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John Wiley & Sons, Inc. Reports Third Quarter Fiscal Year 2015 Results

  • Revenue of $466 million, up 5% over prior year on a constant currency basis
  • Journal subscription revenue of $154 million, up 4% on a constant currency basis
  • Adjusted EPS of $0.99, up 9% over prior year on a constant currency basis
  • Full year financial outlook reaffirmed
Tuesday, March 10, 2015 8:00 am EDT

Public Company Information:

NYSE:
JWA
NYSE:
JWB
"Revenue growth this quarter continued to be driven by the strength of our Research journals business, our 2014 acquisitions, and the continued double-digit growth of our Education solutions businesses, including Deltak Education Services and WileyPLUS Course Workflow Solutions"

HOBOKEN, N.J.--(BUSINESS WIRE)--John Wiley & Sons, Inc. (NYSE: JWa and JWb), a global provider of knowledge and knowledge-enabled services that improve outcomes in research, professional practice, and education, today announced the following results for the third quarter of fiscal year 2015:

     

Change

$ millions   FY15   FY14  

Excluding
FX

 

Including
FX

ADJUSTED

 
 
Revenue
Q3 $466 $458 5% 2%
9 Months $1,381 $1,318 5% 5%
 
EPS
Q3 $0.99 $0.93 9% 6%
9 Months $2.45 $2.28 8% 7%
 

US GAAP

 
Revenue
Q3 $466 $458 5% 2%
9 Months $1,381 $1,318 5% 5%
 
EPS
Q3 $0.72 $0.88 (16%) (18%)
9 Months $2.18 $2.10 5% 4%
 

Please see the attached financial schedules for more detail

Management Commentary

“Revenue growth this quarter continued to be driven by the strength of our Research journals business, our 2014 acquisitions, and the continued double-digit growth of our Education solutions businesses, including Deltak Education Services and WileyPLUS Course Workflow Solutions,” said Mark Allin, Chief Operating Officer. “For the quarter, journal subscriptions revenue increased 4% on a constant currency basis, while Education Services (Deltak) secured eleven new online programs and another university partner. Our profitability also improved, with higher gross margins from digital products, cost savings from restructuring, and lower income tax rates resulting in another quarter of solid earnings growth for the Company.”

Fiscal Year 2015 Outlook

Wiley reaffirms its fiscal year 2015 outlook of mid-single-digit revenue growth on a constant currency basis and adjusted EPS in a range of $3.25 to $3.35.

Foreign Exchange (FX)

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” revenue, contribution to profit, and EPS, which exclude restructuring and impairment charges and deferred tax benefits related to a UK corporate income tax rate reduction. Variances to adjusted revenue, 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 and First Nine Months Summary

  • Third quarter revenue grew 5% on a constant currency basis, or 2% including the impact of foreign exchange, to $465.9 million. Growth in Research Communication/Journals (+5%) and Education Services-Deltak (+20%), as well as a five-month contribution from CrossKnowledge (+$16.2 million) offset a decline in books sales overall. As previously disclosed, financial results for the recently acquired CrossKnowledge had been reported on a two-month delay pending implementation of reporting process improvements. With these five months reported, CrossKnowledge reporting is now current on a year-to-date basis. Wiley revenue for the first nine months grew 5% on a constant currency and reported basis to $1.38 billion.
  • Organic revenue was essentially flat for the third quarter on a constant currency basis, but increased 1% for the nine months. Organic revenue excludes the combined contribution from CrossKnowledge and Profiles International of $22 million for the quarter and $49 million year-to-date.
  • Third quarter adjusted earnings per share (EPS) rose 9% on a constant currency basis, or 6% including foreign exchange, to $0.99. Adjusted EPS excludes certain one-time or unusual items in the current and prior year periods as further described in the attached reconciliation of US GAAP to Adjusted EPS. Adjusted EPS growth was due to higher gross margins from digital products, restructuring savings, and lower income tax rates, partially offset by investments in digital products and services and internal business systems, as well as the dilutive impact of the recent Talent Solutions acquisitions. Adjusted EPS for the first nine months rose 8% to $2.45.
  • Third quarter adjusted shared services and administration costs grew 4% on a constant currency basis, or 2% including foreign exchange, to $121.4 million. Other Administration (+23%) and Technology and Content Management (+3%) costs offset lower Distribution and Operation Services (-13%) expenses. The increase in Other Administration expenses reflects the expiration of a real estate tax incentive related to the Company’s Hoboken headquarters, early stage investment in an Enterprise Resource Planning (ERP) implementation, and occupancy costs related to recent acquisitions. Note that adjusted shared services costs exclude restructuring charges principally related to the consolidation and disposition of real estate assets. For the first nine months, adjusted shared services and administrative costs, excluding the impact of currency, were up 1% compared to the prior year period.
  • Free Cash Flow was $80.0 million for the first nine months of the year compared to $84.6 million in the prior year period, mainly due to increased investment in technology.
  • Share Repurchases: Wiley repurchased 350,000 shares in the quarter at a cost of $20.4 million, or $58.42 per share. For the first nine months, Wiley repurchased 1,083,000 shares at a cost of $62.0 million, or $57.26 per share. Approximately 2.2 million shares remain in the current authorized program.
  • Management Update: On February 10, Wiley announced that President and Chief Executive Officer Stephen M. Smith was diagnosed with a recurrence of urological cancer and would be taking a period of medical leave in order to focus on treatment. In the interim, Wiley’s Executive Leadership Team will report to Mark Allin, the recently named Chief Operating Officer (COO), and Mr. Allin will report to the Executive Committee of the Board of Directors. Mr. Allin is a 14-year Wiley veteran and until recently served as the Executive Vice President of Professional Development. Prior to that, he was the Managing Director of Wiley Asia.
  • Third Quarter Restructuring Charge: As anticipated, the Company recorded a restructuring charge of approximately $24 million this quarter, with about half of the charge related to the completion of facility consolidations and dispositions in connection with prior restructuring actions and the remainder principally due to severance costs related to reorganization and consolidation.

RESEARCH

  • Revenue: Third quarter revenue of $246.5 million grew 3% on a constant currency basis and declined 1% including the impact of FX. Steady revenue growth continued in Journal Subscriptions (+4%), Funded Access (+46%), and Other Journal Revenue (+7%). Books and References revenue decreased 8% while Other Research Revenue grew 8%. For the first nine months, Research revenue increased 2% on a constant currency basis to $766.1 million.
  • Calendar Year 2015 Journal Subscriptions: Through January 31, calendar year 2015 journal subscription billings increased 1% over the prior year period on a constant currency basis with approximately 81% of expected 2015 business closed.
  • Adjusted Contribution to Profit: Third quarter adjusted contribution to profit after allocated shared service and administrative costs of $72.5 million increased 11% on a constant currency basis due to revenue growth and cost savings from procurement and outsourcing initiatives. For the first nine months, adjusted contribution to profit grew 7% to $220.9 million.
  • Society Business: Two new society journals were signed in the quarter with combined annual revenue of $0.2 million; 24 were renewed with combined annual revenue of $13 million; and three with combined annual revenue of $0.6 million were not renewed.

PROFESSIONAL DEVELOPMENT

  • Revenue: Third quarter revenue grew 17% on a constant currency basis (+15% including FX) to $108.6 million due to contribution from 2014 acquisitions, including three months of reported revenue contribution from Profiles International (+$5.8 million) and five months from CrossKnowledge (+$16.2 million) due to reporting improvements enabling elimination of the two-month reporting delay. Excluding the contributions from both acquisitions, revenue was down 7% from prior year as a decline in Book sales (-12%) exceeded growth in Online Test Preparation and Certification (+14%) and other Assessment revenue (+9%). Revenue for the first nine months increased 13% on a constant currency basis to $306.6 million, but declined 5% excluding the contributions from acquisitions.
  • Adjusted Contribution to Profit: Third quarter adjusted contribution to profit after allocated shared service and administrative costs rose 8% to $12.9 million primarily due to restructuring savings, partially offset by lower gross margins on lower book volume and the dilutive impact of the recent Talent Solutions acquisitions. Adjusted contribution to profit for the first nine months increased 27% on a constant currency basis.
  • Online Learning and Training: CrossKnowledge announced an agreement with Gavisus, a Scandinavian-based digital learning and talent development company. CrossKnowledge will provide Gavisus with the technology to plan, design and deliver online leadership training to clients in Norway, Sweden and Denmark.
  • Online Test Preparation: Wiley introduced the Wiley CFA Exam Review, an online test preparation product for the Chartered Financial Analyst (CFA) certification.

EDUCATION

  • Revenue: Third quarter revenue on a constant currency basis declined 2% (or 4% including FX) to $110.9 million, with a 14% decline in Books more than offsetting growth in Custom Products (+6%), Course Workflow Solutions (+13%), and Education Services-Deltak (+20%). Revenue for the first nine months grew 4% on a constant currency basis to $308.1 million.
  • Adjusted Contribution to Profit: Third quarter adjusted contribution to profit after shared service and administrative costs decreased 5% to $27.6 million, reflecting lower revenue and continued investment in Education Services (Deltak). Adjusted contribution to profit after shared services for the first nine months was down 1% to $55.8 million.
  • Education Services (Deltak): In the quarter, Education Services (Deltak) signed Manhattan College as a new online program partner and added eleven new programs for a total of 38 partners and 192 programs under contract (164 revenue-generating and 28 in development).

Earnings Conference Call

  • Scheduled for today, March 10, 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 (888) 572-7034 and enter the participant code 9356260#
  • International callers, please dial (719) 325-2432 and enter the participant code 9356260#.
  • 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 provider of knowledge and knowledge-enabled services that improve outcomes in areas of research, professional practice, 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, online assessment and training services, and test prep and certification. In Education, Wiley provides education solutions including online program management services for higher education institutions and course management tools for instructors and students, as well as print and digital content.

                   

JOHN WILEY & SONS, INC.

UNAUDITED SUMMARY OF OPERATIONS

FOR THE THIRD QUARTER AND NINE MONTHS ENDED

JANUARY 31, 2015 AND 2014

(in thousands, except per share amounts)

 
 

 

THIRD QUARTER ENDED JANUARY 31,

 
2015 2014 % Change
US GAAP  

Adjustments
(A)

  Adjusted US GAAP  

Adjustments
(A)

  Adjusted US GAAP  

Adjusted
excl. FX

 
Revenue $ 465,905 - 465,905 457,933 - 457,933 2 % 5 %
 
Costs and Expenses
Cost of Sales 124,245 - 124,245 130,563 - 130,563 -5 % -2 %
Operating and Administrative 250,479 - 250,479 238,569 - 238,569 5 % 7 %
Restructuring Charges (A) 24,034 (24,034 ) - 4,256 (4,256 ) -
Amortization of Intangibles 13,105   -   13,105   11,165   -   11,165   17 % 19 %
 
Total Costs and Expenses 411,863 (24,034 ) 387,829 384,553 (4,256 ) 380,297 7 % 4 %
 
Operating Income 54,042 24,034 78,076 73,380 4,256 77,636 -26 % 6 %
Operating Margin 11.6 % 16.8 % 16.0 % 17.0 %
 
Interest Expense (4,365 ) - (4,365 ) (3,485 ) - (3,485 ) 25 % 25 %
Foreign Exchange Gain 2,783 - 2,783 29 - 29
Interest Income and Other 800   -   800   466   -   466   72 % 72 %
 
Income Before Taxes 53,260 24,034 77,294 70,390 4,256 74,646 -24 % 5 %
 
Provision for Income Taxes (A) 10,712   7,678   18,390   17,901   1,347   19,248   -40 % -3 %
 
Net Income $ 42,548   16,356   58,904   52,489   2,909   55,398   -19 % 8 %
 
 
Earnings Per Share- Diluted (A) $ 0.72 0.28 0.99 0.88 0.05 0.93 -18 % 9 %
 
Average Shares - Diluted 59,343 59,343 59,343 59,713 59,713 59,713
 
 

 

NINE MONTHS ENDED JANUARY 31,

 
2015 2014 % Change
US GAAP  

Adjustments
(A)

  Adjusted US GAAP  

Adjustments
(A-C)

  Adjusted US GAAP  

Adjusted
excl. FX

 
Revenue $ 1,380,794 - 1,380,794 1,318,106 - 1,318,106 5 % 5 %
 
Costs and Expenses
Cost of Sales 382,839 - 382,839 380,706 - 380,706 1 % 0 %
Operating and Administrative 755,541 - 755,541 713,090 - 713,090 6 % 6 %
Restructuring Charges (A) 23,879 (23,879 ) - 27,327 (27,327 ) -
Impairment Charges (B) - - - 4,786 (4,786 ) -
Amortization of Intangibles 38,859   -   38,859   33,066   -   33,066   18 % 16 %
 
Total Costs and Expenses 1,201,118 (23,879 ) 1,177,239 1,158,975 (32,113 ) 1,126,862 4 % 4 %
 
Operating Income 179,676 23,879 203,555 159,131 32,113 191,244 13 % 9 %
Operating Margin 13.0 % 14.7 % 12.1 % 14.5 %
 
Interest Expense (13,015 ) - (13,015 ) (10,348 ) - (10,348 ) 26 % 26 %
Foreign Exchange Gain 2,828 - 2,828 329 - 329
Interest Income and Other 2,218   -   2,218   2,095   -   2,095   6 % 6 %
 
Income Before Taxes 171,707 23,879 195,586 151,207 32,113 183,320 14 % 8 %
 
Provision for Income Taxes (A-C) 41,736   7,654   49,390   26,588   21,126   47,714   57 % 3 %
 
Net Income $ 129,971   16,225   146,196   124,619   10,987   135,606   4 % 9 %
 
 
Earnings Per Share- Diluted (A-C) $ 2.18 0.27 2.45 2.10 0.19 2.28 4 % 8 %
 
Average Shares - Diluted 59,632 59,632 59,632 59,388 59,388 59,388
 

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, 2015 AND 2014
           
 

RECONCILIATION OF US GAAP TO ADJUSTED EPS - DILUTED (UNAUDITED)

 
 
Third Quarter Ended Nine Months Ended
January 31, January 31,
2015 2014 2015 2014
 
US GAAP Earnings Per Share - Diluted $ 0.72 $ 0.88 $ 2.18 $ 2.10
Adjusted to exclude the following:

Restructuring Charges (A)

(0.28 ) (0.05 ) (0.27 ) (0.31 )
Impairment Charges (B) - - - (0.06 )
Deferred Income Tax Benefit on UK Rate Change (C) - - - 0.18
 
Adjusted Earnings Per Share - Diluted $ 0.99   $ 0.93   $ 2.45   $ 2.28  
 
 

NOTES TO UNAUDITED FINANCIAL STATEMENTS

 
 
Adjustments:
(A) RESTRUCTURING CHARGES: The adjusted results for the three and nine months ended January 31, 2015 and the three and nine months ended January 31, 2014 exclude restructuring charges related to the Company's Restructuring and Reinvestment Program of $24.0 million or $0.28 per share, $23.9 million or $0.27 per share, $4.3 million or $0.05 per share, and $27.3 million or $0.31 per share, respectively.
 
(B)

IMPAIRMENT CHARGES: The adjusted results for the nine months ended January 31, 2014 exclude impairment charges related to certain technology investments of $4.8 million or $0.06 per share.

 
(C) Deferred Income Tax Benefit on UK Rate Change: The adjusted results for the nine months ended January 31, 2014 exclude deferred tax benefits of $10.6 million, or $0.18 per share, associated with tax legislation enacted in the United Kingdom that reduced the U.K. corporate income tax rates by 3%. The benefits reflect the remeasurement of the Company's deferred tax balances to the new income tax rates of 21% effective April 1, 2014 and 20% effective April 1, 2015 and had no current cash tax impact.
 

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, 2015 and 2014

(in thousands)

 
 

 

THIRD QUARTER ENDED JANUARY 31,

 
2015 2014 % Change
US GAAP  

Adjustments
(A)

  Adjusted US GAAP  

Adjustments
(A)

  Adjusted US GAAP  

Adjusted
excl. FX

Revenue

Research $ 246,454 - 246,454 248,797 - 248,797 -1 % 3 %
Professional Development 108,587 - 108,587 94,201 - 94,201 15 % 17 %
Education 110,864 - 110,864 114,935

-

114,935 -4 % -2 %
           
Total $ 465,905   - 465,905   457,933   -   457,933   2 % 5 %
 

Direct Contribution to Profit

Research $ 108,727 4,507 113,234 111,318 (782 ) 110,536 -2 % 7 %
Professional Development 35,214 3,588 38,802 38,886 (833 ) 38,053 -9 % 4 %
Education 46,415 1,033 47,448 48,411 117 48,528 -4 % 0 %
           
Total $ 190,356   9,128 199,484   198,615   (1,498 ) 197,117   -4 % 4 %
 

Contribution to Profit (After Allocated Shared Services and Admin. Costs)

Research $ 67,999 4,507 72,506 69,233 (782 ) 68,451 -2 % 11 %
Professional Development 9,307 3,588 12,895 13,279 (833 ) 12,446 -30 % 8 %
Education 26,581 1,033 27,614 29,851 117 29,968 -11 % -5 %
           
Total $ 103,887 9,128 113,015 112,363 (1,498 ) 110,865 -8 % 6 %
 
Unallocated Shared Services and Admin. Costs (49,845 ) 14,906 (34,939 ) (38,983 ) 5,754 (33,229 ) 28 % 7 %
           
Operating Income $ 54,042   24,034 78,076   73,380   4,256   77,636   -26 % 6 %
 
 
 
 

Total Shared Services and Admin. Costs by Function

Distribution and Operation Services $ (25,257 ) 4,052 (21,205 ) (25,244 ) 17 (25,227 ) 0 % -13 %
Technology and Content Management (61,171 ) 1,842 (59,329 ) (60,658 ) 2,283 (58,375 ) 1 % 3 %
Finance (13,793 ) 164 (13,629 ) (14,194 ) 882 (13,312 ) -3 % 5 %
Other Administration (36,093 ) 8,848 (27,245 ) (25,139 ) 2,572   (22,567 ) 44 % 23 %
Total $ (136,314 ) 14,906 (121,408 ) (125,235 ) 5,754   (119,481 ) 9 % 4 %
 
 

 

NINE MONTHS ENDED JANUARY 31,

 
2015 2014 % Change
US GAAP  

Adjustments
(A)

  Adjusted US GAAP  

Adjustments
(A-B)

  Adjusted US GAAP  

Adjusted
excl. FX

Revenue

Research $ 766,149 - 766,149 747,532 - 747,532 2 % 2 %
Professional Development 306,581 - 306,581 270,832 - 270,832 13 % 13 %
Education 308,064 - 308,064 299,742 - 299,742 3 % 4 %
           
Total $ 1,380,794   - 1,380,794   1,318,106   -   1,318,106   5 % 5 %
 

Direct Contribution to Profit

Research $ 344,155 4,322 348,477 334,179 4,590 338,769 3 % 3 %
Professional Development 104,354 3,833 108,187 100,075 4,834 104,909 4 % 4 %
Education 114,721 1,084 115,805 113,041 375 113,416 1 % 4 %
           
Total $ 563,230   9,239 572,469   547,295   9,799   557,094   3 % 3 %
 

 

Contribution to Profit (After Allocated Shared Services and Admin. Costs)

Research $ 216,603 4,322 220,925 204,646 4,590 209,236 6 % 7 %
Professional Development 26,630 3,833 30,463 19,513 4,834 24,347 - 27 %
Education 54,757 1,084 55,841 57,502 375 57,877 -5 % -1 %
           
Total $ 297,990 9,239 307,229 281,661 9,799 291,460 6 % 7 %
 
Unallocated Shared Services and Admin. Costs (118,314 ) 14,640 (103,674 ) (122,530 ) 22,314 (100,216 ) -3 % 3 %
           
Operating Income $ 179,676   23,879 203,555   159,131   32,113   191,244   13 % 9 %
 
 
 
 

Total Shared Services and Admin. Costs by Function

Distribution and Operation Services $ (71,760 ) 4,436 (67,324 ) (78,334 ) 2,591 (75,743 ) -8 % -11 %
Technology and Content Management (182,445 ) 1,285 (181,160 ) (191,325 ) 13,243 (178,082 ) -5 % 1 %
Finance (40,252 ) 71 (40,181 ) (40,436 ) 882 (39,554 ) 0 % 2 %
Other Administration (89,097 ) 8,848 (80,249 ) (78,069 ) 5,598   (72,471 ) 14 % 11 %
Total $ (383,554 ) 14,640 (368,914 ) (388,164 ) 22,314   (365,850 ) -1 % 1 %
 

See the accompanying Notes to Unaudited Financial Statements for a description of each Adjustment. Certain prior year amounts have been reclassified to conform to the current year's presentation.

                   

UNAUDITED ADJUSTED CONTRIBUTION TO PROFIT

INCLUDING ALLOCATED SHARED SERVICES AND ADMINISTRATIVE COSTS

FOR THE THIRD QUARTER AND NINE MONTHS ENDED

JANUARY 31, 2015 and 2014

(in thousands)

 
 
Third Quarter Ended Nine Months Ended
January 31, January 31,
2015 2014

%
Change

 

% Change
excl. FX

2015 2014

%
Change

 

%
Change
excl. FX

 
 

Research:

Direct Contribution to Profit 108,727 111,318 -2 % 2 % 344,155 334,179 3 % 3 %
Restructuring (Credits) Charges (A) 4,507   (782 ) 4,322   4,590  
Adjusted Direct Contribution to Profit 113,234 110,536 2 % 7 % 348,477 338,769 3 % 3 %
 
Allocated Shared Services and Admin. Costs:
Distribution and Operation Services (10,722 ) (11,406 ) -6 % -2 % (34,141 ) (34,801 ) -2 % -2 %
Technology and Content Management (24,254 ) (24,888 ) -3 % 0 % (75,440 ) (75,969 ) -1 % -1 %
Occupancy and Other (5,752 ) (5,791 ) -1 % 3 % (17,971 ) (18,763 ) -4 % -5 %
Adjusted Contribution to Profit (after allocated 72,506   68,451   6 % 11 % 220,925   209,236   6 % 7 %
Shared Services and Admin. Costs)
 

Professional Development:

Direct Contribution to Profit 35,214 38,886 -9 % -7 % 104,354 100,075 4 % 5 %
Restructuring (Credits) Charges (A) 3,588   (833 ) 3,833   4,834  
Adjusted Direct Contribution to Profit 38,802 38,053 2 % 4 % 108,187 104,909 3 % 4 %
 
Allocated Shared Services and Admin. Costs:
Distribution and Operation Services (7,401 ) (9,634 ) -23 % -20 % (23,671 ) (28,790 ) -18 % -18 %
Technology and Content Management (12,550 ) (11,834 ) 6 % 6 % (35,347 ) (37,872 ) -7 % -7 %
Occupancy and Other (5,956 ) (4,139 ) 44 % 44 % (18,706 ) (13,900 ) 35 % 35 %
Adjusted Contribution to Profit (after allocated 12,895   12,446   4 % 8 % 30,463   24,347   25 % 27 %
Shared Services and Admin. Costs)
 

Education:

Direct Contribution to Profit 46,415 48,411 -4 % -2 % 114,721 113,041 1 % 3 %
Restructuring Charges (A) 1,033   117   1,084   375  
Adjusted Direct Contribution to Profit 47,448 48,528 -2 % 0 % 115,805 113,416 2 % 4 %
 
Allocated Shared Services and Admin. Costs:
Distribution and Operation Services (3,341 ) (4,098 ) -18 % -16 % (9,886 ) (11,987 ) -18 % -17 %
Technology and Content Management (12,815 ) (11,935 ) 7 % 8 % (39,630 ) (34,979 ) 13 % 14 %
Occupancy and Other (3,678 ) (2,527 ) 46 % 46 % (10,448 ) (8,573 ) 22 % 23 %
Adjusted Contribution to Profit (after allocated 27,614   29,968   -8 % -5 % 55,841   57,877   -4 % -1 %
Shared Services and Admin. Costs)
 
Total Adjusted Contribution to Profit (after 113,015 110,865 2 % 6 % 307,229 291,460 5 % 7 %
allocated Shared Services and Admin. Costs)
 

Unallocated Shared Services and Admin. Costs:

Unallocated Shared Services and Admin. Costs (49,845 ) (38,983 ) 28 % 29 % (118,314 ) (122,530 ) -3 % -4 %
Restructuring Charges (A) 14,906 5,754 14,640 17,528
Impairment Charges (B) -   -   -   4,786  
Adjusted Unallocated Shared Services and Admin. Costs (34,939 ) (33,229 ) 5 % 7 % (103,674 ) (100,216 ) 3 % 3 %
       
Adjusted Operating Income 78,076   77,636   1 % 6 % 203,555   191,244   6 % 9 %
 

See the accompanying Notes to Unaudited Financial Statements for a description of each Adjustment. Certain prior year amounts have been reclassified to conform to the current year's presentation.

                   
JOHN WILEY & SONS, INC.
SEGMENT REVENUE by PRODUCT/SERVICE
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2015 and 2014
(in thousands)
                                 
Third Quarter Nine Months
Ended January 31, % of % Change Ended January 31, % of % Change
  2015   2014   Revenue   excl. FX   2015   2014   Revenue   excl. FX
 
 

RESEARCH

Research Communication:
Journal Subscriptions $ 153,755 154,035 62 % 4 % $ 490,893 478,374 64 % 2 %
Funded Access 6,066 4,347 2 % 46 % 16,562 11,538 2 % 43 %
Other Journal Revenue 27,833 27,393 11 % 7 % 90,720 76,487 12 % 19 %
187,654 185,775 76 % 5 % 598,175 566,399 78 % 5 %
 
Books and References:
Print Books 27,743 30,990 11 % -8 % 80,658 89,483 11 % -10 %
Digital Books 10,941 12,636 4 % -9 % 30,154 31,588 4 % -4 %
38,684 43,626 16 % -8 % 110,812 121,071 14 % -8 %
 
Other Research Revenue 20,116 19,396 8 % 8 % 57,162 60,062 7 % -4 %
                                         
Total Revenue       $ 246,454   248,797   100 %   3 %   $ 766,149   747,532   100 %   2 %
 
 

PROFESSIONAL DEVELOPMENT

Knowledge Services:
Print Books $ 55,955 64,497 52 % -11 % $ 164,567 180,599 54 % -9 %
Digital Books 11,352 13,102 10 % -13 % 36,316 38,739 12 % -6 %
Online Test Preparation and Certification 4,030 3,545 4 % 14 % 12,517 10,666 4 % 17 %
Other Knowledge Service Revenue 8,164 6,573 8 % 26 % 20,479 19,203 7 % 7 %
79,501 87,717 73 % -8 % 233,879 249,207 76 % -6 %
 
Talent Solutions:
Assessment 12,891 6,484 12 % 99 % 41,200 21,625 13 % 91 %
Online Learning and Training (A) 16,195 - 15 %   31,502   10 %  
29,086 6,484 27 % 349 % 72,702 21,625 24 % 236 %
                                         
Total Revenue       $ 108,587   94,201   100 %   17 %   $ 306,581   270,832   100 %   13 %
 
 

EDUCATION

Books:
Print Textbooks $ 40,473 54,389 36 % -23 % $ 126,786 140,963 114 % -9 %
Digital Books 11,042 7,962 10 % 41 % 25,196 21,522 23 % 18 %
51,515 62,351 46 % -14 % 151,982 162,485 137 % -5 %
 
Custom Products 13,625 12,892 12 % 6 % 49,560 43,966 45 % 13 %
 
Course Workflow Solutions (WileyPLUS) 20,841 18,575 19 % 13 % 40,552 35,587 37 % 15 %
 
Education Services (Deltak) 22,974 19,144 21 % 20 % 58,908 50,395 53 % 17 %
 
Other Education Revenue 1,909 1,973 2 % -3 % 7,062 7,309 6 % -3 %
                                         
Total Revenue       $ 110,864   114,935   100 %   -2 %   $ 308,064   299,742   278 %   4 %
 

Note: Segment Revenue Categorization

Wiley has modified its segment product revenue categories to reflect recent changes to the business, including acquisitions and restructuring. All prior periods have been revised to reflect the new categorization.

(A) Quarter to date results include five months for the Company's most recent acquisition, CrossKnowledge Group, Ltd, acquired in May 2014, which was previously reported on a two-month lag

         
JOHN WILEY & SONS, INC.
UNAUDITED STATEMENTS OF FINANCIAL POSITION
(in thousands)
 
January 31, April 30,
2015 2014 2014
 
Current Assets
Cash & cash equivalents $ 260,215 315,985 486,377
Accounts receivable 220,311 205,796 149,733
Inventories 65,027 79,168 75,495
Prepaid and other 68,369 60,540 78,057
Total Current Assets 613,922 661,489 789,662
Product Development Assets 71,124 89,142 82,940
Technology, Property and Equipment 187,643 181,092 188,718
Intangible Assets 933,299 961,931 984,661
Goodwill 964,818 856,707 903,665
Income Tax Deposits 60,133 61,086 64,037
Other Assets 63,069 61,799 63,682
Total Assets 2,894,008 2,873,246 3,077,365
 
Current Liabilities
Short-term debt 100,000 - -
Accounts and royalties payable 202,173 205,154 142,534
Deferred revenue 307,783 279,681 385,654
Accrued employment costs 79,063 88,514 118,503
Accrued income taxes 9,450 6,802 13,324
Accrued pension liability 4,567 4,386 4,671
Other accrued liabilities 61,025 48,017 64,901
Total Current Liabilities 764,061 632,554 729,587
Long-Term Debt 588,111 634,000 700,100
Accrued Pension Liability 144,818 195,037 164,634
Deferred Income Tax Liabilities 222,922 199,660 222,482
Other Long-Term Liabilities 89,016 76,005 78,314
Shareholders' Equity 1,085,080 1,135,990 1,182,248
Total Liabilities & Shareholders' Equity $ 2,894,008 2,873,246 3,077,365
 
       
JOHN WILEY & SONS, INC.
UNAUDITED STATEMENTS OF FREE CASH FLOW
(in thousands)
 
 
Nine Months Ended
January 31,
2015 2014
Operating Activities:
Net income $ 129,971 124,619
Amortization of intangibles 38,859 33,066
Amortization of composition costs 30,695 33,940
Depreciation of technology, property and equipment 46,225 43,596
Restructuring and impairment charges 23,879 32,113
Restructuring payments (25,473 ) (20,136 )
Deferred tax benefits on U.K. rate changes - (10,634 )
Share-based compensation expense 11,778 10,995
Excess tax (benefits) charges from share-based compensation (2,487 ) 2,880
Royalty advances (77,265 ) (83,237 )
Earned royalty advances 77,755 77,663
Other non-cash charges and credits 30,407 37,766
Change in deferred revenue (62,822 ) (91,174 )
Income tax deposit (6,814 ) (10,433 )
Net change in operating assets and liabilities, excluding acquisitions (60,557 ) (27,227 )
Cash Provided by Operating Activities 154,151 153,797
 
Investments in organic growth:
Composition spending (26,872 ) (30,460 )
Additions to technology, property and equipment (47,293 ) (38,733 )
 
Free Cash Flow 79,986 84,604
 
Other Investing and Financing Activities:
Acquisitions, net of cash (172,661 ) (5,150 )
Escrowed proceeds from sale of consumer publishing programs 1,100 -
Repayment of long-term debt (550,083 ) (486,600 )
Borrowings of long-term debt 435,700 447,600
Borrowings of short-term debt 100,000 -
Change in book overdrafts (8,742 ) (21,859 )
Cash dividends (51,491 ) (44,182 )
Purchase of treasury shares (61,981 ) (38,533 )
Proceeds from exercise of stock options and other 24,492 48,540
Excess tax benefits (charges) from share-based compensation 2,487   (2,880 )
Cash Used for Investing and Financing Activities (281,179 ) (103,064 )
   
Effects of Exchange Rate Changes on Cash (24,969 ) 305  
 
Decrease in Cash and Cash Equivalents for Period $ (226,162 ) (18,155 )
 
 
 
RECONCILIATION TO GAAP PRESENTATION
 
Investing Activities:
Composition spending $ (26,872 ) (30,460 )
Additions to technology, property and equipment (47,293 ) (38,733 )
Acquisitions, net of cash (172,661 ) (5,150 )
Escrowed proceeds from sale of consumer publishing programs 1,100   -  
Cash Used for Investing Activities $ (245,726 ) (74,343 )
 
Financing Activities:
Cash Used for Investing and Financing Activities $ (281,179 ) (103,064 )
Excluding:
Acquisitions, net of cash (172,661 ) (5,150 )
Escrowed proceeds from sale of consumer publishing programs 1,100   -  
Cash Used for Financing Activities $ (109,618 ) (97,914 )
 

Note: The Company’s management evaluates performance using free cash flow. The Company believes free cash flow provides a meaningful and comparable measure of performance. Since free cash flow is not a measure calculated in accordance with GAAP, it should not be considered as a substitute for other GAAP measures, including cash used for or provided by operating activities, investing activities and financing activities, as an indicator of performance.

Contact:

John Wiley & Sons, Inc.
Investor:
Brian Campbell, 201-748-6874
Investor Relations
brian.campbell@wiley.com
or
Media:
Linda Dunbar, 201-748-6390
Media Relations
ldunbar@wiley.com