Ellis E. Cousens - Executive Vice President, Chief Financial & Operations Officer
Wiley
(201) 748-6534
John Wiley & Sons, Inc. Reports Revenue and Earnings Growth for the Second Quarter
Hoboken, NJ, December 7, 2005 — John Wiley & Sons, Inc. (NYSE:JWa) (NYSE:JWb) announced today that second quarter revenue of $263 million increased 6% from $247 million in the previous year's second quarter. Earnings per diluted share for the second quarter increased 7% to $0.45 from $0.42 in the prior year. Operating income increased 8%, while net income increased 2% over last year’s second quarter. Net income was adversely affected by increased interest expense and a higher effective tax rate. The quarter's results were driven primarily by our global Scientific, Technical and Medical and Professional/Trade businesses. Higher Education's revenue also strengthened during the quarter.
For the first half of fiscal year 2006, Wiley's revenue advanced 5% to $499 million. Earnings per diluted share for the six-month period increased 5% to $0.78, excluding the income tax benefit described below. Earnings per diluted share for the six-month period including the tax benefit was $0.91. Operating income increased 7% for the six months.
"Wiley had a solid second quarter with all of our businesses contributing to the year-on-year revenue growth. Our global Scientific, Technical and Medical business continued to perform well. U.S. Professional/Trade revenue increased 7%. Results for our European Segment were particularly strong. Higher Education rebounded from a sluggish first quarter," said William J. Pesce, President and Chief Executive Officer.
Mr. Pesce concluded, "Based on year-to-date results, leading indicators, and market conditions, we anticipate full-year revenue growth in the mid-to-high single digits and EPS growth in the high single digits."
During the first half of fiscal year 2006, the Company repurchased approximately 1.4 million shares of common stock at an average price of $39.58.
As previously disclosed in the Company's Annual Report filed on Form 10-K for fiscal year 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 from its analytical and narrative discussion for comparative purposes so as to not distort the underlying operating performance of the Company.
Several Wiley authors, contributors, and editors were named as Nobel laureates in October. Robert H. Grubbs, Richard R. Schrock, and Yves Chauvin, who are associated with a number of Wiley publications including Angewandte Chemie, Journal of Polymer Science, Part A: Polymer Chemistry, and Handbook of Metathesis, were awarded the 2005 Nobel Prize in Chemistry. Theodor Hänsch, who is a member of the editorial board of Laser Physics Review, was a co-recipient of the 2005 Nobel Prize in Physics.
Raymond W. McDaniel, Jr., Chairman and Chief Executive Officer of Moody's Corporation (NYSE: MCO) was elected to Wiley's Board of Directors during the Company's Annual Meeting in September. Shortly after the close of the second quarter, John L. Marion, Jr. resigned from his position on Wiley's Board of Directors to devote additional time fulfilling other business interests and responsibilities.
In October, Wiley was one of five publishers that filed a lawsuit against Google on behalf of the publishing industry over Google's plans to digitally copy and distribute copyrighted works without permission of the copyright owners. The lawsuit was filed after lengthy discussions broke down between publishers and Google regarding the copyright infringement implications of the Google Print Library Project. "Publishers are investing millions of dollars creating content with authors and making it available online. Wiley is committed to providing more access to more content to more customers around the world than it ever has in its nearly 200-year history. We have been pursuing and will continue to pursue this vision in collaboration with partners who respect the intellectual property of our authors and our Company," explained Mr. Pesce.
Segment Highlights
Professional/Trade (P/T)
Wiley's U.S. P/T revenue for the second quarter advanced 7% over the prior year. Despite the impact of the hurricanes on retail sales during the last six weeks of the quarter, nearly all of P/T's publishing categories showed growth, with the technology and business book programs performing especially well. Revenue from the Company's acquisition of Sybex, a global publisher of computer and software information technology titles, contributed approximately $3.5 million to the revenue growth for the quarter. Licensing of rights also had a positive effect on results. Year-to-date revenue was up 5% over the prior year. Direct contribution to profit declined 2% for the quarter, but increased 6% for the six months. The second quarter results reflect the effect of product mix, specifically increased sales of higher-cost imported titles and consumer cooking titles. The timing of advertising costs also impacted profits during the quarter.
Several P/T titles received considerable attention from the media and customers, including Michael Gurian/The Minds of Boys; Ken Dychtwald and Daniel J. Kadlec/The Power Years: A User's Guide to the Rest of Your Life; Cheryl Dellasega/Mean Girls Grown Up; Matthew Simmons/Twilight in the Desert; and Marc Siegel/False Alarm: The Truth About the Epidemic of Fear. Five Wiley titles, Addison Wiggin/The Demise of the Dollar…and Why It’s Great For Your Investments; Patrick Lencioni/The Five Dysfunctions of a Team; Andrew Heron and Edmund James/SuDoku For Dummies; Eric Tyson and Ray Brown/Home Buying For Dummies; and Eric Tyson/Investing For Dummies, were featured on major bestseller lists during the quarter. Pietra Rivoli/The Travels of a T-Shirt in the Global Economy and Constantinos C. Markides and Paul O. Geroski/Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets were selected as two of the five finalists for The Financial Times and Goldman Sachs Business Book of the Year.
A number of key titles published during the second quarter, notably the The Betty Crocker Cookbook, 10th Edition; the Spanish language Cocina Betty Crocker; Doug Radcliff and Michael Rymazewski/Age of Empires III: Sybex Official Strategies and Secrets, published as a result of an exclusive arrangement with Microsoft and timed to be on the shelf when the popular software game was released; and David C. Downing/Into the Wardrobe: C.S. Lewis and the Chronicles of Narnia, which should benefit from the late November release of the movie version of the classic book.
During the quarter, Wiley signed an agreement with MSN.com to license the Frommer's database, as well as content from many Frommer's titles, for the travel pages on MSN.com. The Company also reached agreements with TaxAct.com for content from J.K. Lasser tax titles and Lifescan.com for three titles, Maggie Powers/The ADA Guide to Eating Right with Diabetes; Joseph Juliano/When Diabetes Complicates Your Life; and Linn Goldberg and Diane L. Elliot/The Healing Power of Exercise.
Scientific, Technical, and Medical (STM)
Wiley's U.S. STM business recorded strong second quarter and year-to-date results with revenue up 6% over the prior year periods. Subscription and non-subscription journal revenue, such as journal backfiles, advertising, and the sale of databases, contributed to the year-on-year growth. The STM book program continues to perform well against a strong performance last year. Direct contribution to profit for the second quarter and first half of fiscal year 2006 increased 10%, reflecting the positive effect of higher non-subscription journal revenue and lower journal printing costs. New and renewed Enhanced Access Licenses were signed by customers around the world who continue to take advantage of Wiley InterScience's wide range of access options, which is reflected in the continuing growth in usage. Full-text accesses to Wiley InterScience during the first six months of the fiscal year increased 68% over the same period in the previous year.
During the second quarter, Wiley completed its acquisition of InfoPOEM, Inc., a leading provider of evidence-based medicine (EBM) content and web-based search tools. InfoPOEM delivers daily email summaries of medical evidence and provides a web-based software tool, called InfoRetriever, that enables access to EBM resources at the clinical point-of-care via desktop computers and personal digital assistants. The acronym POEM stands for "Patient-Oriented Evidence that Matters." POEMs are selected from over 100 leading peer-reviewed medical journals.
Higher Education
Revenue of Wiley's U.S. Higher Education business increased 3% during the second quarter and 1% for the first half of the year. The second quarter growth was driven by solid sales of science, business, mathematics, and engineering titles, partially offset by softness in social science. Direct contribution to profit declined 6% for the quarter, but increased 1% for the six-month period as compared to prior year. The second quarter decline was mainly due to the timing of costs related to the frontlist.
Sales were driven by notable titles, such as Gerard J. Tortora and Bernard H. Derrickson/Principles of Anatomy and Physiology, 11th Edition; Jerry J. Weygandt, Donald E. Kieso, and Paul D. Kimmel/Financial Accounting with Annual Report, 5th Edition; and Deborah Hughes-Hallet/Calculus, 4th Edition.
WileyPLUS (formerly eGrade Plus) continues to gain momentum as more students and professors are introduced to this integrated suite of resources organized in one easy-to-use website around teaching and learning activities. Now available with approximately 100 titles, WileyPLUS allows instructors to customize course content, create class presentations, assign homework and quizzes for automatic grading, and track student progress. More than 130,000 units of WileyPLUS have been sold this semester, representing a 170% increase over the same period last year. Sales of WileyPLUS are deferred with the majority of the revenue being recognized over the course of the second half of this fiscal year. Excluding the impact of the deferral, Higher Education revenue would have increased in the quarter and for the six months to 4% and 3%, respectively.
Europe
Wiley Europe's second quarter revenue was up 13% over prior year, or 14% excluding foreign currency effects. For the first six months of the year, revenue increased 10% including and excluding foreign currency effects. Growth in P/T and STM drove the solid gains. Excluding foreign currency effects, direct contribution to profit for the second quarter and six-month period improved over the prior year by 18% and 9%, respectively. Revenue growth and product mix contributed to the improvement.
The success of Andrew Heron and Edmund James/SuDoku For Dummies in Europe and the U.S. contributed to the revenue growth. Sales of The Cochrane Collection, which is now fully available through Wiley InterScience, were strong throughout Wiley Europe’s markets.
Other highlights of Wiley Europe's second quarter included the simultaneous publication of English and German language versions of the lavishly illustrated Enduring Passion: The Story of the Mercedes Benz Brand by Leslie Butterfield, with a significant promotional buy-back from Daimler Chrysler. Tony Levene/Paying Less Tax 2005/2006 For Dummies was the U.K.'s best-selling tax guide in September.
Wiley Europe completed the acquisition of four journals during the second quarter. Three titles were acquired from Leaf Coppin Publishing – Lubrication Science, Journal of Synthetic Lubrication, and TriboTest, which expand the Company's presence in the field of tribology and complements the book program acquired last year from Professional Engineering Publishing. The Company also acquired the International Journal of Medical Robotics and Computer Assisted Surgery from Robotics Publications to enhance its portfolio in surgery.
Asia, Australia, and Canada
Wiley's revenue in Asia, Australia, and Canada was up 12% during the second quarter, or 7% excluding foreign currency effects. STM and P/T growth in Asia and technology books in Canada drove the improvement. For the first half of the year, revenue increased 8%, or 3% excluding foreign currency translation effects. Excluding foreign currency effects, direct contribution to profit for the second quarter and six-month period declined from the prior year, mainly due to product mix and higher planned marketing and sales costs.
In Asia, all of Wiley's businesses contributed to the strong revenue growth, particularly in India, Taiwan, Japan, Singapore, and China. STM books continue to build on the momentum gained over the past year, with growth across all product lines. Second quarter results in Australia were affected by a delay of sales in higher education and secondary school markets. The peak selling period for education in Australia begins in the second half of the Company's fiscal year. Wiley Canada's performance during the second quarter was encouraging.
Conference Call
Wiley will hold a conference call today, Wednesday, December 7, 2005, at 10:30 a.m. (EST) to discuss its financial results for the second 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:
International callers may participate by dialing: (719) 457-2692
A replay of the call will be available from 1:30 p.m. (EST) on Wednesday, December 7 through midnight (EST) on Tuesday, December 13, by dialing (888) 203-1112 or (719) 457-0820 and entering Passcode 5854339.
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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