Fiscal year 2008 was a transformative year, as reflected in Wiley’s record results. Revenue increased 36% over the previous year to $1.7 billion, up from $1 billion just two years ago. Excluding Blackwell, revenue for the fiscal year increased 5%, with favorable foreign exchange contributing 2% to the year-on-year growth. On a U.S. GAAP basis, earnings per diluted share for fiscal year 2008 was $2.49, compared to $1.71 in fiscal year 2007. Excluding Blackwell and various tax benefits, adjusted earnings per diluted share improved 15% to $1.89. Blackwell’s performance was accretive to fiscal year 2008 earnings per dilutive share by approximately $0.29, excluding non-recurring tax benefits. Free cash flow of $117 million for the year, including discretionary pension contributions of approximately $48 million to the Company’s U.S. and U.K. statutory plans, was principally used to repay debt of $158 million and pay dividends of $26 million. Outstanding debt on April 30, 2008, was $842 million, down significantly from $1.2 billion at the time of the Blackwell acquisition in February 2007.
Blackwell was the primary driver of Wiley’s strong results in fiscal year 2008. Revenue of approximately
$485 million and operating income of $63 million contributed approximately $0.55 to Wiley’s full-year adjusted earnings per diluted share, or $0.29, excluding one-time tax benefits, compared to dilution of $0.02 per share in the previous year. Included in operating expenses for the year were approximately $21 million of transition and integration-related costs.
By just about every measure, Blackwell’s results exceeded our expectations. We are particularly pleased with our ability to attract and retain society partners; over the course of the year, we added 65 society journals, renewed or extended 74 journals, and lost only 3 journals to competitors. These impressive results were accomplished during a year of transition. Wiley and Blackwell colleagues around the world are collaborating effectively to serve our authors, society partners, and customers.
In January, the Company announced our plan for a combined, enhanced, and rebranded online platform to support our global Scientific, Technical, Medical, and Scholarly business (STMS, also known as Wiley-Blackwell). The first phase will be available to all Wiley and Blackwell customers beginning in July 2008, when all of Blackwell Synergy’s content and customers will be included in Wiley InterScience. The new enhanced service will be launched early in 2009. Book distribution and customer service have been fully integrated into Wiley’s operations in the U.S., Canada, Europe, Asia, and Australia, resulting in costs savings, service improvements, and incremental sales. Off-shoring activities accelerated throughout the year, particularly journal production in Singapore and printing in Asia, where approximately half of the STMS journals are now printed.
Clearly, Blackwell was the highlight of fiscal year 2008, but there is much more to this chapter in Wiley’s history, as the Company continues to evolve as a global enterprise. We have been implementing a global organizational structure across Wiley’s three core businesses. By leveraging our content services and capabilities around the world, we can better serve our authors, society partners, and customers, while increasing revenue, profitability, and return on investment, and enhancing our position as the place to be. In fiscal year 2009, we anticipate reporting our Company’s financial and operating results as three global business segments.
STMS: Now the largest of our three core businesses, STMS serves the world’s research and scholarly communities, and is the largest publisher for professional and scholarly societies. Its programs encompass journals, books, major reference works, databases, and laboratory manuals, offered in print and electronically. Through our Wiley InterScience online platform, we provide our customers access to a broad range of content, including 1,400 journals; two million articles; 5,000 online books and major reference works; 10,000 laboratory protocols; and digital backfiles going back as far as 200 years.
Wiley’s global STMS revenue grew 74% in fiscal year 2008 to $978 million, including Blackwell, or 6% excluding Blackwell. U.S. STM revenue grew 2% over prior year to $235 million. Revenue growth in the U.S. was attributable to moderate journal subscription growth, offset by softness in book sales and advertising revenue. In Asia, fiscal year 2008 offered the first glimpse of the powerful combination of Wiley and Blackwell, as revenue growth was strong, especially in Southeast Asia, China, and India. STMS journals and The Cochrane Library, an evidence-based medicine collection, contributed to growth in Europe.
P/T: Our Professional/Trade business serves professionals and consumers alike, producing books, subscription content, and information services, in all media. Our portfolio of global brands includes For Dummies, Frommer’s, Betty Crocker, Pillsbury, CliffsNotes, Webster’s New World, J.K. Lasser, Jossey-Bass, Pfeiffer, and Sybex. Subject areas include business, technology, architecture, professional culinary, psychology, education, travel, health, religion, consumer reference, and general interest.
Wiley’s global P/T revenue increased 3% to $469 million, with strong showings in Europe and Asia. U.S. P/T revenue advanced slightly to $395 million from $391 million in the previous year. U.S. P/T delivered solid results for the first nine months, but the fourth quarter was adversely affected by a combination of sluggish market conditions and tight inventory management by some key accounts. Despite the challenging fourth quarter, the business, psychology, technology, and general interest programs turned in strong results for the year, as did sales of rights and brand licensing. In Europe, indigenous publishing programs drove the growth, particularly For Dummies titles. In addition, Frommer’s is building market share in the U.K. travel market. P/T revenues were strong across almost all territories in Asia.
It was a strong year for P/T digital initiatives, including the launch of the Webster’s New World Web site and J.K.Lasser.com. Frommers.com included its first sponsored microsite, Family Vacations with Sheraton Hotels, as well as a custom site for Rail Europe, and a blog by Arthur Frommer, featuring travel resources, tips, travel bargains, and current events. Nonetheless, P/T is still primarily a global print book business. Notable Wiley titles during 2008 included Fred Kaplan’s Daydream Believers: How a Few Grand Ideas Wrecked American Power; Jim Hightower’s Swim Against the Current: Even a Dead Fish Can Go With the Flow; Mark Bittman’s How to Cook Everything Vegetarian; the fifth title in the best-selling Little Book series, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments by Pat Dorsey; Ready, Fire, Aim: Zero to $100 Million in No Time Flat by Michael Masterson; How: Why How We Do Anything Means Everything…in Business (and in Life) by Dov Seidman; and The Architect’s Handbook of Professional Practice, 14th edition.
HE: In Higher Education, Wiley’s mission is to help teachers teach and students learn. Our Higher Education business serves teachers, undergraduate and graduate students, and lifelong learners. We publish educational materials in all media, notably through WileyPLUS, our integrated online suite of teaching and learning resources. Wiley publishes higher education learning materials in the sciences, engineering, mathematics, business/accounting, geography, computer science, statistics, education, psychology, and modern languages.
Globally, Higher Education increased 5% for the full year to $227 million. U.S. Higher Education revenue increased 1% in fiscal year 2008 to $165 million. Solid performances by the science and business/accounting programs, sales of Microsoft Official Academic Course books, and the sale of translation rights and reprints were offset by backlist attrition in mathematics, engineering, and the social sciences. The year ended on a positive note with a strong fourth quarter, driven primarily by the continued success of WileyPLUS. HE sales were strong in Europe, China, India, Thailand, Japan, Indonesia, Canada, and Australia. Forty percent of the highly successful Visualizing titles, published in conjunction with National Geographic, are selling with WileyPLUS.
WileyPLUS sales increased 35% over prior year, with digital-only sales nearly doubling. Student usage around the world continued to climb sharply, with registered users increasing 10% in the U.S. and more than doubling outside the U.S. Seventeen percent of the WileyPLUS user base is located outside the U.S. WileyPLUS ended the year with a milestone achievement, the validation of the 500,000th student user in April. Online sales directly to students also grew significantly. During the year, Wiley was one of six publishers to launch CourseSmart, which provides thousands of textbooks in eTextbook format on a common platform.
Throughout the year, as Wiley was deeply engaged in the process of integrating the largest acquisition in the Company’s 200-year history, we led our businesses in intensely competitive markets; continued Wiley’s evolution as a global enterprise; invested in our future; and reported record financial results. Our colleagues have been able to navigate the year’s challenges with the dedication, commitment, and professionalism that distinguish Wiley.
During the past year we had the privilege to celebrate our Bicentennial with Wiley colleagues around the world. Our interaction with them confirmed our strongly held view that Wiley’s culture is indeed a powerful source of sustainable competitive advantage.
Our colleagues work together to make a difference in the personal and professional lives of human beings. Wiley’s mission is about teaching, learning, enlightening, enriching, and informing. Our publications have opened many new frontiers for readers to explore. Last fall, we were proud to learn that nine of 2007’s Nobel Prize winners are members of Wiley’s author community, joining more than 350 Nobel Laureates who have published with us over the years, representing every category in which the prize is awarded (Literature, Economics, Physiology/Medicine, Chemistry, Physics, and Peace). Our collaboration with this esteemed group reflects Wiley’s unwavering commitment to publishing “must-have” content and sharing it with readers around the world.
As we embark on our third century, we are becoming more customer-centric, more flexible, and more dynamic in our interactions with the constituencies we serve. Enabled by technology and the creativity of our colleagues, we are providing more access to more content to more people than ever before in our history. Publishing at Wiley has certainly evolved, but our core values still endure, providing a rock-solid foundation for future growth and prosperity.
William J. Pesce
Peter Booth Wiley
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