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WILEY continues to grow and evolve in the rapidly changing publishing industry. We are dedicated to meeting the needs of our customers by developing new products, expanding our global presence, and continuing to deliver timely, authoritative information.
Our success is highlighted by another year of strong financial performance in fiscal 1996. Revenues rose 10% to $362.7 million in the fiscal year ended April 30, 1996, while net income advanced 35% to $24.7 million. On a per-share basis, net income increased to $1.49 from $1.12 in fiscal 1995. Net income for the latest year includes interest income after taxes of $2.6 million, or $0.16 per share, related to interest received on the favorable resolution of amended tax return claims. Excluding the effects of the interest received on the tax settlement, net income increased 20% in fiscal 1996. Although results for the year were dampened by higher paper costs, paper prices appeared to have stabilized at year-end.
We increased the dividend rate on the Class A and Class B shares for the second consecutive year. The total return (dividends plus market appreciation) on common shares in fiscal 1996 exceeded 24%. In July 1995, Wiley's shares were listed on the New York Stock Exchange, providing greater visibility for the company and greater liquidity for shareholders.
Revenue growth in fiscal 1996 was led by our STM journals programs, college publishing, and our professional/trade computer and finance book lines.
Our print journal renewal rates remain very high, even as this business begins a transition toward an electronic environment. We are moving ahead rapidly in developing journals in digital formats while continuing to publish them in print. Also noteworthy in our STM business was the introduction of two major new encyclopedias and the signing of contracts to develop others.
Our college business continued to grow at approximately double the rate of the industry as a whole. We remain among the leaders in publishing support of curriculum reform initiatives and in applying new digital technologies to the learning process. Our strategy in college publishing is to remain focused on key subject categories where we can gain market share profitably. We are currently among the top three publishers in the "hardside" disciplines science, engineering, and mathematics.
In professional/trade publishing, the exceptional strength of our computer book line is indicated by a revenue increase of 42% in fiscal 1996, on top of an increase of approximately 50% in fiscal 1995. As with many of our products, these books are capturing significant market shares worldwide. Our finance book program also enjoyed robust sales.
Shortly after the fiscal year-end, we acquired a 90% interest in VCH Publishing Group, a leading scientific, technical, and professional publisher headquartered in Weinheim, Germany. VCH has annual revenues of some $60 million and publishes nearly 100 scholarly and professional journals, as well as more than 500 books annually. The purchase price of approximately $100 million is being financed primarily by debt. We are excited by the opportunity to work with the German Chemical Society and the German Pharmaceutical Society, which retain minority ownership positions.
The acquisition of VCH is strategically important to Wiley for a number of reasons. It makes Wiley the second-largest STM journal publisher and solidifies our position as the world's leading commercial chemistry publisher. It provides a greater critical mass for investments in electronic products. VCH is, moreover, a platform to expand our European publishing and marketing programs across the continent. The acquisition should contribute significantly to earnings and shareholder value over the longer term. Substantial synergies are expected to be realized through economies of scale, providing funds for investment in new products.
In addition to growing through internal development and acquisition, we are forming publishing partnerships, such as our new venture with Verlag BG Teubner, a German publisher. Wiley-Teubner is acquiring English-language works by authors in Germany, Austria, and Switzerland and is publishing German translations of Wiley books. In Asia, our Japanese, Chinese, and Korean language copublishing programs continue to expand rapidly.
Publishing alliances offer still another avenue of growth. They combine the publishing skills of Wiley with the editorial content and/or brand-name recognition of our alliance partners. Alliances were formed in fiscal 1996 with the American Cancer Society, Forbes, IndustryWeek, net.Genesis, The New York Public Library, Nightly Business Report, Autodesk, and Science News, joining a long list of others formed in previous years. We continued to broaden our highly successful alliance with Ernst & Young, the international accounting and consulting firm, with the publication of financial planning software, Prosper.
Investment in core businesses - STM, educational, and professional/trade;
Emphasis on subscription and continuity products in our STM and professional publishing programs;
International growth; and Investment in technology to improve existing businesses and develop new, related businesses.
In past annual reports, we have reviewed our strategic program in broad terms. This year's report focuses on one aspect - global growth. Publishing Without Boundaries, the theme of this report, means greater collaboration and synergy among our operations worldwide.
Wiley has been building its global business since the end of World War II. In fiscal 1996, approximately 41% of our revenues were derived from outside the United States, one of the highest proportions in the U.S. publishing industry. With the recent acquisition of VCH Publishing Group, that proportion should rise to nearly one-half. In accelerating our global growth, we will capitalize on the pervasive worldwide demand for scientific, technical, business, and educational information; advances in communications technologies; and the emergence of English as the international language of discourse.
During fiscal 1996, in support of our global growth objectives, we created the Educational and International Publishing Group, encompassing all Wiley operations outside the United States. Executive Vice President William J. Pesce was appointed to lead this group. Stephen Smith assumed the new post of Senior Vice President, International Development. Previously, Mr. Smith was Vice President, Asia. Now based in London, he is responsible for directing Wiley operations in Asia, the Middle East, and Africa. In addition to identifying prospective acquisitions of companies and product lines abroad, he will evaluate opportunities to publish and copublish in languages other than English.
Technology is a powerful tool in our global business. With the rollout of our CORE distributed information system this past fall, Wiley's technical support infrastructure now reaches around the world, linking all company locations.Several years ago, Wiley's non-U.S. subsidiaries operated with a high degree of autonomy. One of the major recent changes is the tremendous amount of teamwork that now takes place among locations, facilitated by Core and other new technologies.
Additionally, our Internet Web site (www.wiley.com), launched in May 1995, has become an important worldwide channel for marketing our products and receiving inquiries from prospective authors. Visitors find a range of offerings, including our general catalog, annual report, discussion forums, free software, and sample book chapters. Nearly 10,000 visitors a week are clicking onto our Web site.
John Wiley & Sons, Ltd., Canada, distributes all our non-journal products. In addition, it publishes college textbooks and instructional packages and is expanding its trade publishing in targeted subject areas. Wiley Canada was named "Campus Publisher of the Year" by the Canadian College Booksellers Association, an award with customer service as the main criterion. We are capitalizing on Wiley's global capabilities to market key Canadian titles worldwide.
Jacaranda Wiley, in Australia, is an educational publisher for the secondary school and college markets and sells Wiley products from around the world. Jacaranda Wiley is now number two in the Australian college market, following four years of growth above the industry average. Sales of Wiley computer, business, and hospitality titles have increased significantly in Australia for the past two years.
Our most dramatic growth is occurring in Asia. We have marketed a full range of Wiley products in Asia for many years, but only in the past four have we aggressively geared up our sales and marketing effort to capitalize on the region's potential. We believe enormous opportunities exist for continued growth in Asia, not only by marketing Wiley products from the United States, Europe, and Canada but also by building our local publishing programs.
Our products have consistently won recognition for their excellence. Three Wiley titles were honored by the Association of American Publishers as being among the outstanding professional and scholarly titles of 1995 Encyclopedia of Energy, Technology and the Environment, by Attilo Bisio and Sharon Boots; Mergers and Acquisitions: Business Strategies for Accountants, by Joseph M. Morris; and the journal Biospectroscopy, edited by Laurence A. Nafie. In the prestigious annual awards sponsored by the newspaper The Australian, Jacaranda Wiley won the best Secondary Series award for Eshuys and Guest's English Power books one to four. The English Power series, Australia's best-selling English text series, is written for students in grades seven to ten.
Customer service is also central to our business philosophy. During the year, the Ingram Book Company, the largest wholesaler of books in the United States, awarded Wiley the Platinum Partnership Level in its annual review of publishers. The Platinum Level is Ingram's top tier for recognition of superior customer support, fulfillment, and sales representation.
Wiley remains alert to, and actively involved in, the issue of copyright protection. There is growing awareness in Washington of the need to protect copyrights in cyberspace. Congress is considering legislation to clarify and strengthen existing protection for materials transmitted on networks, while copyright owners and users have begun discussions to develop guidelines for fair use in this area.
While challenges lie ahead, we are optimistic about our ability to enforce copyrights in a digital environment. One answer may lie in so-called enabling technologies, including recent advances in encryption and the tagging of data. These advances offer the hope that effective ways can be developed to track the destination of information and charge the user. The Association of American Publishers, through its Committee on Enabling Technologies, headed by Wiley's Timothy King, Senior Vice President for Planning and Development, is involved in a program to identify the features of an effective copyright management system for the network environment. The committee's work will include the establishment of appropriate electronic publishing standards.
The electronic distribution of information, while posing challenges, also creates opportunity. In a digital world, instead of selling printed objects, we will have the option of licensing content. In that sense, our business may benefit as it moves closer to becoming an information service. In support of this likely direction, we will be creating a transactional ability on our web site to sell and deliver product online.
 Bradford Wiley II Chairman of the Board June 20, 1996 |
 Charles R. Ellis President & Chief Executive Officer |