS, INC. (Exact name of Registrant as specified in its charter) NEW YORK 13-5593032 - -------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 605 THIRD AVENUE, NEW YORK, NY 10158-0012 - -------------------------------- ---------------------------------- (Address of principal executive offices) Zip Code Registrant's telephone number, (212) 850-6000 including area code ---------------------------------- NOT APPLICABLE -------------------------------------------------------------- Former name, former address, and former fiscal year, if changed since last report Indicate by check mark, whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] The number of shares outstanding of each of the Registrant's classes of common stock as of October 31, 1999 were: Class A, par value $1.00 - 49,848,663 Class B, par value $1.00 - 12,072,156 This is the first page of a 17 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, 1999 and 1998 and April 30, 1999................... 3 Condensed Consolidated Statements of Income - Unaudited for the Three and Six Months ended October 31, 1999 and 1998. ....... 4 Condensed Consolidated Statements of Cash Flow - Unaudited for the Three and Six Months ended October 31, 1999 and 1998......... 5 Notes to Unaudited Condensed Consolidated Financial Statements...... 6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 10-13 Item 3. Quantitative and Qualitative Disclosure About Market Risk........14 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders.... ........ 15 Item 6. Exhibits and Reports on Form 8-K.......................... ..... 15 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995.................... 16 SIGNATURES............................................................... 17 EXHIBITS 3(i) Certificate of Amendment of the Certificate of Incorporation dated as of September 1999 27 Financial Data Schedule
JOHN WILEY & SONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In thousands) (UNAUDITED) October 31, April 30, ------------------- --------- Assets 1999 1998 1999 --------- ------- --------- Current Assets Cash and cash equivalents $ 2,419 71,867 $ 148,970 Accounts receivable 87,977 68,919 53,785 Inventories 40,133 44,923 40,003 Deferred income tax benefits 3,883 443 3,865 Prepaid expenses 6,082 6,528 9,347 -------- -------- -------- Total Current Assets 140,494 192,680 255,970 Product Development Assets 40,375 36,028 38,099 Property and Equipment 34,301 34,073 34,726 Intangible Assets 305,574 178,966 174,911 Deferred Income Tax Benefits 11,463 15,570 13,001 Other Assets 12,399 11,618 11,845 --------- --------- -------- Total Assets $ 544,606 468,935 $ 528,552 ========= ========= ======== Liabilities & Shareholders' Equity Current Liabilities Notes payable and Current portion of long-term debt $ 69,736 - $ - Accounts and royalties payable 56,192 53,775 34,708 Deferred subscription revenues 43,252 34,091 110,143 Accrued income taxes 6,719 5,848 3,356 Other accrued liabilities 50,260 40,603 46,893 -------- -------- -------- Total Current Liabilities 226,159 134,317 195,100 Long-Term Debt 95,000 125,000 125,000 Other Long-Term Liabilities 32,174 28,353 30,271 Deferred Income Taxes 15,807 16,276 15,969 Shareholders' Equity 175,466 164,989 162,212 --------- --------- -------- Total Liabilities & Shareholders' Equity $ 544,606 468,935 $ 528,552 ========= ========= ========
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) Three Months Six Months Ended October 31, Ended October 31, ------------------ ------------------ 1999 1998 1999 1998 -------- -------- ------- ------- Revenues $ 150,338 123,640 $ 287,318 245,731 Costs and Expenses Cost of sales 49,272 42,203 96,814 84,570 Operating and admin. expenses 71,579 63,798 135,319 124,172 Amortization of intangibles 4,573 2,333 7,702 4,617 -------- ------- ------- ------- Total Costs and Expenses 125,424 108,334 239,835 213,359 -------- ------- ------- ------- Operating Income 24,914 15,306 47,483 32,372 Interest Income and Other (67) 1,156 557 2,578 Interest Expense (2,313) (1,969) (4,146) (3,951) -------- ------- -------- ------- Interest Income (Expense) - Net (2,380) (813) (3,589) (1,373) -------- ------- -------- ------- Income Before Taxes 22,534 14,493 43,894 30,999 Provision For Income Taxes 8,450 5,218 16,460 11,160 -------- -------- -------- ------- Net Income $ 14,084 9,275 $ 27,434 19,839 ======== ======== ======== ======= Income Per Share Diluted $ 0.22 0.14 $ 0.42 0.30 Basic $ 0.23 0.15 $ 0.44 0.31 Cash Dividends Per Share Class A Common $ 0.035625 0.031875 $0.071250 0.063750 Class B Common $ 0.031875 0.028125 $0.063750 0.056250 Average Shares Diluted 64,526 66,367 65,099 66,421 Basic 61,423 63,029 61,812 63,156
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) For The Six Months Ended October 31, ------------------------- 1999 1998 ---------- --------- Operating Activities Net income $ 27,434 19,839 Non-cash items 49,386 37,700 Net change in operating assets and liabilities (90,470) (69,044) --------- --------- Cash Used In Operating Activities (13,650) (11,505) --------- --------- Investing Activities Additions to product development assets (14,858) (14,222) Additions to property and equipment (4,417) (4,203) Acquisition of publishing assets (139,838) (8,412) --------- --------- Cash Used in Investing Activities (159,113) (26,837) --------- --------- Financing Activities Purchase of treasury shares (10,968) (12,989) Net borrowings of short-term debt 39,736 - Cash dividends (4,326) (3,966) Proceeds from exercise of stock options 709 709 --------- --------- Cash Used for Financing Activities 25,151 (16,245) --------- --------- Effects of Exchange Rate Changes on Cash 1,061 (951) --------- --------- Cash and Cash Equivalents Decrease for Period (146,551) (55,538) Balance at Beginning of Period 148,970 127,405 --------- -------- Balance at End of Period $ 2,419 71,867 ========= ======== Cash Paid During the Period for Interest $ 4,019 3,920 Income taxes $ 9,610 6,425
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, 1999 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company's consolidated financial position as of October 31, 1999 and 1998, and April 30, 1999, and results of operations and cash flows for the periods ended October 31, 1999 and 1998. These statements should be read in conjunction with the most recent audited financial statements contained in the Company's Form 10-K for the fiscal year ended April 30, 1999. 2. The results for the three and six months ended October 31, 1999 are not necessarily indicative of the results to be expected for the full year. 3. A reconciliation of the shares used in the computation of income per share follows:
Three Months Six Months Ended October 31, Ended October 31, ----------------- ----------------- 1999 1998 1999 1998 ------- -------- ------- -------- (thousands) Weighted average shares outstanding 61,946 63,823 62,333 63,933 Less: Unearned deferred compensation shares (523) (794) (521) (777) ------- ------ ------ ------- Shares used for basic income per share 61,423 63,029 61,812 63,156 Dilutive effect of stock options and other stock awards 3,103 3,338 3,287 3,265 ------- ------ ------ ------- Shares used for diluted income per share 64,526 66,367 65,099 66,421 ------- ------ ------- -------
4. Inventories were as follows:
October 31, April 30, ---------------------------- ------------- 1999 1998 1999 -------------- ----------- ------------- (thousands) Finished goods $35,209 36,235 $34,485 Work-in-process 3,070 5,940 5,325 Paper, cloth and other 3,868 5,023 2,007 ---------- ----------- ---------- 42,147 47,198 41,817 LIFO reserve (2,014) (2,275) (1,814) ---------- ----------- ---------- Total inventories $40,133 44,923 $40,003 ---------- ----------- ----------
JOHN WILEY & SONS, INC., AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 1999 5. Comprehensive income was as follows:
Three Months Six Months Ended October 31, Ended October 31, ------------------ ----------------- 1999 1998 1999 1998 --------- -------- --------- ------- (thousands) Net Income $14,084 9,275 $27,434 19,839 Other Comprehensive Income(Loss) - Foreign Currency Translation Adjustments (67) 169 (11) (1,161) -------- -------- -------- ------- Comprehensive Income $14,017 9,444 $27,423 18,678 -------- -------- -------- -------
6. In the first quarter of fiscal year 2000, the Company acquired certain higher education titles for approximately $58 million in cash, and the Jossey-Bass publishing company for approximately $82 million in cash,from Pearson Inc. The acquisitions were financed by available cash balances and short-term lines of credit. 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 professional and executives in such areas as business, psychology and educational/health management. The acquisitions have been accounted for by the purchase method, and the accompanying financial statements include the net assets acquired and results of operations since the dates of acquisition. The cost of the acquisitions has been allocated on the basis of preliminary estimates of the fair values of the assets acquired and the liabilities assumed. Final asset and liability fair values may differ based on appraisals and tax bases, however, it is anticipated that any changes will not have a material effect in the aggregate on the consolidated financial position of the Company. The excess of cost over the preliminary estimate of the fair value of the tangible assets acquired amounted to approximately $138 million, relating primarily to acquired publication rights and goodwill, and is being amortized on a straight line basis over estimated average lives ranging from 10 to 20 years. 7. In the first quarter of fiscal year 2000, the Company adopted Statement of Position ("SOP") 98-1, "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use" issued by the American Institute of Certified Public Accountants. SOP 98-1 requires that certain costs incurred in developing or obtaining internal use software be capitalized and amortized over the useful life of the software. Previously, the Company expensed most of these costs as incurred. The adoption of SOP 98-1 had the effect of increasing net income in the first six months of fiscal year 2000 by approximately $840,000. JOHN WILEY & SONS, INC., AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 1999 8. Segment information was as follows:
Three Months Ended October 31, ------------------------------------------------- 1999 1998 ------------------------------------------------- (thousands) Inter- Inter- External segment External segment Revenues Customers Sales Total Customers Sales Total ------------------------ ------------------------ Domestic Segments: Scientific, Tech, & Med. $ 34,508 1,363 35,871 $30,791 1,590 32,381 Professional/Trade 36,475 3,495 39,970 26,577 3,844 30,421 College 28,085 6,550 34,635 19,513 4,563 24,076 European Segment 35,487 1,703 37,190 34,789 2,201 36,990 Other Segments 15,783 175 15,958 11,970 110 12,080 Eliminations - (13,286) (13,286) - (12,308) (12,308) ------------------------ ------------------------- Total Revenues $150,338 - 150,338 $123,640 - 123,640 ------------------------ ------------------------- Direct Contribution to Profit Domestic Segments: Scientific, Tech, & Med. $ 15,286 $12,349 Professional/Trade 9,207 8,188 College 10,461 3,936 European Segment 10,128 11,517 Other Segments 2,768 1,771 --------- -------- Total Direct Contribution to Profit 47,850 37,761 Shared Services and Admin. Costs (22,936) (22,455) --------- -------- Operating Income 24,914 15,306 Interest Expense - Net (2,380) (813) --------- --------- Income Before Taxes $22,534 $14,493 --------- ---------
JOHN WILEY & SONS, INC., AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 1999
Six Months Ended October 31, ----------------------------------------------------- 1999 1998 --------------------------- ------------------------- (thousands) Inter- Inter- External segment External segment Revenues Customers Sales Total Customers Sales Total --------------------------------------- ------------ Domestic Segments: Scientific, Tech, & Med. $67,962 2,985 70,947 $61,308 2,955 64,263 Professional/Trade 62,724 6,617 69,341 46,549 6,532 53,081 College 58,617 11,430 70,047 47,592 8,691 56,283 European Segment 67,122 4,395 71,517 65,154 4,985 70,139 Other Segments 30,893 278 31,171 25,128 243 25,371 Eliminations - (25,705)(25,705) - (23,406)(23,406) -------------------------- -------------------------- Total Revenues $287,318 - 287,318 $245,731 - 245,731 -------------------------- -------------------------- Direct Contribution to Profit Domestic Segments: Scientific, Tech, & Med. $30,161 $25,426 Professional/Trade 13,299 10,685 College 23,734 15,574 European Segment 21,166 22,216 Other Segments 5,134 3,213 --------- -------- Total Direct Contribution to Profit 93,494 77,114 Shared Services and Admin. Costs (46,011) (44,742) --------- -------- Operating Income 47,483 32,372 Interest Expense - Net (3,589) (1,373) ---------- --------- Income Before Taxes $43,894 $30,999 ---------- ---------
As a result of recent aquisitions, total assets for the Professional/Trade segment and College segment increased to approximately $171 million and $102 million, respectively. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OCTOBER 31, 1999 FINANCIAL CONDITION During this seasonal period of cash usage, operating activities used $13.7 million of cash,or $2.2 million more than the prior year's comparable period. The increase was primarily due to higher receivable levels. The use of cash during this period is consistent with the seasonality of journal subscription receipts and college product receipts that occur, for the most part, in the second half of the fiscal year. Investing activities used $159.1 million during the current year-to-date, or $132.3 million more than the comparable prior year's period, as the Company continued to expand its core publishing programs through acquisitions including the Jossey-Bass publishing company and certain higher education titles from Pearson Inc. as more fully described in note 6. Financing activities primarily reflect the purchase of treasury shares, dividend payments, and additional short-term borrowings of $39.7 million at a floating interest rate of 5.5% to partially finance the acquisitions noted above. RESULTS OF OPERATIONS SECOND QUARTER ENDED OCTOBER 31, 1999 Revenues for the second quarter advanced 22% to $150.3 million compared with $123.6 million in the prior year. Excluding the acquisitions completed during the current fiscal year as noted above, organic revenue growth for the quarter was approximately 8% over the comparable prior year period. Operating income for the current quarter increased 63% to $24.9 million, compared with $15.3 million in the prior year. Net income advanced 52% to $14.1 million. The Company's overall strategy of gaining market share in its core businesses by growing organically and through targeted acquisitions, while at the same time improving margins, is working. The Company continues to invest in new technologies as it accelerates its migration to the digital world. Cost of sales as a percentage of revenues declined to 32.8% compared with 34.1% in the prior year's second quarter. Operating expenses as a percentage of revenues declined to 47.6% in the current quarter, down from 51.6% in the prior year's second quarter due to cost containment measures coupled with synergies achieved on the acquisitions. The operating margin improved to 16.6% in the current quarter, compared with 12.4% in the prior year's second quarter. Interest income decreased $1.1 million, as cash balances were used to finance the acquisitions during the year. The effective tax rate was 37.5% in the current quarter, compared with 36% in the prior year. SEGMENT RESULTS Domestic Scientific, Technical and Medical (STM) revenues increased 11%, for the second quarter compared with the prior year mainly due to the subscription journals business. The direct contribution to profit increased 24%. The direct contribution margin was 42.6% in the current quarter compared with 38.1% in the prior year's second quarter. Wiley InterScience, the Company's web-based service, is being expanded by adding the content of some of our best-selling major reference works and increasing the number of dedicated sales staff. The investment in Wiley InterScience is beginning to pay off. Customers are signing multi-year enhanced access licenses on business terms that are attractive to them and to the Company. In addition, the Company is playing a leading role in the development of a reference linking service with eleven other prominent STM publishers. This unprecedented collaboration will allow researchers to move easily from a reference in a journal article to the content of a cited journal article typically located on a different server and published by a different publisher. Domestic Professional/Trade segment revenues advanced 31% for the second quarter over the prior year, benefiting from the recent acquisition of Jossey-Bass, a San Francisco-based professional publisher, and strong demand for backlist titles, including increased demand from online internet suppliers. The direct contribution to profit advanced 12%. The direct contribution margin was 23.0% compared with 26.9% in the prior year. The Professional/Trade business is taking advantage of the dramatic growth of e-commerce. Online selling plays to the division'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. The division 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. Domestic College segment revenues increased 44% for the quarter compared with the prior year, primarily related to the acquisition of certain higher education titles during the year, as well as a strong frontlist. Some orders which are normally received in July of the first quarter were received in August of this year's second quarter. The direct contribution to profit increased 166%, and the direct contribution margin improved to 30.2% during the current quarter compared with 16.4% in the prior year's second quarter. The college publishing market is as robust as it has been during the past decade. Aided by technology, lifelong learning opportunities are emerging. All of the division's major college titles now have a technology component to facilitate teaching and learning, on and off the campus. The College division has formed partnerships to provide faculty with course management tools, including online testing. And, technology is helping the division become more efficient by enabling it to distribute teaching supplements to faculty electronically. European segment revenues increased .5%, as the translation effects of a stronger U.S. dollar adversely impacted revenue growth. The direct contribution margin was 27.2% in the current quarter compared with 31.1% in the prior year's second quarter. The improvement in the Other segment's results of operations was due to strong local product and the strengthening of many of the Asian economies. RESULTS OF OPERATIONS SIX MONTHS ENDED OCTOBER 31, 1999 Revenues for the first six months advanced 17% to $287.3 million compared with $245.7 million in the prior year. Excluding the acquisitions completed during the current fiscal year, organic revenue growth for the first six months was approximately 7% over the comparable prior year period. Operating income for the six months increased 47% to $47.5 million, compared with $32.4 million in the prior year. Net income advanced 38% to $27.4 million. After financing costs, the current year acquisitions were accretive to earnings by approximately $1.6 million. Costs of sales as a percentage of revenues for the six months declined to 33.7% compared with 34.4% in the prior year. Operating expenses as a percentage of revenues declined to 47.1% in the current period, down from 50.5% in the prior year due to cost containment measures coupled with synergies achieved on the acquisitions. The operating margin improved to 16.5% in the current period compared with 13.2% in the prior year. Interest income decreased $2 million, as cash balances were used to finance the acquisitions during the year. The effective tax rate was 37.5% in the current period, compared with 36% in the prior year. SEGMENT RESULTS Domestic Scientific, Technical and Medical (STM) revenues increased 10% for the first six months compared with the prior year mainly due to the subscription journals business. The direct contribution to profit increased 19%. The direct contribution margin was 42.5% in the current period compared with 39.6% in the prior year. Domestic Professional/Trade revenues advanced 31% for the six months over the prior year, benefiting from the recent acquisition of Jossey-Bass, a San Francisco-based professional publisher, and strong demand for backlist titles, including increased demand from online internet suppliers. The direct contribution to profit advanced 24%. The direct contribution margin was 19.2% compared with 20.1% in the prior year. Domestic College revenues increased 24% for the six months compared with the prior year, primarly related to the acquisition of certain higher education titles during the year, as well as a strong frontlist. The direct contribution to profit increased 52%, and the direct contribution margin improved to 33.9% during the period compared with 27.7% in the prior year. European segment revenues increased 2%, as the translation effects of a stronger U.S. dollar adversely impacted revenue growth. The direct contribution margin was 29.6% in the current period compared with 31.7% in the prior year. The improvement in the Other segment's results of operations was due to strong local product and the strengthening of many of the Asian economies. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities", which specifies the accounting and disclosure requirements for such instruments, and is effective for the Company's fiscal year beginning on May 1, 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. YEAR 2000 ISSUES The Company reviewed its systems and products to determine the extent and impact of the year 2000 issues, and has substantially completed the remediation and testing of its systems. Many of the Company's systems were new and were designed to accommodate the year 2000 issue when originally installed. The total cost to remedy the situation is currently estimated to be approximately $2.9 million, of which approximately $2.7 million has been expended through October 31, 1999. The Company has communicated with its key customers and suppliers in an effort to assess how they intend to resolve their year 2000 issues. Although nothing has come to the Company's attention to indicate that its key customers or suppliers will not be able to resolve their year 2000 issues in a satisfactory and timely manner, there can be no assurance that they have resolved their year 2000 issues, nor is it possible to estimate the magnitude of the adverse impact it would have on the Company's operations, if they fail to do so. The anticipated costs and timing of resolving the year 2000 issues are based on numerous assumptions and estimates relating to future events including the timely resolution of the third party customer and supplier interface issues and other similar uncertainties. The Company is in the process of finalizing contingency plans which will be implemented, if required. EURO CONVERSION ISSUES Effective January 1, 1999, eleven member countries of the European union established fixed conversion rates between their existing legal currencies and the Euro, and adopted the Euro as their common legal currency. The Company has completed its assessment of the impact that the conversion to the Euro will have on its operations and the modifications that will be required to its systems. Although it is still in the early stages of implementing corrective measures, the Company believes that the Euro conversion should not have a material effect on its operations. 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 $125 million variable rate long-term loan and $39.7 million of variable rate short-term debt outstanding at October 31,1999, which approximated fair value. The weighted average interest rate as of October 31, 1999 was approximately 5.5%. 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 October 31, 1999, the Company had open foreign exchange forward contracts expiring through April 30, 2000 as follows: Average Currency Sold U.S. $Value Contract Rate ------------- ----------- ------------- Canadian Dollars $2.6 million $.6832 Australian Dollars $1.5 million $.6610 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 16, 1999. Election of Directors --------------------- Ten directors as indicated in the Proxy Statement were elected to the Board, three of whom were elected by the holders of Class A Common Stock, and seven by the holders of Class B Common Stock. Adoption of the Long Term Annual Incentive Plan ----------------------------------------------- The Long Term Annual Incentive Plan was approved as follows: Votes For 11,135,305 Votes Against 2,712,389 Abstentions 52,182 Adoption of the Executive Annual Incentive Plan ----------------------------------------------- The Executive Annual Incentive Plan was approved as follows: Votes For 14,711,276 Votes Against 255,375 Abstentions 54,225 Approval Of Amendment To The Company's Restated Certificate Of -------------------------------------------------------------- Incorporation -------------------------------------------------------------- The amendment increased the total number of shares of all classes of capital stock which the Company shall have authority to issue 254,000,000 shares, consisting of 2,000,000 shares of Preferred Stock, 180,000,000 shares of Class A Common Stock, and 72,000,000 shares of Class B Common Stock. The amendment was approved as follows: Votes For 12,556,738 Votes Against 2,449,520 Abstentions 14,619 Ratification of Appointment of Arthur Andersen LLP, as Independent ------------------------------------------------------------------ Public Accountants for the Fiscal Year Ending April 30, 2000 ------------------------------------------------------------ The appointment was ratified as follows: Votes For 15,011,104 Votes Against 311 Abstentions 9,462 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3(i) - Certificate of Amendment of the Certificate of Incorporation dated as of September 1999 27 - Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended October 31, 1999 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 This report contains certain forward-looking statements concerning the Company's operations, performance and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward- looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company, and are subject to change based on many important factors. Such factors include, but are not limited to: (i) the pace, acceptance, and level of investment in emerging new electronic technologies and products; (ii) subscriber renewal rates for the Company's journals; (iii) the consolidation of the retail book trade market; (iv) the seasonal nature of the Company's educational business and the impact of the used book market; (v) the ability of the Company and its customers and suppliers to satisfactorily resolve the year 2000 issues in a timely manner; (vi) worldwide economic and political conditions; and (vii) other factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances. 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: December 14, 1999 EX-3.(I) 2 CERTIFICATE OF AMENDMENT Exhibit 3(i) CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF JOHN WILEY & SONS, INC. Under Section 805 of the Business Corporation Law ------------------------------ It is hereby certified that: FIRST: The original name of the corporation is JOHN WILEY AND SONS. The current name of the corporation is JOHN WILEY & SONS, INC. SECOND: The Certificate of Incorporation of the corporation was filed by the Department of State on January 15, 1904. THIRD: The Amendment of the Certificate of Incorporation of the corporation effected by this Certificate of Amendment is as follows: To increase the aggregate number of shares of capital stock which the corporation shall have authority to issue from One Hundred Twenty-eight Million (128,000,000) to Two Hundred Fifty-four Million (254,000,000) by authorizing an additional Ninety Million (90,000,000) shares of Class A Common Stock with a par value of One Dollar ($1.00) per share, and an additional Thirty-six Million (36,000,000) shares of Class B Common Stock with a par value of One Dollar ($1.00) per share. FOURTH: To accomplish the foregoing amendment, Article THIRD of the Certificate of Incorporation, relating to the number of shares of all classes of capital stock which the corporation shall have authority to issue, is hereby amended to read as follows: The total number of shares of all classes of capital stock which the corporation shall have authority to issue is Two Hundred Fifty-four Million (254,000,000) shares, consisting of Two Million (2,000,000) shares of Preferred Stock with a par value of One Dollar ($1.00) per share, One Hundred Eighty Million (180,000,000) shares of Class A Common Stock with a par value of One Dollar ($1.00) per share, and Seventy-two Million (72,000,000) shares of Class B Common Stock with a par value of One Dollar ($1.00) per share. FIFTH: The foregoing Amendment of the Certificate of Incorporation of the corporation was authorized by a vote of the Board of Directors at a meeting held on June 24, 1999, followed by the vote of the holders of at least a majority of all of the outstanding shares of the corporation entitled to vote on the said Amendment of the Certificate of Incorporation at a meeting of the shareholders held on September 16, 1999. IN WITNESS WHEREOF, we have subscribed this document on the date set forth below, and do hereby affirm, under the penalties of perjury, that the statements contained therein have been examined by us and are true and correct. September 20, 1999 ---------------------------- Robert D. Wilder Executive Vice President and Chief Financial Officer ---------------------------- Josephine Bacchi Corporate Secretary STATE OF NEW YORK ) COUNTY OF NEW YORK) ss: Robert D. Wilder, being duly sworn, deposes and says that he is the Executive Vice President of JOHN WILEY & SONS, INC.; that he signed said Certificate in the corporate name; that he has read the said Certificate and knows the contents thereof; and that the statements contained are true to his knowledge. ------------------------------ Josephine Bacchi Corporate Secretary Subscribed and sworn to before me on September 20, 1999. - ---------------------------- Notary Public EX-27 3 FINANCIAL DATA SCHEDULE FY00 2ND QTR.
5 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. 0000107140 JOHN WILEY & SONS, INC. 1000 6-MOS APR-30-2000 MAY-01-1999 OCT-31-1999 2,419 0 147,530 59,553 40,133 140,494 97,986 63,685 544,606 226,159 95,000 0 0 83,190 92,276 544,606 0 287,318 96,814 239,835 0 0 4,146 43,894 16,460 27,434 0 0 0 27,434 0.44 0.42
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