To Our Shareholders

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Wiley’s performance during fiscal year 2010 tells a compelling story about the quality of our content and its value to our customers; the effective execution of Wiley’s digital strategy and new business models; and the strength of our Company’s culture. In a challenging environment, we gained market share, increased earnings, generated record operating cash flow, and reduced debt significantly. Our accomplishments and initiatives speak not only to how Wiley is keeping pace with rapidly changing communications technologies, but how we are helping to define new ways to put content to use.

LEFT TO RIGHT
Stephen M. Smith
Executive Vice President and Chief Operating Officer
William J. Pesce
President and Chief Executive Officer
Peter Booth Wiley
Chairman, Board of Directors

FINANCIAL RESULTS FOR FISCAL YEAR 2010

We are pleased to report fiscal year 2010 revenue advanced 5% to $1.7 billion, or 4% on a currency neutral basis. Adjusted EPS for the full year increased 20%, or 6% on a currency neutral basis and excluding pre-tax asset impairment and restructuring charges of approximately $15 million, or $0.17 per share.

Scientific, Technical, Medical, and Scholarly (STMS) had a good year in a tough market. We added many new journal customers, a testament to our global reach, opportunities in emerging markets, and the quality of the Wiley offering. In Professional/Trade (P/T), nearly every publishing category showed solid growth, with particular strength in the Americas and EMEA. In Higher Education, we outperformed the industry in a strong market, reflecting the strength of our frontlist, increased penetration in community colleges and for-profit universities, and continued revenue growth from WileyPLUS and other digital content.

Reaching a record level of $419 million, cash flow from operations was 23% over fiscal year 2009 and 49% over fiscal year 2008. Fiscal year 2010 includes approximately $31 million of discretionary accelerated pension funding. Approximately $37 million of operating cash flow was due to delayed cash collections from fiscal year 2009. The Company reduced net debt by $224 million to $495 million. In fiscal year 2010, Wiley increased its dividend for the sixteenth consecutive year.

Impairment and Restructuring Charges

During the year, the Company recorded a $14.3 million, $0.17 per share, impairment and restructuring charge principally related to the Company’s B2B German-language, controlled circulation magazine business (GIT Verlag). Other restructuring charges include $0.8 million in the fourth quarter related to offshoring certain marketing and content management activities to Singapore. The charges related to offshoring are expected to be fully recovered from reduced operating expenses within 18 months of implementation.

LEADERSHIP DEVELOPMENT

While driving strong financial results, we have begun to implement carefully developed plans for the next generation of Wiley leadership. In May, Steve Miron succeeded Eric Swanson as Senior Vice President, STMS. Steve joined us 17 years ago and has served as Regional Manager for Taiwan and Korea; Vice President and Managing Director of Wiley Asia; leader of global STM book publishing; and Vice President and Managing Director of the global STMS Physical Sciences business. In August, Mark Allin was named Senior Vice President, P/T, succeeding Stephen Kippur. Mark joined Wiley in 2000; three years later, he relocated to Asia to lead our business in that region. His role as Vice President and Managing Director of Wiley Asia provided him with experience across all three Wiley businesses.

THREE GLOBAL BUSINESSES

Scientific, Technical, Medical, and Scholarly (STMS)

The largest of our three businesses, STMS serves the world’s research and scholarly communities and is the largest publisher globally for professional and scholarly societies. STMS programs encompass journals, books, major reference works, databases, and laboratory manuals, offered in print and electronically. Wiley Online Library hosts one of the world’s broadest and deepest multidisciplinary collections of online resources covering life, health, and physical sciences; the social sciences; and the humanities. It provides access to more than 4 million articles from 1,500 journals, 8,000 books, and hundreds of reference works, laboratory protocols, and databases.

Global STMS revenue for fiscal year 2010 advanced 2% to $987 million, but was flat on a currency neutral basis. Higher revenue from rights, individual articles, and The Cochrane Library offset lower revenue from advertising, journal subscriptions (partially due to production scheduling), and individual member subscriptions. The improvement in rights income principally relates to a legal settlement of approximately $2 million. Excluding the transfer to Higher Education of books with sales of $4 million, STMS book revenue increased 2% over prior year.

Wiley's STMS products

Direct contribution to profit for the full year rose 2%, but was flat on a currency neutral basis and excluding $15 million in restructuring and impairment charges, mostly due to the write-down of GIT Verlag, a B2B German-language, controlled circulation magazine business. Lower journal production costs, the effect of outsourcing initiatives, the completion of Blackwell-related integration activities, and expense control were offset by increased costs associated with new business and a $2 million bad debt recovery in the prior year.

The renowned quality of our combined Wiley-Blackwell content resulted in significant new and renewed business worldwide. As of April 30, 2010, calendar year 2010 journal subscription billings were up 3 to 4% over prior year on a currency neutral basis, with approximately 95% of expected business closed. Online book revenue grew 44% in fiscal year 2010 to $6 million, as institutional library customers purchased more digital books individually or through license subscriptions, similar to journal licenses. Society relationships continued to strengthen and grow, with 31 new journals and 90 renewals/extensions added, and only two not renewed, during the fiscal year.

Wiley achieved an important milestone in our migration from print to digital when we launched our new online service replacing Wiley InterScience in summer 2010. Wiley Online Library combines a clean and simple interface, intuitive navigation, enhanced discoverability, expanded functionalities, and a range of personalization options.

Professional/Trade (P/T)

Wiley’s P/T 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, Better Homes and Gardens, Family Circle, CliffsNotes, Webster’s New World, J.K. Lasser, Jossey-Bass, Pfeiffer, Sybex, Weight Watchers, and Bloomberg Press®. Global P/T bounced back nicely from a difficult fiscal year 2009 with revenue of $430 million, up 7% over the prior year or 6% on a currency neutral basis. Growth was driven by consumer, business, technology, psychology, and education sales and by new publishing relationships with the Graduate Management Admission Council® (GMAC®) and the Meredith Corporation (Better Homes and Gardens). North America exhibited the most growth, followed by EMEA. Direct contribution to profit was up 12% to $100 million, or 11% on a currency neutral basis, mainly due to top-line results and prudent expense management, partially offset by higher performance-based incentive accruals.

Wiley's Professional/Trade products

Full-year sales of eBooks were up 93% to $7 million, and we recently signed an eBook agreement with Apple. P/T’s online advertising and Web site business thrived in fiscal year 2010. CliffsNotes.com advertising revenue grew by 28% over prior year, and Dummies.com recorded its highest-ever monthly traffic count: 4 million users during the month of March. Digital technologies are allowing us to develop flexible business models and customize content to meet our customers’ specific needs.

Wiley is continuing to forge important new partnerships to drive growth. In March 2010, Wiley was selected as the exclusive global publisher of Bloomberg® and Bloomberg Business Week® branded books to be marketed as “Bloomberg Press®, a Wiley imprint.” In addition, Wiley was named an official licensee by the London Organising Committee of the Olympic and Paralympic Games to publish London 2012 books through a partnership that builds on our agreements related to the Vancouver Winter Olympics and Beijing Summer Olympics.

Higher Education

Wiley Higher Education’s mission is to help teachers teach and students learn. Higher Education serves teachers; undergraduate, graduate, and advanced placement students; and lifelong learners worldwide, as well as secondary school students in Australia. We publish educational materials in all media, notably through WileyPLUS, our integrated online suite of teaching and learning resources. Wiley publishes materials in the sciences, engineering, mathematics, business/accounting, geography, computer science, statistics, education, psychology, and modern languages.

Wiley's Higher Education products

For the full year, global Higher Education revenue was up 18% compared to prior year, or 15% on a currency neutral basis. There was double-digit growth in all regions and in nearly every category, notably business and accounting, mathematics and statistics, social sciences, and Microsoft Official Academic Course materials. Full-year results include revenue of $3 million from books previously reported in STMS and $1 million from books previously reported in P/T. Excluding these books, Higher Education growth was 13% on a currency neutral basis. Direct contribution to profit in the full year increased 29%, or 25% on a currency neutral basis, primarily due to top-line growth and gross margin improvement. Digital revenue and manufacturing efficiencies resulted in meaningful gross margin improvement for the second consecutive year.

The continuing growth of WileyPLUS is indicated by the 42% increase in global revenue to $31 million. WileyPLUS now accounts for 11% of global Higher Education sales. Digital-only sales (not packaged with a print textbook) grew 55% to $10 million, accounting for 36% of WileyPLUS sales.

Wiley signed a partnership agreement with Reaction Explorer to bring new capabilities to WileyPLUS. Reaction Explorer will enable students to predict the results of arbitrary organic chemistry reactions and achieve a higher level of understanding of the intricacies of organic chemistry reactions, syntheses, and mechanisms.

With 650 titles now available as eBooks through CourseSmart, Higher Education’s eBook program gained ground during the year. In the Australian secondary school market, the number of registered users of the JacarandaPLUS eBook solution grew from 13,000 in April 2009 to 85,000 in April 2010.

Global Higher Education revenue generated by products and services other than traditional print textbooks—products that cannot be resold as used books, such as WileyPLUS, digital content sales to institutions, custom publishing, binder editions, and eBooks—grew 37% this year to $61 million, and now accounts for 22% of total Higher Education revenue.

Wiley's products

OUTLOOK

While we are mindful of the volatility in markets around the world, we believe the ongoing shift towards knowledge-based economies, the robust demand for outcomes-based learning, and investments in research and development bode well for Wiley. By optimizing our investments in enabling technology, accelerating our migration from print to digital business models, ensuring a competitive cost structure, and building on our culture of collaboration and enduring partnerships, we are strengthening Wiley’s position as a company that delivers value to shareholders, customers, authors, clients, and colleagues.

In fiscal year 2011, we are projecting mid-single-digit revenue growth on a currency neutral basis. Growth in operating income is expected to be partially offset by a higher effective tax rate and an increase in shares outstanding. Excluding the effect of foreign exchange, we are projecting EPS growth of approximately 10% from fiscal year 2010 adjusted EPS of $2.58. These projections are based on average exchange rates that were in effect in the last fiscal year. Since then, the U.S. dollar has strengthened significantly, which will have an unfavorable effect on Wiley’s reported results.

In April, Wiley earned a place on several “Best Places to Work” lists, including recognition of our Company’s operations in New Jersey, Indianapolis, and San Francisco. We are proud of this recognition and grateful to our colleagues who embrace Wiley’s culture, which is built on a solid foundation of trust, ethics, and integrity.

William J. Pesce
President and Chief Executive Officer
Peter Booth Wiley
Chairman, Board of Directors
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