Ellis E. Cousens, Executive Vice President, Chief Financial & Operations Officer
Wiley
(201) 748-6534
John Wiley & Sons, Inc. Reports Revenue and Operating Income Growth for the First Quarter
Hoboken, NJ, September 8, 2005 — John Wiley & Sons, Inc. (NYSE:JWa) (NYSE:JWb) announced today that first quarter revenue and operating income increased 4% to $237 million and $32 million, respectively. Earnings per diluted share increased 6% to $0.34 compared to $0.32 in the prior year, excluding an income tax benefit described below. Including the tax benefit, first quarter earnings per diluted share was $0.46.
"Wiley's first quarter performance was driven primarily by continued strength in our global Scientific, Technical and Medical business. Professional/Trade also contributed to the year-on-year growth, while Higher Education's revenue was essentially flat with last year's first quarter. Operating income growth reflects the effect of improved gross margins principally due to product mix," said William J. Pesce, President and Chief Executive Officer.
Mr. Pesce concluded, "Based on first quarter results, leading indicators, and market conditions, we reaffirm our guidance for fiscal year 2006 revenue growth in the mid-to-high single digits and EPS growth greater than that of revenue."
During the quarter the Company repurchased approximately 542,000 common shares of stock at an average price of $39.32.
As previously discussed in the Company's Annual Report filed on Form 10-K for fiscal year 2005, pursuant to guidance issued by the Internal Revenue Service in May 2005, the Company recorded a tax benefit of approximately $7.5 million, or $0.12 per diluted share in the first quarter of fiscal year 2006 and reduced income taxes due on the fiscal year 2005 repatriation of earnings from its European subsidiaries. The tax benefit offsets a tax charge recorded in the fourth quarter of fiscal year 2005, neither of which had a cash impact to the Company. The Company has excluded this tax item for comparative purposes so as to not distort the underlying operating performance of the Company.
Segment HighlightsProfessional/Trade (P/T)
Wiley's U.S. P/T revenue for the first quarter advanced 3% over prior year, while direct contribution to profit increased 21%. Solid sales results in business, psychology, and education drove these results. Revenue from the Company's recent acquisition of Sybex, a global publisher of computer and software information technology titles, contributed approximately $1 million in revenue for the quarter. Sales growth through online outlets is continuing at a healthy rate. P/T is well positioned to take advantage of the largest release of books in its history during the second quarter.
First quarter highlights include the publication of Dan Denning's The Bull Hunter; Matthew Simmons' Twilight in the Desert, well-timed due to the recent oil price increases and the book's focus on global oil supplies; and McKinsey & Company's Valuation 4e, the best selling and most respected corporate valuation title in the market, which is also packaged in a widely used university edition with online course material.
Top consumer technology publications that were published during the quarter, such as Peter Bauer's Photoshop CS2 For Dummies and Bob Levitus' Mac OS X Tiger For Dummies, reflect the demand for books on recent major software releases. To capitalize on the popularity of the Su Doku puzzle game, P/T published Andrew Heron and Edmund James' Su Doku For Dummies in both Europe and the U.S. Another timely release during the quarter was the Tour de France For Dummies by Phil Liggett, James Raia, and Sammarye Lewis, with a foreword by Lance Armstrong.
Several P/T titles received considerable attention from the media and customers. Both The Bull Hunter and Twilight in the Desert hit The Wall Street Journal Bestseller List. Other titles that were on national and regional bestseller lists include Patrick Lencioni's Five Dysfunctions of a Team; the J.K. Lasser's Income Tax Guide 2005; Michael Masterson's Automatic Wealth; Eric Tyson and Ray Brown's Home Buying For Dummies; Eric Tyson's Investing For Dummies; and Sarah Glendon Lyons and John E. Lucas' Mortgages For Dummies. The publicity surrounding the May release of Jeffery Young's Icon: Steve Jobs, The Greatest Second Act in the History of Business, continued to drive sales throughout the first quarter.
Several Wiley authors received awards during the quarter. The Council for Advancement and Support of Education bestowed their John Grenzebach Award for Outstanding Research in Philanthropy to Richard Chair, William Ryan, and Barbara Taylor for their book, Governance as Leadership: Reframing the Work of Nonprofit Boards. The organization also named Alan Wendroff as recipient of the H.S. Warwick Research Award for his book, Special Events: Proven Strategies for Nonprofit Fundraising. Michele Scicolone’s 1000 Italian Recipes and Gil Marks' Olive Trees and Honey were selected as finalists for two prestigious James Beard Awards. Three journals won 2005 APEX Awards of Excellence in May, the Journal of Organizational Excellence for Best Printed Journal; Leader to Leader for Best Magazine and Journal Writing and Best Design and Layout; and Alternatives to the High Cost of Litigation for Best Newsletter Writing.
In July, the Company acquired the publication rights to seven newsletters from the Manisses Communications Group, a leading provider of mental health and addiction information. Five of the seven newsletters have long-standing affiliations with Brown University. In late May, Wiley completed the acquisition of substantially all the assets of Sybex. Its integration with Wiley is well underway.
Scientific, Technical, and Medical (STM)
Wiley's U.S. STM business once again started the year on a strong note, with revenue up 6% over last year's solid first quarter. Direct contribution to profit increased 10%. Non-subscription revenue, especially journal backfile sales, contributed nicely to the year-on-year growth. The STM book program and subscription journals performed well, each experiencing a 6% revenue improvement over prior year. Globally, STM revenue grew approximately 6%.
In addition to healthy subscription journal license renewals, several new Enhanced Access Licenses (EAL) were signed by academic and corporate customers around the world. EAL customers enjoyed improved customer service due to a number of system enhancements implemented during the quarter. Customers continue to take advantage of Wiley InterScience's wide range of access options. During the quarter, the number of visits to Wiley InterScience increased by approximately 42% over prior year.
The growing value of Wiley's journals to the scientific community was evident in the results of the recently announced 2004 ISI Impact Factor Analysis, an independent ranking that measures how often a journal's articles are cited by other researchers. Wiley journals exhibiting significant increases included the Journal of Biomedical Materials Research, Catheterization and Cardiovascular Intervention, Neurology and Urodynamics, Head and Neck, and American Journal of Physical Anthropology.
In July, Wiley was among a group of major publishers and health organizations to launch patientINFORM (www.patientinform.org), a free online information resource that allows patients direct access to the latest medical research on some of the most serious diseases and medical conditions. The service provides consumers with access to the latest research articles published in medical and scientific journals, assistance in interpreting the articles, and access to additional materials on the web sites of participating voluntary health organizations.
The STM book program performed very well during the first quarter. Product output was excellent; manuscript transmittals have been strong; market conditions were relatively favorable; and online sales channels have fueled growth. Global STM book revenue grew approximately 9%.
Higher Education
Revenue of Wiley's U.S. Higher Education business was essentially flat with that of the previous year's first quarter, but direct contribution to profit increased 6%. Growth in mathematics, science, and accounting was offset by sluggish sales in the social sciences and engineering. Higher Education revenue in August has improved over the prior year.
An encouraging development has been the strong sales of WileyPLUS (formerly eGrade Plus). Available for eighty five key titles, WileyPLUS delivers to students and instructors an integrated suite of resources (including an online version of the textbook), that is organized in one easy-to-use website around teaching and learning activities. WileyPLUS allows instructors to customize course content, create class presentations, assign homework and quizzes for automatic grading, and track student progress. Sales of WileyPLUS were significantly higher than last year's first quarter, however this revenue is deferred and the majority will be recognized over the course of the fall and spring semesters, i.e., the second, third and fourth quarters of Wiley's fiscal year.
Wiley Higher Education offers students value by providing a wide variety of product formats at different price points. Soon after the close of the quarter, Wiley announced an agreement with VitalSource Technologies, Inc. to support Wiley Desktop Editions, which will provide downloadable e-text versions of leading Higher Education textbooks directly from Wiley. These digital editions are intended for students who want lower-priced versions of textbooks. The Company also signed an agreement with Qwizdom to distribute radio frequency clickers to universities that adopt Wiley learning materials. The clicker system facilitates two-way communication between instructors and students, facilitating classroom administration, accountability, and assessment.
Europe
Wiley Europe's first quarter revenue was up 6% over prior year, while direct contribution to profit was essentially flat with last year. STM journals and reference books drove the top-line results. In addition, revenue from the Company's initial sales of German publications under the For Dummies brand contributed to the growth.
Wiley Europe renewed its contract with the Quaternary Research Association to publish The Journal of Quaternary Research. A new controlled circulation magazine, Spectroscopy Asia, was successfully launched in May. During the quarter, the Company published the Dictionary of Microscopy. The dictionary is a brand extension of the Microscopy & Analysis controlled-circulation magazine, which was acquired last year.
Wiley Europe's For Dummies program continued to gain momentum. The release of Su Doku For Dummies is taking advantage of the numbers puzzle craze. More than forty translated and three indigenous für Dummies titles are on the market in Germany and selling briskly. Wiley-VCH is also capitalizing on the centenary of Albert Einstein's theory of relativity by publishing Renn/Einstein Essays (in German and English), as well as Renn/Einstein Katalog.
Asia, Australia, and Canada
First quarter revenue and direct contribution to profit in Asia, Australia, and Canada increased 3% and 2%, respectively, including the favorable effect of foreign currency. Sluggish performance in Canada was partially offset by growth in Asia.
P/T books performed particularly well in India, China, Thailand, and the Philippines. Wiley Asia's P/T list picked up interest globally. For example, the revised edition of Richard Duncan's The Dollar Crisis (originated in Asia) is being adopted as a textbook for finance courses and is being used as the basis for a seminar by Rich Dad, Poor Dad author Robert Kiyosaki.
In Australia, Higher Education and School revenue was strong while P/T lagged behind due to a subdued retail environment. Wiley Australia expects to benefit from a strong pipeline of P/T publications for the holiday season. Wiley Australia was named Secondary Publisher of the Year at the Australian Awards for Excellence in Educational Publishing for the sixth consecutive year. Recognizing overall excellence, the award was granted by a panel of judges that included booksellers, teachers, and publishers.
Conference Call
Wiley will hold a conference call today, Thursday, September 8, 2005, at 10:30 a.m. (EDT) to discuss its financial results for the first quarter of fiscal year 2006. 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: (800) 474-8920
International callers may participate by dialing: (719) 457-2727
A replay of the call will be available from 1:30 p.m. (EDT) on Thursday, September 8 through midnight (EDT) on Wednesday, September 14, by dialing (719) 457-0820 or (888) 203-1112 and entering Passcode: 5529469.
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.
"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; (viii)the Company's ability to protect its copyrights and other intellectual property worldwide and (ix)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.
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.
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