JOHN WILEY & SONS, INC. (NYSE:JW.A) Files An 8-K Results of Operations and Financial ConditionITEM 2.02:
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On March 7, 2017, John Wiley Sons Inc., a New York corporation (the Company), issued a press release announcing the Companys financial results for the third quarter of fiscal year 2017. A copy of the Companys press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The information in this report, including the exhibits hereto, (x) shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and (y) shall not be incorporated by reference into any filing of the Company with the Securities and Exchange Commission, whether made before or after the date hereof, regardless of any general incorporation language in such filings (unless the Company specifically states that the information or exhibits in this particular report are incorporated by reference). The furnishing of the information set forth in this report is not intended to, and does not, constitute a determination or admission as to the materiality or completeness of such information.
ITEM 9.01:
FINANCIAL STATEMENTS AND EXHIBITS
Exhibit No. Description
99.1 Press release dated March 7, 2017 titled Wiley Reports Third Quarter Fiscal Year 2017 Results (furnished and not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and not deemed incorporated by reference in any filing under the Securities Act of 1934, as amended).
Wiley Reports Third Quarter Fiscal Year 2017 Results
Third quarter revenue of $436.5 million, up 3% over prior year on a constant currency basis (flat on a US GAAP basis) primarily due to the impact of shifting to time-based journal subscriptions (+$29M)
Third quarter journal subscription revenue up 23% on a constant currency basis (+19% US GAAP) primarily due to the impact of shifting to time-based journal subscriptions (+$29M); excluding the impact of the subscription shift and currency, journal subscription revenue was even
Third quarter adjusted EPS of $0.92, up 37% on a constant currency basis primarily due to shift to time-based subscriptions (+$0.33). Adjusted EPS excludes certain charges and credits further described below and in the attached financial schedules. EPS on a US GAAP basis was $0.82.
Four new university Online Program Management partners signed George Mason (VA), Seton Hall (NJ), St. Johns (NY), and Vlerick (Belgium); 19 new programs
Reaffirming full-year outlook of mid-single digit decline in adjusted EPS but revising revenue guidance from flat to a low-single digit decline due to market weakness for books. Both exclude the impact of foreign exchange, the shift to time-based journal subscriptions, and acquisitions
March 7, 2017 (Hoboken, NJ) John Wiley Sons, Inc. (NYSE: JWa and JWb), a global research and learning company, today announced the following results for the third quarter of fiscal year 2017, ending January 31:
% Change
$ millions
FY17
FY16
Excluding FX
Including FX
Revenue:
Q3
$436.5
$436.4
3%
0%
Nine Months
$1,266.3
$1,292.7
1%
(2%)
GAAP EPS:
Q3
$0.82
$0.61
34%
Nine Months
$1.15
$1.90
(39%)
Adjusted EPS:
Q3
$0.92
$0.67
37%
37%
Nine Months
$2.18
$2.04
9%
7%
Adjusted EPS exclude tax charges and credits, restructuring charges and credits, and pension settlement as more fully described in the attached financial schedules.
Management Commentary
Results were mixed this quarter, said Mark Allin, Wileys President and CEO. Research revenue and earnings were fully in line with our expectations, with steady performance from journal subscriptions and double-digit growth from author-funded access. The Solutions business continued to post double-digit revenue growth and very strong profit improvement. We are encouraged by the momentum in the Online Program Management business, with four new partners and nineteen new programs. Publishing revenue showed a significant decline due to market weakness in Books and Reference Material, particularly print.
Fiscal Year 2017 Outlook
Wiley is reaffirming its fiscal year 2017 operational outlook of mid-single digit decline in adjusted EPS and lowering its operational revenue outlook from flat to a low-single digit decline due to further weakness in print book markets. Operationally speaking, revenue and adjusted EPS for the nine months were down 3% and 6%, respectively. Note, the adjusted full year outlook excludes foreign exchange, the favorable impact from shifting to time-based journal subscription agreements (+$34 million in revenue and +$0.38 in EPS), and the partial year revenue contribution (approximately +$20 million) and EPS dilution (approximately -$0.10) of recent acquisitions. Also note, the fiscal year 2017 impact of the shift to time-based journal agreements was projected to be +$37 million of revenue and +$0.42 of EPS; however, due to the prolonged weakness in the British Pound, the FY17 impact has lowered to+$34 million and +0.38 per share.
Foreign Exchange (FX)
Note that foreign exchange was adverse to third quarter revenue by $12.9 million, neutral to EPS and adverse to nine month revenue and adjusted EPS by $36.8 million and $0.05, respectively. Wiley generates approximately half of its revenue from outside the United States and is therefore exposed to foreign exchange rate fluctuations, particularly in relation to the euro and pound sterling. The weighted average rates for fiscal 2016 were 1.11 and 1.50, respectively. Throughout this report, references are made to variances excluding foreign exchange or on a constant currency basis; such amounts exclude both currency translation effects and transactional gains and losses.
Adjusted Results
The Company provides financial measures referred to as adjusted contribution to profit and EPS, which exclude a previously announced tax charge; restructuring charges; a pension settlement charge related to voluntary lump sum buyouts; and certain deferred tax benefits as more fully described in the attached financial schedules. Variances to adjusted contribution to profit and EPS are on a constant currency basis unless otherwise noted. Management believes the exclusion of such items provides additional information to facilitate the analysis of results. These non-GAAP measures are not intended to replace the financial results reported in accordance with GAAP.
Third Quarter Summary
Third quarter revenue was flat on a US GAAP basis at $436.5 million, and increased 3% excluding the adverse impact of foreign exchange. Higher revenue on a constant currency basis was primarily driven by the favorable impact of the shift to time-based subscriptions (+$29M), the contribution of the Atypon acquisition (+$8M) and growth in Solutions (+$7M), partially offset by a continued decline in Publishing (-$25M) and the impact of an unusually large backfile sale in the year-ago period (-$10M). Excluding the favorable subscription shift and the contribution from Atypon, revenue on a constant currency base was down 5% due to the prior year backfile sale and current period declines in book sales (-18%), which offset double-digit growth in Solutions (+14%). Nine month revenue was down 2% on a US GAAP basis to $1,266 million, but up 1% excluding the impact of currency.
Third quarter EPS increased 34% on a US GAAP basis to $0.82, or 37% on an adjusted basis to $0.92. Adjusted EPS excludes restructuring charges in the current quarter ($0.10) and prior year period ($0.16); and a deferred tax benefit in the prior year period related to a future tax rate reduction in the UK ($0.10). The increase in Adjusted EPS was mainly due to the favorable impact of the shift to time-based journal subscriptions (+$0.33) and one-time tax benefits (+$0.12), partially offset by the impact of lower revenue in Publishing, dilution from the Atypon and Ranku acquisitions (-$0.03), and the impact of an unusually large backfile sale in the year-ago period (-$0.10). Excluding the shift to time-based subscriptions and Atypon and Ranku dilution, third quarter adjusted EPS was down 5%. Nine month EPS was down 39% on a US GAAP basis to $1.15 primarily due to the second quarter $0.82 one-time tax charge. Nine month adjusted EPS at constant currency was up 9%.
Restructuring Activity: Wiley recorded a $9.1 million restructuring charge in the quarter primarily related to the consolidation of facilities and severance provisions related to additional efficiency gains.
Net Debt and Cash Position: Net debt (debt less cash and cash equivalents) at the end of January was $383.4 million compared to $428.9 million as of January 31, 2017. Cash and cash equivalents as of January 31, 2017 were $482.3 million.
Free Cash Flow less Composition Costs (note, this is identical to the free cash flow metric previously reported but with a modified label): Free Cash Flow less Composition Costs was $119.5 million for the first nine months compared to $18.9 million in the prior year primarily due to earlier journal cash collections (timing), but also lower tax payments and lower restructuring payments, partially offset by higher capital spending.
Share Repurchases: Wiley repurchased 255,200 shares this quarter at a cost of $14.1 million, an average of $55.14 per share. Over 4 million shares remain in the current authorized repurchase programs.
RESEARCH (JOURNALS AND ATYPON)
Revenue: Third quarter revenue of $205.8 million rose 12% on a US GAAP basis, or 17% on a constant currency basis. Constant currency performance was driven by the favorable impact of shifting to time-based journal subscriptions (+$29M), the contribution from the Atypon acquisition (+$8M), steady underlying performance from Journal Subscriptions, and double-digit growth in author funded access (+15%), which offset a decline in Licensing, Reprints, Backfiles, and Other (-14%), largely as a result of the large backfile sale in the prior year period. For the nine months, Research revenue was up 4% on a US GAAP basis but increased 8% at constant currency primarily due to the shift to time-based journal subscriptions (+$34M) and 4-month contribution from Atypon (+$10M).
Contribution to Profit: Third quarter contribution to profit (CTP) of $52.5 million was up 19% on a US GAAP basis or 17% on an adjusted basis primarily due to the shift to time-based journal subscriptions (+$25M CTP), which more than offset the large, high-margin backfile sale in the prior year period; costs associated with Atypon; higher technology costs; and other spending to support society journals. For the first nine months, contribution to profit was up 1% on a US GAAP basis, or 4% on an adjusted basis, including the benefit from the shift to time-based journal subscriptions ($29M).
Calendar Year 2017 Journal Subscriptions: As of the end of January, calendar year 2017 Journal Subscriptions were up 5% on a constant currency basis due to earlier renewals resulting from the introduction of database model subscriptions, which provided library-wide access for our largest customers (note, 87% of CY17 targeted business has been contracted). Wiley expects full year calendar year 2017 subscription growth to be about 1%.
Society Publishing Agreements: No new society contracts were signed in the three month period; 78 were renewed/extended with combined annual revenue of $57 million; and five contracts with annual revenue of $0.6 million were not renewed.
PUBLISHING (BOOKS, COURSE WORKFLOW, ONLINE TEST PREPARATION)
Revenue: Third quarter revenue declined 15% on a US GAAP basis to $171.4 million, or 13% at constant currency due to continued market pressure on Books and Reference Material (-18%). Constant currency growth in Online Test Preparation (+29%), Course Workflow (+7%) and Licensing and Other (+7%) was more than offset by a 27% decline in Education Books, which continue to be impacted by rental and other market forces, and a 12% decline in STM and Professional Books, which saw a continued decline in print revenue. Also note, Wiley recorded an unusually large STM online book sale (+$4 million) in the prior year period. For the nine months, Publishing revenue declined 13% on a US GAAP basis, or 11% at constant currency.
Contribution to Profit: Third quarter contribution to profit fell 18% on a US GAAP basis to $38.8 million, or 21% on an adjusted basis. Lower profit was primarily due to the Book revenue decline, partially offset by additional efficiency savings generated from the Companys restructuring program. For the nine months, contribution to profit on both a US GAAP and adjusted basis was down 15%.
SOLUTIONS (ONLINE PROGRAM MANAGEMENT, CORPORATE LEARNING AND ASSESSMENT)
Revenue: Third quarter revenue rose 14% on both a US GAAP and constant currency basis to $59.2 million. Growth at constant currency was driven by Online Program Management (+15%) and Corporate Learning (+20%). Professional Assessment grew 5%. For the nine months, Solutions revenue was up 13% on both a US GAAP and constant currency basis.
Contribution to Profit: Third quarter contribution to profit on a US GAAP basis rose 105% to $3.6 million, or 137% on an adjusted basis. Growth at constant currency was due to revenue growth and improved operating efficiency. For the nine months, Contribution to Profit on a US GAAP basis was $9.1 million, or $10.7 million on an adjusted basis, as compared to $0.2 million and $0.5 million, respectively, in the prior year period.
Online Program Management: Wiley signed four new partners in the quarter George Mason (VA), Seton Hall (NJ), St. Johns (NY), and Vlerick Business School (Belgium). One non-US partnership was cancelled. Wiley also signed 19 new programs in the quarter and discontinued six. As of January 31, 2017, Wiley had 40 university partners and 244 programs under contract, compared to 37 partners and 231 programs at the end of last quarter.
Earnings Conference Call
Scheduled for today, March 7, at 10:00 a.m. (ET)
Access the webcast at www.wiley.com Investor Relations Events and Presentations, or http://www.wiley.com/WileyCDA/Section/id-370238.html
U.S. callers, please dial (800) 381-2652 and enter the participant code 9058430#.
International callers, please dial (719) 325-2190 and enter the participant code 9058430#.
An archive of the webcast will be available for a period of up to 14 days
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
This release contains certain forward-looking statements concerning the Company’s operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company, and are subject to change based on many important factors. Such factors include, but are not limited to (i) the level of investment in new technologies and products; (ii) subscriber renewal rates for the Company’s journals; (iii) the financial stability and liquidity of journal subscription agents; (iv) the consolidation of book wholesalers and retail accounts; (v) the market position and financial stability of key online retailers; (vi) the seasonal nature of the Company’s educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) the Company’s ability to protect its copyrights and other intellectual property worldwide (ix) the ability of the Company to successfully integrate acquired operations and realize expected opportunities and (x) 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.
About Wiley
Wiley is a global research and learning company. Through the Research segment, the Company provides scientific, technical, medical, and scholarly journals, as well as related content and services, for academic, corporate, and government libraries, learned societies, and individual researchers and other professionals. The Publishing segment provides scientific (STM), professional development, and education books and related content, as well as test preparation services and course workflow tools, to libraries, corporations, students, professionals, and researchers. In Solutions, Wiley provides online program management services for higher education institutions, and learning, development, and assessment services for businesses and professionals.
JOHN WILEY SONS, INC.
UNAUDITED SUMMARY OF OPERATIONS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2017 AND 2016
(in thousands, except per share amounts)
THIRD QUARTER ENDED JANUARY 31,
% Change
US GAAP
Adjustments
Adjusted
US GAAP
Adjustments
Adjusted
US GAAP
Adjusted
excl. FX
Revenue
$
436,456
–
436,456
436,393
–
436,393
0%
3%
Costs and Expenses
Cost of Sales
116,405
–
116,405
120,215
–
120,215
-3%
0%
Operating and Administrative
247,278
–
247,278
250,667
–
250,667
-1%
2%
Restructuring Charges (A)
9,118
(9,118)
–
13,713
(13,713)
–
Amortization of Intangibles
12,495
–
12,495
12,179
–
12,179
3%
8%
Total Costs and Expenses
385,296
(9,118)
376,178
396,774
(13,713)
383,061
-3%
1%
Operating Income
51,160
9,118
60,278
39,619
13,713
53,332
29%
14%
Operating Margin
11.7%
–
13.8%
9.1%
–
12.2%
Interest Expense
(4,931)
–
(4,931)
(4,590)
–
(4,590)
7%
7%
Foreign Exchange Gain
2,118
–
2,118
1,431
–
1,431
Interest Income and Other
637
–
637
786
–
786
-19%
-16%
Income Before Taxes
48,984
9,118
58,102
37,246
13,713
50,959
32%
14%
Provision for Income Taxes (A)
1,565
3,359
4,924
1,728
10,000
11,728
-9%
-58%
Net Income
$
47,419
5,759
53,178
35,518
3,713
39,231
34%
35%
Earnings Per Share- Diluted (A)
$
0.82
0.10
0.92
0.61
0.06
0.67
34%
37%
Average Shares – Diluted
58,012
58,012
58,012
58,204
58,204
58,204
NINE MONTHS ENDED JANUARY 31,
% Change
US GAAP
Adjustments
Adjusted
US GAAP
Adjustments
Adjusted
US GAAP
Adjusted
excl. FX
Revenue
$
1,266,329
–
1,266,329
1,292,736
–
1,292,736
-2%
1%
Costs and Expenses
Cost of Sales
341,457
–
341,457
356,357
–
356,357
-4%
-1%
Operating and Administrative (B)
729,775
(8,842)
720,933
733,503
–
733,503
-1%
1%
Restructuring Charges (A)
15,045
(15,045)
–
20,832
(20,832)
–
Amortization of Intangibles
37,321
–
37,321
37,251
–
37,251
0%
5%
Total Costs and Expenses
1,123,598
(23,887)
1,099,711
1,147,943
(20,832)
1,127,111
-2%
0%
Operating Income
142,731
23,887
166,618
144,793
20,832
165,625
-1%
3%
Operating Margin
11.3%
–
13.2%
11.2%
–
12.8%
Interest Expense
(13,362)
–
(13,362)
(12,487)
–
(12,487)
7%
7%
Foreign Exchange Gain
1,979
–
1,979
1,389
–
1,389
Interest Income and Other
1,365
–
1,365
2,094
–
2,094
-35%
-34%
Income Before Taxes
132,713
23,887
156,600
135,789
20,832
156,621
-2%
3%
Provision for Income Taxes (C,D)
65,745
(36,244)
29,501
24,214
12,767
36,981
172%
-17%
Net Income
$
66,968
60,131
127,099
111,575
8,065
119,640
-40%
9%
Earnings Per Share- Diluted
$
1.15
1.03
2.18
1.90
0.14
2.04
-39%
9%
Average Shares – Diluted
58,181
58,181
58,181
58,711
58,711
58,711
See the accompanying Notes to Unaudited Financial Statements for a description of each Adjustment.
JOHN WILEY SONS, INC.
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2017 AND 2016
RECONCILIATION OF US GAAP TO ADJUSTED EPS – DILUTED (UNAUDITED)
Third Quarter Ended
Nine Months Ended
JANUARY 31,
JANUARY 31,
US GAAP Earnings Per Share – Diluted
$
0.82
$
0.61
$
1.15
$
1.90
Adjusted to exclude the following:
Restructuring Charges (A)
0.10
0.16
0.17
0.24
One-time – Pension Settlement (B)
–
–
0.09
–
Unfavorable Tax Settlement (C)
–
–
0.82
–
Deferred Income Tax Benefit on UK Rate Change (D)
–
(0.10)
(0.04)
(0.10)
Adjusted Earnings Per Share – Diluted
$
0.92
$
0.67
$
2.18
$
2.04
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Adjustments:
A
Restructuring Charges: The adjusted results for the three and nine months ended January 31, 2017 exclude restructuring charges related to the Company’s Restructuring and Reinvestment Program of $9.1 million or $0.10 per share, and $15.0 million or $0.17 per share, respectively. The adjusted results for the three and nine months ended January 31, 2016 exclude restructuring charges of $13.7 million or $0.16 per share and $20.8 million or $0.24 per share, respectively.
B
In fiscal year 2017, the Company announced a voluntary, limited-time opportunity for terminated vested employees who were participants in the U.S. defined benefit retirement plan to elect a single lump sum payment of accumulated benefits. The aggregate amount of payments made under this one time election was $28.3 million. The total charge, recorded in the second quarter of fiscal year 2017, including a prorata portion of the unamortized net actuarial loss was $8.8 milion or $0.09 per share.
C
As previously disclosed and as reported in the Company’s SEC filings, the Company was appealing an unfavorable tax ruling in Germany related to tax benefits obtained through an increase in the tax deductable basis of certain merged German subsidiaries. In September 2016, the German Federal Fiscal Court issued an unfavorable final judgement in Wiley’s longstanding tax appeal. As a consequence, the Company reported a $47.5 million charge, or $0.82 per share in the second quarter of fiscal year 2017.
D
Deferred Income Tax Benefit on UK Rate Change: The adjusted results exclude deferred tax benefits of $2.6 million, or $0.04 per share, for the nine months ended January 31, 2017, and $5.9 million, or $0.10 per share for both the three and nine months ended January 31, 2016. The benefits in these periods are associated with changes in tax legislation enacted in the United Kingdom which reduced the U.K. corporate income tax rates. The benefits reflect the remeasurement of the Company’s deferred tax balances to the new income tax rates and had no current cash tax impact. The fiscal year 2016 legislation reduced the U.K. income tax rates to 19% effective April 1, 2017 and 18% effective April 1, 2020, and the fiscal year 2017 legislation further reduced the April 1, 2020 statutory income tax rate to 17%.
Non-GAAP Financial Measures:
In addition to providing financial results in accordance with GAAP, the Company has provided adjusted financial results that exclude the impact of other nonrecurring items described in more detail throughout this press release. These non-GAAP financial measures are labeled as “Adjusted” and are used for evaluating the results of operations for internal purposes. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, the Company believes the exclusion of such items provides additional information to investors to facilitate the comparison of past and present operations. Unless otherwise noted, adjusted amounts in the attached schedules include foreign exchange.
JOHN WILEY SONS, INC.
UNAUDITED SEGMENT RESULTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2017 AND 2016
(in thousands)
THIRD QUARTER ENDED JANUARY 31,
% Change
US GAAP
Adjustments
(A,B)
Adjusted
US GAAP
Adjustments
(A,B)
Adjusted
US GAAP
Adjusted
excl. FX
Revenue
Research
$
205,769
–
205,769
183,568
–
183,568
12%
17%
Publishing
171,440
–
171,440
200,645
–
200,645
-15%
-13%
Solutions
59,247
–
59,247
52,180
–
52,180
14%
14%
Total
$
436,456
–
436,456
436,393
–
436,393
0%
3%
Direct Contribution to Profit
Research
$
89,182
517
89,699
74,876
2,497
77,373
19%
19%
Publishing
78,444
1,027
79,471
92,602
4,121
96,723
-15%
-16%
Solutions
12,427
1,095
13,522
9,995
245
10,240
24%
32%
Total
$
180,053
2,639
182,692
177,473
6,863
184,336
1%
1%
Contribution to Profit (After Allocated Shared Services and Admin. Costs)
Research
$
52,508
517
53,025
43,944
2,497
46,441
19%
17%
Publishing
38,807
1,027
39,834
47,200
4,121
51,321
-18%
-21%
Solutions
3,591
1,095
4,686
1,751
245
1,996
105%
137%
Total
$
94,906
2,639
97,545
92,895
6,863
99,758
2%
0%
Unallocated Shared Services and Admin. Costs
(43,746)
6,479
(37,267)
(53,276)
6,850
(46,426)
-18%
-16%
Operating Income
$
51,160
9,118
60,278
39,619
13,713
53,332
29%
14%
Total Shared Services and Admin. Costs by Function
Distribution and Operation Services
$
(23,415)
5,185
(18,230)
(22,430)
2,355
(20,075)
4%
-5%
Technology and Content Management
(62,464)
(71)
(62,535)
(69,633)
2,670
(66,963)
-10%
-5%
Finance
(11,163)
50
(11,113)
(14,208)
2,740
(11,468)
-21%
-1%
Other Administration
(31,851)
1,315
(30,536)
(31,583)
(915)
(32,498)
1%
-4%
Total
$
(128,893)
6,479
(122,414)
(137,854)
6,850
(131,004)
-7%
-4%
NINE MONTHS ENDED JANUARY 31,
% Change
US GAAP
Adjustments
(A,B)
Adjusted
US GAAP
Adjustments
(A,B)
Adjusted
US GAAP
Adjusted
excl. FX
Revenue
Research
$
618,987
–
618,987
595,932
–
595,932
4%
8%
Publishing
479,701
–
479,701
548,656
–
548,656
-13%
-11%
Solutions
167,641
–
167,641
148,148
–
148,148
13%
13%
Total
$
1,266,329
–
1,266,329
1,292,736
–
1,292,736
-2%
1%
Direct Contribution to Profit
Research
$
284,908
677
285,585
269,615
3,363
272,978
6%
8%
Publishing
214,454
1,596
216,050
242,620
4,380
247,000
-12%
-11%
Solutions
34,862
1,619
36,481
24,854
385
25,239
40%
44%
Total
$
534,224
3,892
538,116
537,089
8,128
545,217
-1%
1%
Contribution to Profit (After Allocated Shared Services and Admin. Costs)
Research
$
173,235
677
173,912
171,357
3,363
174,720
1%
4%
Publishing
94,639
1,596
96,235
111,345
4,380
115,725
-15%
-15%
Solutions
9,097
1,619
10,716
160
385
545
Total
$
276,971
3,892
280,863
282,862
8,128
290,990
-2%
0%
Unallocated Shared Services and Admin. Costs
(134,240)
19,995
(114,245)
(138,069)
12,704
(125,365)
-3%
-5%
Operating Income
$
142,731
23,887
166,618
144,793
20,832
165,625
-1%
3%
Total Shared Services and Admin. Costs by Function
Distribution and Operation Services
$
(66,720)
9,781
(56,939)
(64,259)
4,320
(59,939)
4%
-1%
Technology and Content Management
(201,420)
1,662
(199,758)
(194,022)
3,443
(190,579)
4%
7%
Finance
(34,318)
(296)
(34,614)
(37,093)
2,315
(34,778)
-7%
2%
One-time Pension Settlement
(8,842)
8,842
–
–
–
–
Other Administration
(80,193)
6
(80,187)
(96,922)
2,626
(94,296)
-17%
-13%
Total
$
(391,493)
19,995
(371,498)
(392,296)
12,704
(379,592)
0%
0%
(A)
See the accompanying Notes to Unaudited Financial Statements for a description of the Adjustment.
UNAUDITED ADJUSTED CONTRIBUTION TO PROFIT
INCLUDING ALLOCATED SHARED SERVICES AND ADMINISTRATIVE COSTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2017 AND 2016
(in thousands)
Third Quarter Ended
Nine Months Ended
January 31,
January 31,
%
Change
% Change
excl. FX
%
Change
% Change
excl. FX
Research:
Direct Contribution to Profit
$
89,182
74,876
19%
22%
$
284,908
269,615
6%
9%
Restructuring Charges (A)
517
2,497
677
3,363
Adjusted Direct Contribution to Profit
89,699
77,373
16%
19%
285,585
272,978
5%
8%
Allocated Shared Services and Admin. Costs:
(36,674)
(30,932)
19%
21%
(111,673)
(98,258)
14%
16%
Adjusted Contribution to Profit (after allocated
$
53,025
46,441
14%
17%
$
173,912
174,720
0%
4%
Shared Services and Admin. Costs)
Publishing:
Direct Contribution to Profit
$
78,444
92,602
-15%
-14%
$
214,454
242,620
-12%
-10%
Restructuring Charges (A)
1,027
4,121
1,596
4,380
Adjusted Direct Contribution to Profit
79,471
96,723
-18%
-16%
216,050
247,000
-13%
-11%
Allocated Shared Services and Admin. Costs:
(39,637)
(45,402)
-13%
-11%
(119,815)
(131,275)
-9%
-7%
Adjusted Contribution to Profit (after allocated
$
39,834
51,321
-22%
-21%
$
96,235
115,725
-17%
-15%
Shared Services and Admin. Costs)
Solutions:
Direct Contribution to Profit
$
12,427
9,995
24%
25%
$
34,862
24,854
40%
40%
Restructuring Charges (A)
1,095
245
1,619
385
Adjusted Direct Contribution to Profit
13,522
10,240
32%
32%
36,481
25,239
45%
44%
Allocated Shared Services and Admin. Costs:
(8,836)
(8,244)
7%
7%
(25,765)
(24,694)
4%
4%
Adjusted Contribution to Profit (after allocated
$
4,686
1,996
135%
137%
$
10,716
545
Shared Services and Admin. Costs)
Total Adjusted Contribution to Profit (after
$
97,545
99,758
-2%
0%
$
280,863
290,990
-3%
0%
allocated Shared Services and Admin. Costs)
Unallocated Shared Services and Admin. Costs:
Unallocated Shared Services and Admin. Costs
$
(43,746)
(53,276)
-18%
-15%
$
(134,240)
(138,069)
-3%
0%
Restructuring Charges (A)
6,479
6,850
11,153
12,704
One-time – Pension Settlement (B)
–
–
8,842
–
Adjusted Unallocated Shared Services and Admin. Costs
$
(37,267)
(46,426)
-20%
-16%
$
(114,245)
(125,365)
-9%
-5%
Adjusted Operating Income
$
60,278
53,332
13%
14%
$
166,618
165,625
1%
3%
(A)
See the accompanying Notes to Unaudited Financial Statements for a description of the Adjustment.
JOHN WILEY SONS, INC.
SEGMENT REVENUE by PRODUCT/SERVICE
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2017 AND 2016
(in thousands)
Third Quarter
Nine Months
Ended January 31,
% of
% Change
Ended January 31,
% of
% Change
Revenue
excl. FX
Revenue
excl. FX
RESEARCH
Journal Revenue
Journal Subscriptions
$
149,909
125,669
73%
23%
$
472,401
450,970
76%
9%
Author-Funded Access
6,915
6,429
3%
15%
21,851
18,301
4%
27%
Licensing, Reprints, Backfiles, and Other
40,983
51,470
20%
-14%
114,295
126,661
18%
-5%
Total Journal Revenue
197,807
183,568
96%
12%
608,547
595,932
98%
6%
Platform Services (Atypon)
7,962
–
4%
10,440
–
2%
Total Revenue
$
205,769
183,568
100%
17%
$
618,987
595,932
100%
8%
Publishing
STM and Professional Books
$
76,899
90,830
45%
-12%
$
215,734
251,742
45%
-12%
Education Books
50,343
69,502
29%
-27%
162,669
203,333
34%
-19%
Total Books and Reference Material
127,242
160,332
74%
-18%
378,403
455,075
79%
-15%
Course Workflow (WileyPLUS)
23,464
21,894
14%
7%
44,170
41,359
9%
7%
Online Test Preparation and Certification
8,508
6,627
5%
29%
25,585
21,472
5%
20%
Licensing, Distribution, Advertising and Other
12,226
11,792
7%
7%
31,543
30,750
7%
6%
Total Revenue
$
171,440
200,645
100%
-13%
$
479,701
548,656
100%
-11%
Solutions
Online Program Management
30,016
26,057
51%
15%
81,195
69,754
48%
16%
Professional Assessment
13,783
13,162
23%
5%
43,451
42,196
26%
3%
Corporate Learning
15,448
12,961
26%
20%
42,995
36,198
26%
19%
Total Revenue
$
59,247
52,180
100%
14%
$
167,641
148,148
100%
13%
Total
$
436,456
436,393
3%
$
1,266,329
1,292,736
1%
JOHN WILEY SONS, INC.
UNAUDITED STATEMENTS OF FINANCIAL POSITION
(in thousands)
January 31,
April 30,
Current Assets
Cash cash equivalents
$
482,321
535,859
363,806
Accounts receivable
220,845
235,806
167,638
Inventories
49,247
53,747
57,779
Prepaid and other
124,058
71,529
81,456
Total Current Assets
876,471
896,941
670,679
Product Development Assets
90,267
73,906
72,126
Technology, Property and Equipment
241,385
207,515
214,770
Intangible Assets
834,252
872,224
877,007
Goodwill
981,453
938,796
951,663
Income Tax Deposits
–
59,591
62,912
Other Assets
79,210
65,435
71,939
Total Assets
3,103,038
3,114,408
2,921,096
Current Liabilities
Short-term debt
–
150,000
–
Accounts and royalties payable
210,853
205,724
166,222
Deferred revenue
403,269
305,541
426,489
Accrued employment costs
83,276
82,400
97,902
Accrued income taxes
9,084
10,023
9,450
Accrued pension liability
5,458
4,590
5,492
Other accrued liabilities
78,094
68,658
76,252
Total Current Liabilities
790,034
826,936
781,807
Long-Term Debt
865,700
814,728
605,007
Accrued Pension Liability
178,023
185,976
224,170
Deferred Income Tax Liabilities
182,571
192,220
189,868
Other Long-Term Liabilities
75,250
78,465
83,138
Shareholders’ Equity
1,011,460
1,016,083
1,037,106
Total Liabilities Shareholders’ Equity
$
3,103,038
3,114,408
2,921,096
JOHN WILEY SONS, INC.
UNAUDITED STATEMENTS OF FREE CASH FLOW *
(in thousands)
Nine Months Ended
January 31,
Operating Activities:
Net income
$
66,968
111,575
Amortization of intangibles
37,321
37,251
Amortization of composition costs
29,502
30,047
Depreciation of technology, property and equipment
50,520
50,820
Restructuring charges
15,045
20,832
Restructuring payments
(15,740)
(24,809)
Deferred tax benefit on UK Corporate Income Tax Rate Change
(2,575)
(5,859)
Unfavorable Tax Settlement
47,531
–
One-time pension settlement
8,842
–
Share-based compensation expense
10,187
12,292
Excess tax benefits from share-based compensation
(227)
(517)
Royalty advances
(79,804)
(79,026)
Earned royalty advances
77,554
71,761
Other non-cash charges and credits
26,096
15,492
Change in deferred revenue
(7,733)
(57,959)
Net change in operating assets and liabilities
(34,335)
(65,289)
Cash Provided by Operating Activities
229,152
116,611
Investments in organic growth:
Additions to technology, property and equipment
(82,257)
(69,048)
Composition spending
(27,369)
(28,627)
*
Free Cash Flow less Composition Spending
119,526
18,936
Other Investing and Financing Activities:
Acquisitions, net of cash
(152,110)
(17,972)
Repayment of long-term debt
(340,207)
(158,861)
Borrowings of short-term debt
–
50,000
Borrowings of long-term debt
600,900
323,500
Change in book overdrafts
(8,866)
(3,287)
Cash dividends
(53,638)
(52,612)
Purchase of treasury shares
(35,362)
(59,704)
Proceeds from exercise of stock options and other
16,444
556
Excess tax benefits from share-based compensation
227
517
Cash Provided by Investing and Financing Activities
27,388
82,137
Effects of Exchange Rate Changes on Cash
(28,399)
(22,655)
Increase in Cash and Cash Equivalents for Period
$
118,515
78,418
RECONCILIATION TO GAAP PRESENTATION
Investing Activities:
Additions to technology, property and equipment
$
(82,257)
(69,048)
Composition spending
(27,369)
(28,627)
Acquisitions, net of cash
(152,110)
(17,972)
Cash Used for Investing Activities
$
(261,736)
(115,647)
Financing Activities:
Cash Used for Investing and Financing Activities
$
27,388
82,137
Excluding:
Acquisitions, net of cash
(152,110)
(17,972)
Cash Provided by Financing Activities
$
179,498
100,109
Free Cash Flow less Composition Spending:
The Company provides financial measures referred to as Free Cash Flow less Composition Spending. Free Cash Flow less Composition Spending is defined as cash flow from operating activities, less composition and other capital spending. Management believes this metric provides additional information to investors to facilitate the comparison of past and present results. This metric is also used internally by management in evaluating results. This non-GAAP measure is not intended to replace the financial results reported in accordance with US Generally Accepted Accounting Principles.
About JOHN WILEY & SONS, INC. (NYSE:JW.A) John Wiley & Sons, Inc. provides knowledge and knowledge-enabled services in the areas of research, professional practice and education. The Company operates through three segments: Research, Professional Development and Education. Through the Research segment, the Company provides digital and print scientific, technical, medical and scholarly journals, reference works, books, database services and advertising. The Professional Development segment provides digital and print books, corporate learning solutions, employment talent solutions and training services, and test prep and certification. In the Education segment, the Company provides print and digital content, and education solutions, including online program management services for higher education institutions and course management tools for instructors and students. The Company is engaged in developing and cross-marketing products to its customer base of researchers, professionals, students and educators. JOHN WILEY & SONS, INC. (NYSE:JW.A) Recent Trading Information JOHN WILEY & SONS, INC. (NYSE:JW.A) closed its last trading session down -0.15 at 52.20 with 284,880 shares trading hands.
