0001140361-19-016270.txt : 20190906 0001140361-19-016270.hdr.sgml : 20190906 20190906124239 ACCESSION NUMBER: 0001140361-19-016270 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 79 CONFORMED PERIOD OF REPORT: 20190731 FILED AS OF DATE: 20190906 DATE AS OF CHANGE: 20190906 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOHN WILEY & 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: 1934 Act SEC FILE NUMBER: 001-11507 FILM NUMBER: 191079014 BUSINESS ADDRESS: STREET 1: 111 RIVER STREET CITY: HOBOKEN STATE: NJ ZIP: 07030 BUSINESS PHONE: 2017486000 MAIL ADDRESS: STREET 1: 111 RIVER STREET CITY: HOBOKEN STATE: NJ ZIP: 07030 FORMER COMPANY: FORMER CONFORMED NAME: WILEY JOHN & SONS, INC. DATE OF NAME CHANGE: 20070820 FORMER COMPANY: FORMER CONFORMED NAME: WILEY JOHN & SONS INC DATE OF NAME CHANGE: 19920703 10-Q 1 form10q.htm FORM 10Q FY20 Q1

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2019

OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____ to _____

Commission File No. 001-11507

JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)

New York
 
13-5593032
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
111 River Street, Hoboken, New Jersey
 
07030
(Address of principal executive offices)
 
Zip Code

 
(201) 748-6000
 
 
Registrant’s telephone number, including area code
 

 
Not Applicable
 
Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Class A Common Stock, par value $1.00 per share
 
JW.A
 
New York Stock Exchange
Class B Common Stock, par value $1.00 per share
 
JW.B
 
New York Stock Exchange

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    No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 
 
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No

The number of shares outstanding of each of the Registrant’s classes of common stock as of August 31, 2019 were:

Class A, par value $1.00 – 47,349,487
Class B, par value $1.00 – 9,119,828


JOHN WILEY & SONS, INC. AND SUBSIDIARIES
INDEX

PART I - FINANCIAL INFORMATION

Item 1.
 
Financial Statements
   
         
     
5
         
     
6
         
     
7
         
     
8
         
     
9
         
   
Notes to Unaudited Condensed Consolidated Financial Statements
   
     
10
     
10
     
12
     
13
     
14
     
16
     
16
     
16
     
17
     
18
     
19
     
20
     
20
     
21
     
21
     
22
     
23
     
23
         
Item 2.
   
24
         
Item 3.
   
31
         
Item 4.
   
32
         
PART II - OTHER INFORMATION
   
         
Item 1.
   
33
         
Item 1a.
   
33
         
Item 2.
   
33
         
Item 6.
   
33
         
SIGNATURES
 
34

2

Cautionary Notice Regarding Forward-Looking Statements “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:

This report contains certain “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 concerning our business, consolidated financial condition and results of operations. The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “should,” “estimates,” “expects,” “intends,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding our fiscal year 2020 outlook, anticipated restructuring charges and savings, 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 many assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond our control, 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 our 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 retailers; (vi) the seasonal nature of our educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) our ability to protect our copyrights and other intellectual property worldwide; (ix) our ability to successfully integrate acquired operations and realize expected opportunities; (x) the ability to realize operating savings over time and in fiscal year 2020 in connection with our multi-year Business Optimization Program; and (xi) other factors detailed from time to time in our filings with the SEC. We undertake no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.

Please refer to Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Non-GAAP Financial Measures:

We present financial information that conforms to Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). We also present financial information that does not conform to U.S. GAAP, which we refer to as non-GAAP.

In this report, we may present the following non-GAAP performance measures:

Adjusted Earnings Per Share (“Adjusted EPS”);
Free Cash Flow less Product Development Spending;
Adjusted Revenue;
Adjusted Operating Income and margin;
Adjusted Contribution to Profit and margin;
EBITDA and Adjusted EBITDA;
Inorganic contribution; and
Results on a constant currency basis.

Management uses these non-GAAP performance measures as supplemental indicators of our operating performance and financial position as well for internal reporting and forecasting purposes, when publicly providing its outlook, to evaluate our performance and to evaluate and calculate incentive compensation. We present these non-GAAP performance measures in addition to U.S. GAAP financial results because we believe that these non-GAAP performance measures provide useful information to certain investors and financial analysts for operational trends and comparisons over time. The use of these non-GAAP performance measures may also provide a consistent basis to evaluate operating profitability and performance trends by excluding items that we do not consider to be controllable activities for this purpose.

3

For example:

Adjusted EPS, Adjusted Revenue, Adjusted Operating Profit, Adjusted Contribution to Profit, Adjusted EBITDA, and Inorganic contribution provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance.
Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders as it represents cash available to repay debt, pay common stock dividends and fund share repurchases and acquisitions.
Results on a constant currency basis removes distortion from the effects of foreign currency movements to provide better comparability of our business trends from period to period. We measure our performance before the impact of foreign currency (or at “constant currency”), which means that we apply the same foreign currency exchange rates for the current and equivalent prior period.

In addition, we have historically provided these or similar non-GAAP performance measures and understand that some investors and financial analysts find this information helpful in analyzing our operating margins, and net income and comparing our financial performance to that of our peer companies and competitors. Based on interactions with investors, we also believe that our non-GAAP performance measures are regarded as useful to our investors as supplemental to our U.S. GAAP financial results, and that there is no confusion regarding the adjustments or our operating performance to our investors due to the comprehensive nature of our disclosures. We have not provided our 2020 outlook for the most directly comparable U.S. GAAP financial measures, as they are not available without unreasonable effort due to the high variability, complexity, and low visibility with respect to certain items, including restructuring charges and credits, gains and losses on foreign currency, and other gains and losses. These items are uncertain, depend on various factors, and could be material to our consolidated results computed in accordance with U.S. GAAP.

Non-GAAP performance measures do not have standardized meanings prescribed by U.S. GAAP and therefore may not be comparable to the calculation of similar measures used by other companies and should not be viewed as alternatives to measures of financial results under U.S. GAAP. The adjusted metrics have limitations as analytical tools and should not be considered in isolation from or as a substitute for U.S. GAAP information. It does not purport to represent any similarly titled U.S. GAAP information and is not an indicator of our performance under U.S. GAAP. Non-U.S. GAAP financial metrics that we present may not be comparable with similarly titled measures used by others. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures.

4


JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Dollars in thousands

 
July 31, 2019
   
April 30, 2019
 
   
(Unaudited)
       
Assets:
           
Current Assets
           
Cash and cash equivalents
 
$
104,025
   
$
92,890
 
Accounts receivable, net
   
281,055
     
294,867
 
Inventories, net
   
44,811
     
35,582
 
Prepaid expenses and other current assets
   
61,292
     
67,441
 
Total Current Assets
   
491,183
     
490,780
 
                 
Product Development Assets, net
   
60,093
     
62,470
 
Royalty Advances, net
   
26,788
     
36,185
 
Technology, Property and Equipment, net
   
292,535
     
289,021
 
Intangible Assets, net
   
878,269
     
865,572
 
Goodwill
   
1,121,783
     
1,095,666
 
Operating Lease Right-of-Use Assets
   
147,370
     
 
Other Non-Current Assets
   
102,052
     
97,308
 
Total Assets
 
$
3,120,073
   
$
2,937,002
 
                 
Liabilities and Shareholders' Equity:
               
Current Liabilities
               
Accounts payable
 
$
60,213
   
$
90,980
 
Accrued royalties
   
88,162
     
78,062
 
Short-term portion of long-term debt
   
6,250
     
 
Contract liabilities
   
408,630
     
507,365
 
Accrued employment costs
   
64,215
     
97,230
 
Accrued income taxes
   
11,418
     
21,025
 
Short-term portion of operating lease liabilities
   
18,041
     
 
Other accrued liabilities
   
75,896
     
75,900
 
Total Current Liabilities
   
732,825
     
870,562
 
                 
Long-Term Debt
   
724,291
     
478,790
 
Accrued Pension Liability
   
154,529
     
166,331
 
Deferred Income Tax Liabilities
   
141,316
     
143,775
 
Operating Lease Liabilities
   
166,642
     
 
Other Long-Term Liabilities
   
68,464
     
96,197
 
Total Liabilities
   
1,988,067
     
1,755,655
 
                 
Shareholders’ Equity
               
Preferred Stock, $1 par value: Authorized – 2 million, Issued 0
   
     
 
Class A Common Stock, $1 par value: Authorized-180 million, Issued 70,138,555 and 70,126,963 as of July 31, 2019 and April 30, 2019, respectively
   
70,139
     
70,127
 
Class B Common Stock, $1 par value: Authorized-72 million, Issued 13,043,115 and 13,054,707 as of July 31, 2019 and April 30, 2019, respectively
   
13,043
     
13,055
 
Additional paid-in-capital
   
424,904
     
422,305
 
Retained earnings
   
1,915,445
     
1,931,074
 
Accumulated other comprehensive loss
   
(536,024
)
   
(508,738
)
Treasury stock (Class A - 22,795,256 and 22,633,869 as of July 31, 2019 and April 30, 2019, respectively; Class B -  3,917,574 and 3,917,574 as of July 31, 2019 and April 30, 2019, respectively)
   
(755,501
)
   
(746,476
)
Total Shareholders’ Equity
   
1,132,006
     
1,181,347
 
Total Liabilities and Shareholders' Equity
 
$
3,120,073
   
$
2,937,002
 

See accompanying notes to the unaudited condensed consolidated financial statements.
5


JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED
Dollars in thousands except per share information

 
Three Months Ended
July 31,
 
   
2019
   
2018
 
Revenue, net
 
$
423,530
   
$
410,901
 
                 
Costs and Expenses
               
Cost of sales
   
143,096
     
127,738
 
Operating and administrative expenses
   
250,170
     
240,426
 
Restructuring and related charges (credits)
   
10,735
     
(6,086
)
Amortization of intangibles
   
14,970
     
12,683
 
Total Costs and Expenses
   
418,971
     
374,761
 
                 
Operating Income
   
4,559
     
36,140
 
                 
Interest Expense
   
(6,077
)
   
(2,796
)
Foreign Exchange Transaction Gains (Losses)
   
2,652
     
(1,729
)
Interest and Other Income
   
2,833
     
2,466
 
                 
Income Before Taxes
   
3,967
     
34,081
 
Provision for Income Taxes
   
343
     
7,786
 
                 
Net Income
 
$
3,624
   
$
26,295
 
                 
Earnings Per Share
               
Basic
 
$
0.06
   
$
0.46
 
Diluted
 
$
0.06
   
$
0.45
 
                 
Weighted Average Number of Common Shares Outstanding
               
Basic
   
56,536
     
57,430
 
Diluted
   
56,905
     
58,114
 

See accompanying notes to the unaudited condensed consolidated financial statements.

6


JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS – UNAUDITED
Dollars in thousands

 
Three Months Ended
July 31,
 
   
2019
   
2018
 
Net Income
 
$
3,624
   
$
26,295
 
                 
Other Comprehensive Loss:
               
Foreign currency translation adjustment
   
(35,539
)
   
(40,325
)
Unamortized retirement costs, tax (expense) of $(2,180) and $(2,488), respectively
   
8,168
     
8,811
 
Unrealized gain (loss) on interest rate swaps, tax benefit of $44 and $204, respectively
   
85
     
(652
)
Total Other Comprehensive Loss
   
(27,286
)
   
(32,166
)
                 
Comprehensive Loss
 
$
(23,662
)
 
$
(5,871
)

See accompanying notes to the unaudited condensed consolidated financial statements.
7


JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED
Dollars in thousands

 
Three Months Ended
July 31,
 
   
2019
   
2018
 
Operating Activities
           
Net income
 
$
3,624
   
$
26,295
 
Adjustments to reconcile net income to net cash used in operating activities:
               
Amortization of intangibles
   
14,970
     
12,683
 
Amortization of product development assets
   
8,714
     
9,428
 
Depreciation and amortization of technology, property and equipment
   
18,535
     
18,060
 
Restructuring charges (credits)
   
10,735
     
(6,086
)
Stock-based compensation expense
   
4,604
     
3,930
 
Employee retirement plan expense
   
1,841
     
2,469
 
Royalty advances
   
(25,687
)
   
(28,526
)
Earned royalty advances
   
33,886
     
39,069
 
Foreign currency (gains) losses
   
(2,652
)
   
1,729
 
Other non-cash charges (credits)
   
3,750
     
(1,287
)
Changes in Operating Assets and Liabilities
               
Accounts receivable, net
   
11,934
     
(64,053
)
Accounts payable
   
(23,742
)
   
(36,138
)
Contract liabilities
   
(103,268
)
   
(67,221
)
Other accrued liabilities
   
(33,404
)
   
(50,424
)
Other assets and liabilities
   
(18,008
)
   
(4,917
)
Net Cash Used In Operating Activities
   
(94,168
)
   
(144,989
)
Investing Activities
               
Product development spending
   
(6,211
)
   
(6,246
)
Additions to technology, property and equipment
   
(24,202
)
   
(18,304
)
Businesses acquired in purchase transactions, net of cash acquired
   
(73,209
)
   
 
Acquisitions of publication rights and other
   
(2,270
)
   
(1,970
)
Net Cash Used in Investing Activities
   
(105,892
)
   
(26,520
)
Financing Activities
               
Repayment of long-term debt
   
(10,400
)
   
(29,900
)
Borrowing of long-term debt
   
264,248
     
177,654
 
Payment of debt issuance costs
   
(3,957
)
   
 
Purchase of treasury shares
   
(10,000
)
   
(7,994
)
Change in book overdrafts
   
(6,169
)
   
(9,390
)
Cash dividends
   
(19,252
)
   
(19,043
)
Net (payments) proceeds from exercise of stock options and other
   
(1,137
)
   
7,880
 
Net Cash Provided by Financing Activities
   
213,333
     
119,207
 
Effects of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash
   
(2,138
)
   
(4,363
)
Cash Reconciliation:
               
Cash and Cash Equivalents
   
92,890
     
169,773
 
Restricted cash included in Prepaid expenses and other current assets
   
658
     
484
 
Balance at Beginning of Period
   
93,548
     
170,257
 
    Increase/(Decrease) for the Period
   
11,135
     
(56,665
)
Cash and cash equivalents
   
104,025
     
113,108
 
Restricted cash included in Prepaid expenses and other current assets
   
658
     
484
 
Balance at End of Period
 
$
104,683
   
$
113,592
 
Cash Paid During the Period for:
               
Interest
 
$
5,410
   
$
2,476
 
Income taxes, net of refunds
 
$
11,484
   
$
12,202
 

See the accompanying notes to the unaudited condensed consolidated financial statements.
8


JOHN WILEY & SONS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY – UNAUDITED
Dollars in thousands

 
Common Stock
Class A
   
Common Stock
Class B
   
Additional
Paid-in Capital
   
Retained
Earnings
   
Treasury
Stock
   
Accumulated Other
Comprehensive Loss
   
Total
Shareholder’s Equity
 
Balance at April 30, 2019
 
$
70,127
   
$
13,055
   
$
422,305
   
$
1,931,074
   
$
(746,476
)
 
$
(508,738
)
 
$
1,181,347
 
                                                         
Restricted Shares Issued under Stock-based Compensation Plans
   
     
     
(2,112
)
   
(1
)
   
2,219
     
     
106
 
Net (Payments)/Proceeds from Exercise of Stock Options and Other
   
     
     
107
     
     
(1,244
)
   
     
(1,137
)
Stock-based Compensation Expense
   
     
     
4,604
     
     
     
     
4,604
 
Purchase of Treasury Shares
   
     
     
     
     
(10,000
)
   
     
(10,000
)
Class A Common Stock Dividends ($0.34 per share)
   
     
     
     
(16,148
)
   
     
     
(16,148
)
Class B Common Stock Dividends ($0.34 per share)
   
     
     
     
(3,104
)
   
     
     
(3,104
)
Common Stock Class Conversions
   
12
     
(12
)
   
     
     
     
     
 
Comprehensive Income (Loss), Net of Tax
   
     
     
     
3,624
     
     
(27,286
)
   
(23,662
)
Balance at July 31, 2019
 
$
70,139
   
$
13,043
   
$
424,904
   
$
1,915,445
   
$
(755,501
)
 
$
(536,024
)
 
$
1,132,006
 


 
Common Stock
Class A
   
Common Stock
Class B
   
Additional
Paid-in Capital
   
Retained
Earnings
   
Treasury
Stock
   
Accumulated Other
Comprehensive Loss
   
Total
Shareholder’s Equity
 
Balance at April 30, 2018
 
$
70,111
   
$
13,071
   
$
407,120
   
$
1,834,057
   
$
(694,222
)
 
$
(439,580
)
 
$
1,190,557
 
                                                         
Restricted Shares Issued under Stock-based Compensation Plans
   
     
     
(2,156
)
   
(1
)
   
2,203
     
     
46
 
Net Proceeds from Exercise of Stock Options and Other
   
     
     
4,594
     
     
3,286
     
     
7,880
 
Stock-based Compensation Expense
   
     
     
3,930
     
     
     
     
3,930
 
Purchase of Treasury Shares
   
     
     
     
     
(7,994
)
   
     
(7,994
)
Class A Common Stock Dividends ($0.33 per share)
   
     
     
     
(16,022
)
   
     
     
(16,022
)
Class B Common Stock Dividends ($0.33 per share)
   
     
     
     
(3,021
)
   
     
     
(3,021
)
Common Stock Class Conversions
   
4
     
(4
)
   
     
     
     
     
 
Adjustment Due to Adoption of New Revenue Standard
   
     
     
     
4,503
     
     
     
4,503
 
Comprehensive Income (Loss), Net of Tax
   
     
     
     
26,295
     
     
(32,166
)
   
(5,871
)
Balance at July 31, 2018
 
$
70,115
   
$
13,067
   
$
413,488
   
$
1,845,811
   
$
(696,727
)
 
$
(471,746
)
 
$
1,174,008
 

See accompanying notes to the audited consolidated financial statements.
9


JOHN WILEY & SONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Basis of Presentation

Throughout this report, when we refer to “Wiley,” the “Company,” “we,” “our,” or “us,” we are referring to John Wiley & Sons, Inc. and all our subsidiaries, except where the context indicates otherwise.

Our Unaudited Condensed Consolidated Financial Statements include all the accounts of the Company and our subsidiaries. We have eliminated all intercompany transactions and balances in consolidation. 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 Unaudited Condensed Consolidated Financial Condition, Results of Operations, Comprehensive Income and Cash Flows for the periods presented. Operating results for the interim period are not necessarily indicative of the results expected for the full year. All amounts are in thousands, except per share amounts, and approximate due to rounding. These financial statements should be read in conjunction with the most recent audited consolidated financial statements included in our Form 10-K for the fiscal year ended April 30, 2019 as filed with the SEC on July 1, 2019 (“2019 Form 10-K”).

Our Unaudited Condensed Consolidated Financial Statements were prepared in accordance with the interim reporting requirements of the SEC. As permitted under those rules, annual footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted. The preparation of our Unaudited Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Certain prior year amounts have been reclassified to conform to the current year’s presentation. The Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended July 31, 2018, includes a reclassification of $4.5 million between Operating Activities within the net change in operating assets and liabilities and Investing Activities related to costs to fulfill a contract and product development spending.  In addition, for the three months ended July 31, 2018, amortization expense related to costs to fulfill a contract of $0.8 million was reclassed from amortization of product development spending to other non-cash charges (credits) within Operating Activities.

Note 2 Recent Accounting Standards

Recently Adopted Accounting Standards

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU 2018-02 “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The standard was effective for us on May 1, 2019, and interim periods within that fiscal year, with early adoption permitted. We adopted ASU 2018-02 on May 1, 2019. We did not elect to reclassify the income tax effects from comprehensive income to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act. Our policy for releasing the income tax effects from accumulated other comprehensive income is when the corresponding pretax accumulated other comprehensive income items are reclassified to earnings.

Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” to simplify and improve the application and financial reporting of hedge accounting. Subsequently, in November 2018, the FASB issued ASU 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”.  ASU 2017-12 eases the requirements for measuring and reporting hedge ineffectiveness and clarifies that changes in the fair value of hedging instruments for cash flow, net investment, and fair value hedges should be reflected in the same income statement line item as the earnings effect of the hedged item. The guidance also permits entities to designate specific components in cash flow and interest rate hedges as the hedged risk, instead of using total cash flows. ASU 2018-16 allows the use of the OIS rate based on the SOFR as a U.S. benchmark interest rate for hedge accounting purposes. These ASUs were effective for us on May 1, 2019, with early adoption permitted. We adopted ASU 2017-12, 2018-06 and 2019-04, for those portions related to ASU 2017-02, on May 1, 2019 and there was no impact to our consolidated financial statements at the date of adoption. The future impact will depend on any future hedging activities we may enter into.

10


Leases

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)”. Subsequently, the FASB issued in March 2019, ASU 2019-01, “Leases (Topic 842): Codification Improvements”, in December 2018 ASU 2018-20, “Leases (Topic 842): Narrow Scope Improvements for Lessors”, and in July 2018 the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements” and ASU 2018-10, “Codification Improvements to Topic 842, Leases”.  ASU 2016-02 requires an entity to recognize a right-of-use asset (“ROU”) and lease liability for all leases with terms of more than 12 months and provide enhanced disclosures. Recognition, measurement, and presentation of expenses depends on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance.

The new standard provides a number of optional practical expedients in transition. We elected the practical expedients to forgo a reassessment of (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) initial direct costs.  We did not elect the practical expedient allowing the use-of-hindsight which would have required us to reassess the lease term of our leases based on all facts and circumstances through the effective date.  In addition, we did not elect the practical expedient pertaining to land easements.

In addition, the new standard provides as a practical expedient, certain policy elections for ongoing lease accounting which we elected at the date of adoption and included the following, (i) to not separate nonlease components from the associated lease component if certain conditions are met, and (ii) to not recognize ROU assets and lease liabilities for leases that qualify as short-term.

The standard was effective for us on May 1, 2019, with early adoption permitted. A modified retrospective transition approach was required, applying the standard to all leases existing at the date of initial application. A company could choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as of its date of initial application. We adopted the new standard on May 1, 2019 and used the effective date as the date of initial application. Accordingly, previously reported financial information was not updated, and the disclosures required under the new standard will not be provided for dates and periods before May 1, 2019. 

At adoption, we recognized operating lease liabilities of $178 million based on the present value of the remaining minimum rental payments for existing operating leases and ROU assets of $142 million on our Unaudited Condensed Consolidated Statement of Financial Position. The difference between the ROU assets and operating lease liabilities represents the existing deferred rent liabilities, prepaid rent balances, and applicable restructuring liabilities, which were reclassified upon adoption to reduce the measurement of the ROU assets. The adoption of the standard did not have an impact on our Unaudited Condensed Consolidated Statement of Shareholders’ Equity, Condensed Consolidated Statement of Income or Condensed Consolidated Statement of Cash Flow. See Note 5, “Operating Leases”, for further details on our operating leases.

Recently Issued Accounting Standards

Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

In August 2018, the FASB issued ASU 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for us on May 1, 2020, and interim periods within that fiscal year, with early adoption permitted. We are currently assessing the impact the new guidance will have on our consolidated financial statements.

Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued ASU 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and added additional disclosures. The standard is effective for us on May 1, 2021, with early adoption permitted. The amendments in ASU 2018-14 would need to be applied on a retrospective basis.  We are currently assessing the impact the new guidance will have on our disclosures.

11


Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 removes, modifies and added disclosures. The standard is effective for us on May 1, 2020, with early adoption permitted. Certain disclosures in ASU 2018-13 would need to be applied on a retrospective basis and others on a prospective basis. We are currently assessing the impact the new guidance will have on our disclosures.

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, “Intangibles–Goodwill and Other (Topic 350): “Simplifying the Test for Goodwill Impairment”, which simplifies the measurement of a potential goodwill impairment charge by eliminating the requirement to calculate an implied fair value of the goodwill based on the fair value of a reporting unit’s other assets and liabilities. The new guidance eliminates the implied fair value method and instead measures a potential impairment charge based on the excess of a reporting unit’s carrying value compared to its fair value. The impairment charge cannot exceed the total amount of goodwill allocated to that reporting unit. The standard is effective for us on May 1, 2020, with early adoption permitted. Based on our most recent annual goodwill impairment test completed in the year ended April 30, 2019, we expect no impact upon adoption.

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” Subsequently, in May 2019, the FASB issued ASU 2019-05 - "Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief”, in April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” and in November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”.  ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. ASU 2016-13, ASU 2019-05, ASU 2019-04 and ASU 2018-19 are effective for us on May 1, 2020, including interim periods within those fiscal periods, with early adoption permitted. We are currently assessing the impact the new guidance will have on our consolidated financial statements.

Note 3 Acquisitions

Fiscal Year 2020

Zyante Inc.

On July 1, 2019, we completed the acquisition of Zyante Inc. (“zyBooks”), a leading provider of computer science and STEM education courseware. The results of operations of zyBooks is included in our Education Publishing & Professional Learning segment results. The preliminary fair value of the cash consideration transferred, net of $1.8 million of cash acquired was approximately $54.1 million. We recorded the preliminary fair value of the assets acquired and liabilities assumed on the acquisition date, which included a preliminary allocation of $33.2 million of goodwill and $28.5 million of intangible assets, consisting of developed technology, customer relationships, content and trademarks.

Other Acquisitions

On May 31, 2019, we completed the acquisition of certain assets of Knewton, Inc. (“Knewton”). Knewton is a provider of affordable courseware and adaptive learning technology. The results of Knewton are included in our Education Publishing & Professional Learning segment results. In addition, in the three months ended July 31, 2019, we also completed the acquisition of two immaterial businesses, which are included in our Research Publishing & Platforms segment.

The preliminary fair value of cash consideration transferred during the three months ended July 31, 2019 was approximately $19.1 million. We recorded the preliminary fair value of the assets acquired and liabilities assumed on the acquisition date, which included a preliminary allocation of $9.4 million of goodwill and $15.3 million of intangible assets.

The allocation of the purchase price to the assets acquired and the liabilities assumed for the acquisitions discussed above is preliminary and could be revised as a result of additional information obtained due to the finalization of the third-party valuation report,  tax related matters and contingencies, but such amounts will be finalized within the measurement period, which will not exceed one year from the acquisition dates.

12

Fiscal Year 2019

The Learning House, Inc.

On November 1, 2018, we completed the acquisition of 100% of the outstanding stock of The Learning House, Inc. (“Learning House”) a diversified education services provider. The results of operations of Learning House are included in our Education Services segment.

The fair value of the consideration transferred was approximately $201.3 million which included $200.7 million of cash and $0.6 million of warrants, inclusive of purchase price adjustments which were finalized in the fourth quarter of fiscal year 2019. We financed the payment of the cash consideration through borrowings under our RCA (as defined below in Note 15, “Debt and Available Credit Facilities”). The warrants were classified as equity and allow the holder to purchase 400,000 shares of our Class A Common Stock at an exercise price of $90.00, subject to adjustments. The term of the warrants is three years, expiring on November 1, 2021. The fair value of the warrants was determined using the Black-Scholes option pricing model. The fair value of the cash consideration transferred, net of $10.3 million of cash acquired was approximately $190.4 million.

The allocation of the consideration transferred to the assets acquired and the liabilities assumed is preliminary and could be revised as a result of additional information obtained due to the finalization of the third-party valuation report,  tax related matters and contingencies, but such amounts will be finalized within the measurement period, which will not exceed one year from the acquisition date. During the three months ended July 31, 2019, no revisions were made to the allocation of the consideration transferred to the assets acquired and liabilities assumed.

Note 4 Revenue Recognition, Contracts with Customers

Disaggregation of Revenue

As previously announced, we have changed our segment reporting structure to align with our strategic focus areas. See Note 10, “Segment Information,” for more details. The following table presents our revenue from contracts with customers disaggregated by segment and product type.


 
Three Months Ended July 31, 2019
 
   
Research
Publishing &
Platforms
   
Education
Publishing &
Professional
Learning
   
Education
Services
   
Total
 
Research Publishing & Platforms:
                       
Research Publishing
 
$
219,927
   
$
   
$
   
$
219,927
 
Research Platforms
   
9,448
     
     
     
9,448
 
Education Publishing & Professional Learning:
                               
Education Publishing
   
     
65,523
     
     
65,523
 
Professional Learning
   
     
79,335
     
     
79,335
 
Education Services:
                               
Education Services
   
     
     
49,297
     
49,297
 
Total
 
$
229,375
   
$
144,858
   
$
49,297
   
$
423,530
 


 
Three Months Ended July 31, 2018
 
   
Research
Publishing &
Platforms
   
Education
Publishing &
Professional
Learning
   
Education
Services
   
Total
 
Research Publishing & Platforms:
                       
Research Publishing
 
$
216,714
   
$
   
$
   
$
216,714
 
Research Platforms
   
8,603
     
     
     
8,603
 
Education Publishing & Professional Learning:
                               
Education Publishing
   
     
74,034
     
     
74,034
 
Professional Learning
   
     
82,390
     
     
82,390
 
Education Services:
                               
Education Services
   
     
     
29,160
     
29,160
 
Total
 
$
225,317
   
$
156,424
   
$
29,160
   
$
410,901
 

13


Accounts Receivable, net and Contract Liability Balances

When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue when, or as, control of the products or services are transferred to the customer and all revenue recognition criteria have been met.

The following table provides information about receivables and contract liabilities from contracts with customers.


 
July 31, 2019
   
April 30, 2019
   
Increase/
(Decrease)
 
Balances from contracts with customers:
                 
Accounts receivable, net
 
$
281,055
   
$
294,867
   
$
(13,812
)
Contract liability (1)
   
408,630
     
507,365
     
(98,735
)
Contract liability (included in Other Long-Term Liabilities)
 
$
13,752
   
$
10,722
   
$
3,030
 

(1)
The sales return reserve recorded in Contract Liability is $33.4 million and $25.9 million, as of July 31, 2019 and April 30, 2019, respectively.

Revenue recognized for the three months ended July 31, 2019 relating to the contract liability at April 30, 2019 was $194.3 million.

Remaining Performance Obligations included in Contract Liability

As of July 31, 2019, the aggregate amount of the transaction price allocated to the remaining performance obligations is approximately $422.4 million, which included the sales return reserve of $33.4 million. Excluding the sales return reserve, we expect that approximately $375.2 million will be recognized in the next twelve months with the remaining $13.8 million to be recognized thereafter.

Assets Recognized for the Costs to Fulfill a Contract

Costs to fulfill a contract are directly related to a contract that will be used to satisfy a performance obligation in the future and are expected to be recovered. These types of costs are incurred in the following revenue streams, (1) Research Platforms and (2) Education Services.

Our assets associated with incremental costs to fulfill a contract were $9.5 million at July 31, 2019 and are included within Other Non-Current Assets on our Unaudited Condensed Consolidated Statements of Financial Position. We recorded amortization expense of $1.0 million and $0.8 million during the three months ended July 31, 2019 and 2018, respectively, related to these assets within Cost of Sales on the Unaudited Condensed Consolidated Statements of Income.

Sales and value-added taxes are excluded from revenues. Shipping and handling costs, which are primarily incurred within the Education Publishing & Professional Learning segment, occur before the transfer of control of the related goods. Therefore, in accordance with the new revenue standard, it is not considered a promised service to the customer and would be considered a cost to fulfill our promise to transfer the goods. Costs incurred for third party shipping and handling are primarily reflected in Operating and Administrative Expenses on the Unaudited Condensed Consolidated Statements of Income. We incurred $7.4 million and $7.9 million in shipping and handling costs in the three months ended July 31, 2019 and 2018, respectively.

Note 5 Operating Leases

On May 1, 2019, we adopted a new accounting standard for leases. For further information, see Note 2, “Recent Accounting Standards.”

We have contractual obligations as a lessee with respect to offices, warehouses and distribution centers, automobiles, and office equipment.

We determine if an arrangement is a lease at inception of the contract in accordance with guidance detailed in the new standard and we perform the lease classification test as of the lease commencement date. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

The present value of the lease payments is calculated using an incremental borrowing rate, which was determined based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use an unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate.

14


Under the new leasing standard, leases that are more than one year in duration are capitalized and recorded on the Unaudited Condensed Consolidated Statements of Financial Position. Some of our leases offer an option to extend the term of such leases. We utilize the reasonably certain threshold criteria in determining which options we will exercise. Furthermore, some of our lease payments are based on index rates with minimum annual increases. These represent fixed payments and are captured in the future minimum lease payments calculation.

For operating leases, the ROU assets and liabilities are presented in our Unaudited Condensed Consolidated Statement of Financial Position as follows:


 
Balance at July 31, 2019
 
Operating Lease Right-of-Use Assets
 
$
147,370
 
Short-term portion of operating lease liabilities
   
18,041
 
Operating Lease Liabilities, non-current
 
$
166,642
 

During the three months ended July 31, 2019, we added $10.3 million to the ROU assets and $11.9 million to the operating lease liabilities due to new leases as well as modifications and remeasurements to our existing operating leases.

Our total net lease costs are as follows:

 
Three Months Ended
July 31, 2019
 
Operating lease cost
 
$
6,861
 
Variable lease cost
   
1,203
 
Sublease income
   
(523
)
Total net lease cost
 
$
7,541
 

Other supplemental information includes the following:

 
Weighted-Average
Remaining Contractual
Lease Term (Years)
   
Three Months Ended
July 31, 2019
 
Operating leases
   
10
       
               
Weighted-average discount rate:
             
Operating leases
           
5.82
%
                 
Cash paid for amounts included in the measurement of lease liabilities:
               
Operating cash flows from operating leases
         
$
7,300
 

The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded in the Unaudited Condensed Consolidated Statement of Financial Position as of July 31, 2019:

Fiscal Year
 
Operating Lease
Liabilities
 
2020 (remaining 9 months)
 
$
23,920
 
2021
   
27,376
 
2022
   
24,446
 
2023
   
22,109
 
2024
   
21,651
 
Thereafter
   
133,534
 
Total undiscounted lease payments
   
253,036
 
         
Less: Imputed interest
   
68,353
 
         
Present Value of Minimum Lease Payments
   
184,683
 
         
Less: Current portion
   
18,041
 
         
Noncurrent portion
 
$
166,642
 

15


Note 6 Stock-Based Compensation

We have stock-based compensation plans under which employees may be granted performance-based stock awards and other restricted stock awards.  Prior to fiscal year 2017, we also granted options to purchase shares of our common stock at the fair market value at the time of grant. We recognize the grant date fair value of stock-based compensation in net income on a straight-line basis, net of estimated forfeitures over the requisite service period. The measurement of performance for performance-based stock awards is based on actual financial results for targets established three years in advance. For the three months ended July 31, 2019 and 2018, we recognized stock-based compensation expense, on a pre-tax basis, of $4.6 million and $3.9 million, respectively.

The following table summarizes restricted stock awards we granted (shares in thousands):


Three Months Ended
July 31,
 
 
2019
 
2018
 
Restricted Stock:
           
Awards granted
   
500
     
230
 
Weighted average fair value of grant
 
$
45.31
   
$
66.55
 

Note 7 Accumulated Other Comprehensive Loss

Changes in Accumulated Other Comprehensive Loss by component, net of tax, for the three months ended July 31, 2019 and 2018 were as follows:


 
Foreign
Currency Translation
   
Unamortized
Retirement Costs
   
Interest
Rate Swaps
   
Total
 
Balance at April 30, 2019
 
$
(312,107
)
 
$
(196,057
)
 
$
(574
)
 
$
(508,738
)
Other comprehensive (loss) income before reclassifications
   
(35,539
)
   
7,130
     
328
     
(28,081
)
Amounts reclassified from accumulated other comprehensive loss
   
     
1,038
     
(243
)
   
795
 
Total other comprehensive (loss) income
   
(35,539
)
   
8,168
     
85
     
(27,286
)
Balance at July 31, 2019
 
$
(347,646
)
 
$
(187,889
)
 
$
(489
)
 
$
(536,024
)
                                 
Balance at April 30, 2018
 
$
(251,573
)
 
$
(191,026
)
 
$
3,019
   
$
(439,580
)
Other comprehensive income (loss) before reclassifications
   
(40,325
)
   
7,720
     
70
     
(32,535
)
Amounts reclassified from accumulated other comprehensive loss
   
     
1,091
     
(722
)
   
369
 
Total other comprehensive income (loss)
   
(40,325
)
   
8,811
     
(652
)
   
(32,166
)
Balance at July 31, 2018
 
$
(291,898
)
 
$
(182,215
)
 
$
2,367
   
$
(471,746
)

During the three months ended July 31, 2019 and 2018, pre-tax actuarial losses included in Unamortized Retirement Costs of approximately $1.3 million and $1.4 million, respectively, were amortized from Accumulated Other Comprehensive Loss and recognized as pension expense in Operating and Administrative Expenses and Interest and Other Income in the Unaudited Condensed Consolidated Statements of Income.

Note 8 Reconciliation of Weighted Average Shares Outstanding

A reconciliation of the shares used in the computation of earnings per share follows:


 
Three Months Ended
July 31,
 
   
2019
   
2018
 
Weighted average shares outstanding
   
56,564
     
57,510
 
Less: Unvested restricted shares
   
(28
)
   
(80
)
Shares used for basic earnings per share
   
56,536
     
57,430
 
Dilutive effect of stock options and other stock awards
   
369
     
684
 
Shares used for diluted earnings per share
   
56,905
     
58,114
 

Since their inclusion in the calculation of diluted earnings per share would have been anti-dilutive, options to purchase 252,704 shares of Class A Common Stock have been excluded for the three months ended July 31, 2019. There were no options excluded for the three months ended July 31, 2018.

Warrants to purchase 511,094 shares of Class A Common Stock have not been included for the three months ended July 31, 2019. There were no warrants issued during the three months ended July 31, 2018.

There were no restricted shares excluded for the three months ended July 31, 2019 and July 31, 2018.

16


Note 9 Restructuring and Related Charges

Business Optimization Program

Beginning in fiscal year 2020, we initiated a multi-year Business Optimization Program (the “Business Optimization Program”) to drive efficiency improvement and operating savings.

The following tables summarize the pre-tax restructuring charges related to this program:


 
Three Months Ended
 
   
July 31, 2019
 
Charges by Segment:
     
Research Publishing & Platforms
 
$
2,636
 
Education Publishing & Professional Learning
   
2,777
 
Education Services
   
2,192
 
Corporate Expenses
   
3,265
 
Total Restructuring and Related Charges
 
$
10,870
 
         
Charges by Activity:
       
Severance and termination benefits
 
$
10,709
 
Operating lease right-of-use asset impairment
   
161
 
Total Restructuring and Related Charges
 
$
10,870
 

The following table summarizes the activity for the Business Optimization Program liability for the three months ended July 31, 2019:


 
April 30, 2019
   
Charges
   
Payments
   
Foreign
Translation
   
July 31, 2019
 
Severance and termination benefits
 
$
   
$
10,709
   
$
(1,337
)
 
$
(33
)
 
$
9,339
 
Total
 
$
   
$
10,709
   
$
(1,337
)
 
$
(33
)
 
$
9,339
 

The restructuring liability as of July 31, 2019 for accrued severance and termination benefits is reflected in Accrued Employment Costs in the Unaudited Condensed Consolidated Statement of Financial Position.

Restructuring and Reinvestment Program

Beginning in the year ended April 30, 2013, we initiated a global program (the “Restructuring and Reinvestment Program”) to restructure and realign our cost base with current and anticipated future market conditions. We are targeting a majority of the expected cost savings achieved to improve margins and earnings, while the remainder will be reinvested in high-growth digital business opportunities.

The following tables summarize the pre-tax restructuring credits related to this program:


 
Three Months Ended July 31,
   
Total Charges
 
   
2019
   
2018 (1)
   
Incurred to Date (1)
 
(Credits) Charges by Segment:
                 
Research Publishing & Platforms
 
$
(16
)
 
$
(980
)
 
$
26,528
 
Education Publishing & Professional Learning
   
28
     
(717
)
   
42,867
 
Education Services
   
(103
)
   
(208
)
   
3,764
 
Corporate Expenses
   
(44
)
   
(4,181
)
   
96,334
 
Total Restructuring and Related Credits
 
$
(135
)
 
$
(6,086
)
 
$
169,493
 
                         
(Credits) Charges by Activity:
                       
Severance and termination benefits
 
$
(350
)
 
$
(5,778
)
 
$
115,909
 
Consulting and Contract Termination Costs
   
     
135
     
21,155
 
Other Activities