John Wiley & Sons, Inc. Reports Solid Revenue and EPS Growth for the Third Quarter
John Wiley & Sons, Inc. (NYSE:JWa) (NYSE:JWb), announced today that revenue for the third quarter increased 10%, or 5% excluding foreign exchange translation gains, to $242.4 million from $221.2 million in the prior year. Earnings per diluted share of $0.45 and net income of $28.3 million for the third quarter of fiscal year 2004 increased over prior year by 16% and 17%, respectively, excluding a net tax benefit recognized in the current period. Earnings per diluted share for the third quarter of fiscal year 2004, including the net tax benefit, was $0.50 as compared to $0.39 in the prior year period.
Third quarter results were driven by Scientific, Technical and Medical journals, Professional/Trade books, and Higher Education textbooks and educational materials. Net income and earnings per share for the third quarter reflected the positive effects of operations, the resolution of certain tax matters and foreign exchange.
For the first nine months of fiscal year 2004, revenue advanced 6%, or 3% excluding foreign currency translation gains, to $690.9 million from $650.6 million in the prior year. Earnings per diluted share and net income for the nine-month period increased 11%, excluding charges reported in the prior year related to the Company's relocation to Hoboken, New Jersey and certain tax benefits. Including these items, earnings per diluted share for the nine-month period of fiscal year 2004 and 2003 was $1.25.
"Wiley's third quarter results were strong across our core businesses. Professional/Trade experienced a good holiday season. Scientific, Technical and Medical generated solid growth in our journal business globally and reported healthy renewals of Enhanced Access Licenses for Wiley InterScience. Our Higher Education business outpaced the industry in the third quarter and for the nine-months," said William J. Pesce, President and CEO.
He concluded, "Based on year-to-date results and expectations for the fourth quarter, which is seasonally Wiley's least significant quarter in financial terms, we anticipate full-year revenue growth near the high end of our 4-6% guidance and EPS growth at the high end of our mid to high single digits guidance, excluding the unusual items reported in fiscal year 2003 and the tax benefit recorded in this year’s third quarter."
Wiley's P/T business grew 3% during the third quarter, with the business, architecture, culinary, education, and consumer programs exhibiting strength throughout the holiday season. Year-to-date revenue was up 2% over the prior year.
P/T's business program rebounded nicely in a slowly improving market, building momentum throughout the quarter with solid performances from a wide range of titles. Several Wiley business titles appeared on major bestseller lists, including J.K. Lasser’s Income Tax 2004; Bonner/Financial Reckoning Day (#1 on The New York Times Hardcover Business Bestseller List in December); Scheinfeld and Allen/The 11th Element; Lencioni/Five Dysfunctions of a Team; George/Authentic Leadership (on The Economist “Best Books of 2003” list); Gitomer/The Sales Bible; and Kouzes and Posner/The Leadership Challenge.
Notable recent publications include How to Make Money in Stocks Desk Diary 2004 by Investors Business Daily founder William O'Neil; a new version of the widely acclaimed training and assessment tool, Leadership Practices Inventory Online; and four titles from Wiley's relationship with Morningstar, the renowned provider of stock and mutual fund news and analyses: The Morningstar Guide to Mutual Funds: 5-Star Strategies for Success; The Five Rules for Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market; Morningstar Funds 500: 2004; and Morningstar Stocks 500: 2004.
In December, the Company signed an agreement with Mergent, Inc. (formerly Moody's financial services division) to publish Mergent's Dividend Achievers, Handbook of Common Stocks, and Handbook of NASDAQ Stocks. Although market conditions continue to be challenging, Wiley's computer books program gained some momentum during the quarter. Key titles that published recently include Collier/eBay For Dummies; LeVitus/Mac OS Panther For Dummies, and MaranGraphics/Teach Yourself VISUALLY™ Mac OS Panther v.10.3.
Frommer's, Wiley’s market-leading travel program, experienced significant reordering by major U.S. accounts and strong sales of European travel titles. Frommers.com hit a record high of 16 million page views in January. The company's CliffsNotes and For Dummies lines and the culinary category also exhibited strength.
P/T capitalized on the success of The Lord of the Rings by promoting The Origins of Tolkien's Middle-earth For Dummies at movie theaters in targeted cities. In addition, P/T benefited from the publication of its new biography, Ravina/The Last Samurai, which coincided with the release of the movie with the same title. Alan Dershowitz's, The Case for Israel, reached the top of The New York Times Expanded Hardcover Bestseller list. All the Shah’s Men by Stephen Kinzer was the History selection on The Economist “Best Books of 2003” list.
An unprecedented number of the Company's cookbooks were honored in holiday round-ups of the best cookbooks of 2003, notably Wolfert/Slow Mediterranean Kitchen; Delouvrier/Mastering Simplicity; and Revsin/Come for Dinner. The paperback edition of Eades/30 Day Low Carb Diet Solution released successfully during the quarter, as did the third edition of National Restaurant Association Educational Foundation’s flagship books on food sanitation, ServSafe. Civitello/Cuisine and Culture was awarded the Gourmand World Cookbook Award and was also named as one of the top three culinary books by Sante magazine.
At the Association of American Publishers — Professional and Scholarly Publishing Annual Awards program, McGowan and Kruse/Interior Graphic Standards won the Architecture & Urban Studies category and Weiner/Handbook of Psychology won the Multi-Volume Reference/Humanities category.
During the quarter, the Company announced a partnership with VantageMed Corporation, a leading provider of healthcare information systems, to jointly develop a software interface that will allow Therascribe 4.0 and VantageMed’s Therapist Helper to work together as a seamless practice management solution for mental health providers.
Scientific, Technical, and Medical (STM)
Wiley's U.S. STM revenue advanced 7% during the third quarter. Contributing to this growth were new society journals (such as Hepatology and Liver Transplantation), the Polymer Backfile Collection, ArticleSelect, and online books in electronics and electrical engineering. Revenue for the first nine months increased 2%, reflecting, in part, the adverse effect of the Rowecom bankruptcy and lower-than-anticipated advertising revenue. Globally, STM journal revenue increased approximately 13% in the quarter and 8% for the nine months.
The Wiley InterScience annual license renewal process is well underway and proceeding as anticipated. During the third quarter, two important license renewals were completed with the California Digital Library and NESLI (UK Academic Consortium). Several new licenses were also signed, including the Universidad Nacional Autonoma de Mexico, Alerta al Conociemeiento Consortium in Chile, University of South Florida, University of Kansas, University of Tampa, Procter & Gamble, BUGALICIA (Galician Academic Consortium), University of Innsbruck, Halle University, Technical University of Berlin, Korea Institute of Science & Technology, and the National Defense University in Taiwan.
Wiley's STM digital access business, which utilizes the Wiley InterScience platform, continued to add content and functionality for customers to meet their information needs. Wiley InterScience customer usage statistics are compliant with COUNTER (Continuing Online Usage of Networked Electronic Resources—(www.projectcounter.org), an international initiative designed to serve librarians, publishers, and information intermediaries by facilitating the recording and exchange of online usage statistics. By adopting this new industry standard, Wiley InterScience will enable customers to make direct comparison between the usage of its journals and those of other publishers.
Wiley InterScience extended its Pay Per View and Article Select options to include access to its extensive range of online reference works. Previously available only for access to online books and journal content, these services allow librarians, scientists, and other researchers to obtain individual articles and chapters from publications for which they do not hold subscriptions. Providing a wide range of access options is part of the company’s strategy to offer customers greater flexibility and choice.
Wiley continues to extend its publishing services to learned societies and their members by forming new partnerships with numerous prominent national, regional, and international societies. The Company formed a publishing partnership with the Society of Plastics Engineers (SPE) to provide all publishing services for its technical journals—Polymer Engineering & Science, Polymer Composites, and Journal of Vinyl & Additive Technology. During the quarter, the Company also renewed its agreement with the Society for Bioelectromagnetics to publish its journal Bioelectromagnetics.
Although the STM book market continues to be soft, there were some bright spots. Sales of online major reference works and OnlineBooks were strong. Early in the fourth quarter, Wiley signed an agreement to distribute Merck's four professional manuals in the U.S. - The Merck Manual, The Merck Veterinary Manual, The Merck Manual of Geriatrics, and The Merck Index. Widely considered to be among the most trusted resources for medical and scientific information, these highly regarded titles will be excellent additions to Wiley's comprehensive offerings.
At the Association of American Publishers—Professional and Scholarly Publishing Annual Awards program, four STM publications were recognized, including the Potter and Colman/Handbook of Weather, Climate, and Water (Geology and Earth Science category); Huurdeman/The Worldwide History of Telecommunications (History of Science category); Horvath/Encyclopedia of Catalysis (Multi-Volume Reference/Sciences category); and Organic Synthesis (Electronic Product/Science category).
In January, the Wiley Foundation announced that the third annual Wiley Prize in the Biomedical Sciences was awarded to C. David Allis, Ph.D., the newly appointed Professor, Laboratory of Chromatin Biology and Epigenetics at the Rockefeller University in New York. Dr. Allis was recognized for his significant discovery on gene activity. His work has already led to advances in the treatment of leukemia.
Growth in Wiley's Higher Education business was 7% for the third quarter and 6% for the nine months, outpacing the industry for both periods. Programs in business, the sciences and social sciences drove these results. Sales of P/T and STM publications into the higher education market exceeded expectations, as well.
Top selling titles during the quarter included Tortora/Anatomy and Physiology; Kieso/Intermediate Accounting; Weygandt/Principles of Financial Accounting; Solomons/Organic Chemistry; Huffman/Psychology; DeBlij/Regions and Halliday/Fundamentals of Physics, which published its 7th edition during the quarter.
During the quarter, Wiley signed a strategically important contract with Paul M. Romer of Stanford University's Graduate School of Business. Dr. Romer is one of the nation's leading economists and a primary developer of New Growth Theory, a body of work that provides a fresh foundation for thinking about wealth creation. He was the recipient of Stanford's Distinguished Teaching Award in 1999. He will author a new textbook in intermediate macroeconomics, which will serve as a catalyst for growth in Higher Education's economics program. As important as the textbook, Wiley also signed an agreement with Aplia, the educational software company that Dr. Romer founded. Aplia uses Web technology to create educational tools for students that will afford them the opportunity to increase productivity and success. Intermediate Macroeconomics will be the first Wiley offering to be integrated with Aplia courseware.
At the end of the quarter, Higher Education announced a collaborative agreement with the Society of Manufacturing Engineers (SME), a leading professional society supporting manufacturing education, to develop content that brings real world manufacturing into the academic classroom. Through this exclusive agreement, Wiley and SME have adapted material from the highly acclaimed SME Fundamental Manufacturing Processes video series and are distributing it on DVD with Wiley engineering texts.
Third quarter revenue for Wiley's European operations was up 18% over prior year, or 9% excluding foreign currency translation gains. For the first nine months of the year, Wiley Europe's revenue was up 11%, or 3% excluding foreign currency translation gains. Strong performance from Wiley's worldwide journals continued to mitigate the combined effects of the sluggish book and advertising markets.
In spite of the impact of the Rowecom bankruptcy, Wiley Europe's STM journals program exhibited strong growth throughout the U.K. and Europe. Wiley-VCH reported solid performances from Angewandte Chemie, Helvetica Chimica Acta, the Macro journals and the Advanced Materials and Advanced Functional Materials journals. In addition, journal revenue began to benefit from the contribution of new businesses such as the Cochrane Library database, the British Journal of Surgery, and the journal of Ultrasound in Obstetrics and Gynecology.
In addition to the aforementioned new Wiley InterScience licenses, during the quarter Wiley Europe signed two major Enhanced Access Licenses, one with an Italian Consortium and the other with the Friedrich-Althoff Konsortium in Germany.
Building on the success of the release of The Polymer Backfile Collection, Wiley Europe released the Angewandte Chemie Backfile Collection late in the third quarter. The early market response is very encouraging.
The STM and P/T book programs showed good performance against prior year, driven primarily by improvements in the U.K., Benelux, Eastern Europe, and Greece and through online booksellers. The For Dummies list in the U.K. got off to a good start with the successful release of British History For Dummies and CVs For Dummies. England's success as Rugby World Cup winner fueled sales of Rugby For Dummies. For Dummies titles developed in the U.S., especially consumer technology titles such as Windows XP For Dummies, Internet For Dummies, and PC For Dummies, also sold well.
Wiley Europe experienced a pick up in sales of STM books, with the release of such titles as Alberts/Moleckularbiologie der Zelle and Brown/ Encyclopedia of Optics, as well as a number of major reference works, including Schreiber and Harvard/Handbook of Clinical Biology and Handbook of RNA Biochemistry. The third quarter saw a number of key adoptions of higher education learning materials in the UK and continental Europe. Tortora/Anatomy and Physiology was the top-selling title in these regions during this period.
Asia, Australia, and Canada
Wiley's revenue in Asia, Australia, and Canada advanced 16% in the third quarter and 14% for the first nine months. Excluding the benefit of foreign currency translation, revenue was essentially flat for the quarter and year-to-date period. Solid indigenous publishing results in Australia were offset by a soft holiday season for P/T in Canada and a weak retail market in Asia.
Sales in India continued to perform above expectations, as reflected in the year-on-year revenue growth of 24%. Several important Wiley InterScience licenses were signed in India during the quarter. Wiley Asia formed an alliance with Citibank to develop personal finance books for Asia. The first title, Growing Your Money, will publish next year with Citibank already committed to purchase a substantial number of copies. Revenue from Wiley Asia's translation business continued to grow at a rapid rate.
In Australia, Higher Education, School, and P/T performed well during the third quarter. In November, Wiley Australia again won Tertiary Publisher of the Year, a prestigious award given by the Australian Campus Booksellers Association each year for excellence in service to the higher education market. Wiley has won this award consistently during the past several years. In addition, Wiley Australia was awarded the Employer of Choice citation for the third consecutive year.
Wiley Canada's performance during the quarter was somewhat disappointing, as growth in Higher Education could not compensate for slow P/T sales. There was good news in the quarter, however, including robust sales of Dreyden/The Game, 20th Anniversary Edition and solid backlist sales of business and international titles.
During the second quarter of fiscal year 2003, the Company merged several of its European subsidiaries into a new entity, which enabled the Company to increase the tax-deductible asset basis of the merged subsidiaries to the fair value of the business at the date of merger. Under U.S. accounting principles, the tax benefit attributable to the increase in tax basis was immediately included in income, although the cash benefit of this change will be recognized pro-rata over a 15-year period.
Wiley completed the relocation of the Company's headquarters to Hoboken, New Jersey in the first quarter of fiscal year 2003 and reported an unusual charge for costs associated with the relocation of approximately $1.5 million after-tax, or $.02 cents per share.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995
This report contains certain forward-looking statements concerning the Company's operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company, and are subject to change based on many important factors. Such factors include, but are not limited to (i) the 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; and (viii) 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.
John Wiley & Sons, Inc. (NYSE:JWa) (NYSE:JWb), will hold a conference call on March 2, at 10:30 a.m. (ET) to discuss its financial results for the third quarter of fiscal year 2004. The call will include a brief management presentation followed by a question and answer session. To participate in the conference call, please dial the following number approximately ten minutes prior to the scheduled starting time:
International callers may participate by dialing: (719) 457-2734
A replay of the call will be available from 1:30 p.m. (ET) on Tuesday, March 2 through midnight (ET) on Monday, March 8 by dialing (888) 203-1112 or (719) 457-0820 and entering Passcode 730504.
A live audio Webcast will be accessible at http://www.wiley.com/go/communications. A replay of the Webcast will be accessible for 14 days afterwards.
Founded in 1807, John Wiley & Sons, Inc., provides must-have content and services to customers worldwide. Its core businesses include scientific, technical, and medical journals, encyclopedias, books, and online products and services; professional and consumer books and subscription services; and educational materials for undergraduate and graduate students and lifelong learners. Wiley has publishing, marketing, and distribution centers in the United States, Canada, Europe, Asia, and Australia. The Company is listed on the New York Stock Exchange under the symbols JWa and JWb. Wiley's Internet site can be accessed at http://www.wiley.com.