| Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as part of a Publicly Announced Program | | Maximum Number of Shares that May be Purchased Under the Program |
February 2016 | - | | - | | - | | 963,022 |
March 2016 | 118,036 | | $47.12 | | 118,036 | | 845,006 |
April 2016 | 98,150 | | $48.00 | | 98,150 | | 746,836 |
Total | 216,186 | | $47.52 | | 216,186 | | |
Item 6.Item 6. Selected Financial Data | Selected Financial Data |
| For the Years Ended April 30, | |
| Dollars in millions (except per share data) | | 2013 | | 2012 | | 2011 | | 2010 | | 2009 |
| Revenue | | $ | 1,760.8 | | | $ | 1,782.7 | | | $ | 1,742.6 | | | $ | 1,699.1 | | | $ | 1,611.4 | |
| Operating Income (a-d) | | | 199.4 | | | | 280.4 | | | | 248.1 | | | | 242.6 | | | | 218.5 | |
| Net Income (a-e) | | | 144.2 | | | | 212.7 | | | | 171.9 | | | | 143.5 | | | | 128.3 | |
| Working Capital (f) | | | (32.2 | ) | | | (66.3 | ) | | | (228.9 | ) | | | (188.7 | ) | | | (157.4 | ) |
| Deferred Revenue in Working Capital (f) | | | (363.0 | ) | | | (342.0 | ) | | | (321.4 | ) | | | (275.7 | ) | | | (246.6 | ) |
| Total Assets | | | 2,806.4 | | | | 2,532.9 | | | | 2,430.1 | | | | 2,308.6 | | | | 2,216.8 | |
| Long-Term Debt | | | 673.0 | | | | 475.0 | | | | 330.5 | | | | 559.0 | | | | 754.9 | |
| Shareholders’ Equity | | | 988.4 | | | | 1,017.6 | | | | 977.9 | | | | 722.4 | | | | 513.5 | |
| Per Share Data | | | | | | | | | | | | | | | | | | | | |
| Earnings Per Share (a-e) | | | | | | | | | | | | | | | | | | | | |
| Diluted | | $ | 2.39 | | | $ | 3.47 | | | $ | 2.80 | | | $ | 2.41 | | | $ | 2.15 | |
| Basic | | $ | 2.43 | | | $ | 3.53 | | | $ | 2.86 | | | $ | 2.45 | | | $ | 2.20 | |
| Cash Dividends | | | | | | | | | | | | | | | | | | | | |
| Class A Common | | $ | 0.96 | | | $ | 0.80 | | | $ | 0.64 | | | $ | 0.56 | | | $ | 0.52 | |
| Class B Common | | $ | 0.96 | | | $ | 0.80 | | | $ | 0.64 | | | $ | 0.56 | | | $ | 0.52 | |
For the Years Ended April 30, |
Dollars in millions (except per share data) | 2016 | 2015 | 2014 | 2013 | 2012 |
Revenue | $1,727.0 | $1,822.4 | $1,775.2 | $1,760.8 | $1,782.7 |
Operating Income (a-b) | 188.1 | 237.7 | 206.7 | 199.4 | 280.4 |
Net Income (a-c) | 145.8 | 176.9 | 160.5 | 144.2 | 212.7 |
Working Capital (d) | (111.1) | (62.8) | 60.1 | (32.2) | (66.3) |
Deferred Revenue in Working Capital (d) | (426.5) | (372.1) | (385.7) | (363.0) | (342.0) |
Total Assets | 2,921.1 | 3,004.2 | 3,077.4 | 2,806.4 | 2,532.9 |
Long-Term Debt | 605.0 | 650.1 | 700.1 | 673.0 | 475.0 |
Shareholders’ Equity | 1,037.1 | 1,055.0 | 1,182.2 | 988.4 | 1,017.6 |
Per Share Data | | | | | |
Earnings Per Share (a-c) | | | | | |
Diluted | $2.48 | $2.97 | $2.70 | $2.39 | $3.47 |
Basic | $2.51 | $3.01 | $2.73 | $2.43 | $3.53 |
Cash Dividends | | | | | |
Class A Common | $1.20 | $1.16 | $1.00 | $0.96 | $0.80 |
Class B Common | $1.20 | $1.16 | $1.00 | $0.96 | $0.80 |
(a)a) | In fiscal yearyears 2016, 2015, 2014 and 2013, the Company recorded restructuring charges of $28.6 million ($0.8 per share), $28.8 million ($0.34 per share), $42.7 million ($0.48 per share) and $29.3 million ($19.8 million after tax or $0.330.33 per share), respectively, and related impairment charges in fiscal years 2014 and 2013 of $4.8 million ($0.06 per share) and $30.7 million ($21.1 million after tax or $0.350.35 per share)., respectively. |
(b)b) | In fiscal year 2013, the Company recorded a gain, net of losses, on the sale of certain Professional Development consumer publishing programs of $6.0 million ($2.6 million after tax or $0.040.04 per share). |
(c)c) | In fiscal year 2011, the Company recorded a $9.3 million bad debt provision ($6.0 million afterCertain tax or $0.10 per share) related to the bankruptcy of a large book retailer “Borders”. |
(d) | In fiscal year 2010, the Company recognized intangible asset impairment and restructuring charges of $15.1 million ($10.6 million after tax or $0.17 per share) principally related to GIT Verlag, a Business-to-Business German-language controlled circulation magazine business acquired in 2002. |
(e) | Tax benefits and charges included in fiscal year results are as follows: |
· | Fiscal years 2016, 2014, 2013 2012 and 20112012 include tax benefits of $5.9 million ($0.10 per share), $10.6 million ($0.18 per share), $8.4 million ($0.14 per share), and $8.8 million ($0.14 per share) and $4.2 million ($0.07 per share), respectively, principally associated with legislative reductionsconsecutive tax legislation enacted in the United Kingdom that reduced the U.K. corporate income tax rates. The benefits reflect the remeasurement of all applicable U.K. deferred tax balances which are reflected at 23% as of April 30, 2013. |
· | Fiscal year 20132015 includes a non-recurring tax chargebenefit of $2.1$3.1 million ($0.040.05 per share) due to recently published IRS tax positions related to tax deductions claimed on the Company’s abilitywrite-up of certain foreign tax assets to take certain deductions in the U.S.fair market value. |
· | Fiscal year 2012 includes a tax benefit of $7.5 million ($0.12 per share) related to the reversal of an income tax reserve recorded in conjunction with the Blackwell acquisition. |
(f)d) | The primary driver of the negative working capital is unearned deferred revenue related to subscriptions for which cash has been collected in advance. Cash received in advance for subscriptions is used by the Company for a number of purposes including paying down debt;acquisitions; debt repayments; funding operations; paying dividends;dividend payments; and purchasing treasury shares. The deferred revenue will be recognized in income asover the products areterm of the subscription; when the related issue is shipped or made available online, toor the customers over the term of the subscription.service is rendered. |
| Management’s Discussion and Analysis of Business, Financial Condition and Results of Operations |
The Company is a global provider of knowledge and knowledge-basedknowledge-enabled services that improve outcomes in areas of research, professional developmentpractice and education. Core businesses produceThrough the Research segment, the Company provides digital and print scientific, technical, medical and scholarly research journals, reference works, books, database services and advertising; professionaladvertising. The Professional Development segment provides digital and print books, corporate learning solutions, post and certification,pre-employment assessment and training services;services, and test preparation and certification. In Education, the Company provides print and digital content, and education content and servicessolutions including online program management services for collegeshigher education institutions and universities and integrated online teaching and learning resourcescourse management tools for instructors and students. The Company takes full advantage of its content from all three core businesses in developing and cross-marketing products to its diverse customer base of researchers, professionals, students, and educators. The use of technology enables the Company to make its content efficiently more accessible to its customers around the world. The Company maintains publishing, marketing, and distribution centersCompany’s operations are primarily located in the United States, Canada, Europe, Asia, and Australia.
Business growth comes from a combination of organic growth from existing brands and titles; title, imprint and other business acquisitions which complement the Company’s existing businesses; the development of new products and services; designing and implementing new methods of delivering products to our customers; and organic growth from existing brandsthe development of new products and titles.services. The Company’s revenue grewdeclined at a compound annual rate of 1%0.2% over the past five years.
Core BusinessesBusiness Segments
Research:
The Company’s Research business serves the world’s research and scholarly communities and is the largest publisher for professional and scholarly societies. Research’s mission is to support researchers, professionals and learners in the discovery and use of research knowledge to help them achieve results that help shape the future.their goals in research, learning and practice. Research products include scientific, technical, medical and scholarly research journals, books, major reference works, databases, clinical decision support tools, and laboratory manuals and workflow tools, in the publishing areas of the physical sciences and engineering, health sciences, social science and humanities and life sciences. Research customers include academic, corporate, government, and public libraries; researchers; scientists; clinicians; engineers and technologists; scholarly and professional societies; and students and professors. The Company’s Research products are sold and distributed globally onlinein digital and in print formats through multiple channels, including research libraries and library consortia, independent subscription agents, direct sales to professional society members, bookstores, online booksellers and other customers. Publishing centers include Australia, China, Germany, India, Singapore, the United Kingdom and the United States. Research accounted for approximately 57%56% of total Company revenue in fiscal year 2013 and generated revenue growth2016 which declined at a compound annual rate of 1% over the past five years.
Research revenue by product type includes: Journal Subscriptions; Author-Funded Access; Other Journal Revenue, which includes Journal Subscriptions sold onlinepublishing service charges for article customization charges, sales of journal licensing rights, journal reprint revenue, backfiles and in print;individual articles. In addition, Print Books; Digital Books; and Other Books and eBooks including major reference works; Publishing RightsReference Revenue, which is revenue from theincludes, advertising, book licensing of the right to republish Wiley content either online or in print; Advertising and Other. Other revenue includes journal and article reprints, pay per view journal revenue, the sale of journal backfile collections, journal contributor fees, open access revenuerights, distribution services and the sale of databases and protocols.
The graph below presents Research revenue by product type for fiscal year 2013:2016 and 2015:
Key growth strategies for the Research business include evolving and developing new licensing models for the Company’s institutional customers; developing new funded access revenue streams; focusing resources on high-growth and emerging markets; and developing new digital products, services and workflow solutions to meet the needs of researchers, authors, societies and societies; continuing the migration and transformation of the book business from print to digital, focusing resources on high-growth and emerging markets; developing new open access revenue streams; and evolving and developing new licensing models for the Company’s institutionalcorporate customers.
Approximately 53%50% of journal subscriptionJournal Subscription revenue is derived from publishing rights owned by the Company. Publishing alliances also play a major role in Research’s success. Approximately 47%50% of journal subscriptionJournal Subscription revenue is derived from publication rights which are owned by professional societies and published by the Company pursuant to a long-term contract or owned jointly with a professional society. These society alliances bring mutual benefit, with the societies gaining Wiley’s publishing, marketing, sales and distribution expertise, while Wiley benefits from being affiliated with prestigious societies and their members. The Company publishes the journals of many prestigious societies, including the American Cancer Society, the American Heart Association, the British Journal of Surgery Society, the Federation of European Biochemical Societies, the European Molecular Biology Organization, the American Anthropological Association, the American Geophysical Union and the German Chemical Society.
The Company transitioned from issue-based to time-based digital journal subscription agreements for calendar year 2016. Under this new model, the Company provides access to all journal content published within a calendar year and recognizes revenue on a straight-line basis over the calendar year. Under the Company’s previous licensing model, a customer subscribed to a discrete number of online journal issues and revenue was recognized as each issue was made available online. The change shifted approximately $37 million of revenue from fiscal year 2016 to the remainder of calendar year 2016 (fiscal year 2017). The change had no impact on free cash flow. The Company made these changes to significantly simplify the contracting and administration of digital journal subscriptions.
The Company’s Research business is a provider of content and services in evidence-based medicine (EBM). Through the Company’s alliance with The Cochrane Collaboration, the Company publishes The Cochrane Library, a premier source of high-quality independent evidence to inform healthcare decision-making, which provides the foundation for the Company’s growing suite of EBM products designed to improve patient healthcare. EBM facilitates the effective management of patients through clinical expertise informed by best practice evidence that is derived from medical literature.
Wiley Online Library, the online publishing platform for the Company’s Research business, is one of the world’s broadest and deepest multidisciplinary collections of online resources covering life, health and physical sciences, social science and the humanities. Built on the latest technology and designedDesigned with extensive input from scholars around the world, Wiley Online Library delivers seamless integrated access to over 47 million articles from 1,5001,700 journals, 13,00019,000 online books, and hundreds of multi-volume reference works, laboratory protocols and databases. Wiley Online Library provides the user with intuitive navigation, enhanced discoverability, expanded functionality and a range of personalization options. Access to abstracts is free, full content is accessible through licensing agreements or as individual article purchases. Large portions of the content are provided free or at nominal cost to nations in the developing world through partnerships with certain non-profit organizations. Wiley Online Library also provides the Company with revenue growth opportunities through new applications and business models, online advertising, deeper market penetration and individual sales and pay-per-view options.
Full content Access toon Wiley Online Libraryis sold through licenses with academic and corporate libraries, consortia and other academic, government and corporate customers. The Company offers a range of licensing options including customized suites of journal publications for individual customer needs as well as subscriptions for individual journal and online book publications. Licenses are typically sold in durations of one to three years. Through the Article Select and PayPerView programs, the Company provides fee-based access to non-subscribed journal content, book chapters and major reference work articles.
For calendar year 2013, the Company piloted an alternative journal subscription license model for a group of customers. Previously, those customer licenses were based on a commitment by the Company to provide a discrete number of online journal issues which provided for recognition of revenue by the Company as issues were published. Under this alternative model, the Company provides access to all journal content published in the calendar year and provides for recognition of revenue on a straight-line basis over the calendar year covered by the alternative license model. The new license model improves the value proposition for our established customer base in mature markets and makes licensing the Company’s journals a more straightforward process which frees up sales and support resources to focus on growth opportunities in other digital products and services.
Wiley Online Library takes advantage of technology to update content frequently and to add new features and resources on an ongoing basis to increase the productivity of scientists, professionals and students. Two examples are EarlyView, through which customers can access individual articles well in advance of print publication, and MobileEditions,the Wiley Journals Apps service, which enables users to view tables ofaccess articles and related content and abstractsfrom over 200 titles on wireless handheld devices and smartphones.a tablet or other mobile device.
Wiley Open Access is the Company’s publishing program for open-access research articles. Under the Wiley Open Access business model, research articles submitted by authors are published and compiled by subject area intoin open-access journals. All research articles published in Wiley Open Access journals are freely available to the general public on Wiley Online Library to read, download and share. A publication service fee is charged upon acceptance of a research article by the Company, which may be paid by the individual author.author or by the author’s funder or institution. To actively support researchers and members who wish to publish in Wiley Open Access journals, an academic or research institution, society or corporation may fund the fee directly. In return for the service fee, the Company provides its customary publishing, editing, peer review, technology and distribution services. All accepted open-access articles are subject to the same rigorous peer-review process applied to the Company’s subscription based journals which are supported by the Company’s network of prestigious journals and societies. In addition to Wiley Open Access, the Company provides authors with the opportunity to make their individual research articles that were published within the Company’s paid subscription journals freely available to the general public through OnlineOpen.OnlineOpen on payment of an Article Payment Charge.
Professional Development (“PD”):
The Company’s Professional Development business acquires, develops and publishes professional information and content delivered through print and digital books, subscription products,test preparation, assessments, online learning solutions and certification and training services and online applications in the areas ofservices. Communities served include business, finance, accounting, workplace learning, management, leadership, technology, behavioral health, engineering/architecture and education. Professional DevelopmentDevelopment’s mission is focused on creatingto create products and services that help customersprofessionals worldwide learn, achieve results, and enhance their skills throughout their careers enabling corporations to maximize their investment in employees, having them become more effective in the workplace and achieve career success.workplace. Products are developed in print and digitally for worldwide distribution through multiple channels, including major chainschain and online booksellers, independent bookstores, libraries, colleges and universities, warehouse clubs, corporations, direct to consumer, websites, distributor networks and other online applications. Professional Development’s mission is to help professionals worldwide learn, achieve results, develop opportunities and enhance their skills throughout their career. Publishing centers include Australia, Canada, Germany, India, Singapore, the United Kingdom and the United States. Professional Development accounted for approximately 24%23% of total Company revenue in fiscal year 2013 and2016 which declined at a compound annual rate of 2%1% over the past five years. Excludingyears, including the impact of the divested consumer publishing programs in fiscal year 2013 divestmentand the acquisitions of the Consumer Publishing Programs, the fiveInscape in fiscal year compound growth rate was essentially flat.2012, Efficient Learning Systems, Inc. in fiscal year 2013, Profiles in fiscal year 2014 and CrossKnowledge in fiscal year 2015.
Professional Development revenue by product type includes eBooks and Print Books; Digital Books; Online TrainingTest Preparation and Assessment which is revenue from the sale of productsCertification; Assessments; and services focusing on workplace effectiveness and career success; Publishing Rights which is revenue from the licensing of the right to republish Wiley content either online or in print; Journal Subscriptions online and in print to professionals; and Other. Other includes advertising revenue, distribution and agency revenue and reprint revenue. Corporate Learning.
The graph below presents PD revenue by product type for fiscal year 2013:2016 and 2015:
Key growth strategies for the Professional Development business includeinclude: developing and acquiring learning applications, online trainingproducts and assessment, workflow solutionsservices to supportdrive corporate development and professional career development,development; developing leading brands and franchises,franchises; executing strategic acquisitions and partnerships,partnerships; innovating digital and eBookbook formats while expanding their global discoverability and distributiondistribution; and creating advertising opportunities on the Company’s branded websites and online applications. The Company has recently executed several initiatives focusedSeveral of the more recent acquisitions that focus on achieving these growth strategies which are described in more detail below.
In February 2012, WileyMay 2014, the Company acquired Inscape Holdings, Inc. (“Inscape”), a leading provider of online training and assessment solutions,CrossKnowledge for approximately $85$166 million in cash, net of cash acquired. The acquisition combines Wiley’s deep wellCrossKnowledge is a learning solutions provider focused on leadership and managerial skills development that offers subscription-based, digital learning solutions for global corporations, universities, and small and medium-sized enterprises. CrossKnowledge’s solutions include a variety of valuablemanagerial and leadership skills assessments, courses, certifications, content and global reachexecutive training programs that are delivered on a cloud-based LMS platform with over 19,000 learning objects in leadership and training with Inscape’s technology, distribution network, and talent expertise, including the innovative EPIC online assessment-delivery platform and an elite global authorized distributors network of nearly 1,700 independent consultants, trainers, and coaches. Inscape’s solution-focused products are used17 languages. CrossKnowledge serves over seven million end-users in thousands of organizations, including major government agencies and Fortune 500 companies. Inscape80 countries. CrossKnowledge generated revenue of $21.6$50.7 million in fiscal year 2013.2016.
Inscape’s solutions-focused DiSC® offerings complementIn April 2014, the products published under Wiley’s Pfeiffer brand, such as KouzesCompany acquired Profiles International (“Profiles”) for approximately $48 million in cash, net of cash acquired. Profiles provides pre-employment assessment and Posner’s Leadership Practices Inventory®,selection tools that enable employers to optimize candidate selections and develop the full potential of their employees. Solutions include pre-hire assessments, including those designed to measure and match personality, knowledge, skills, managerial fit, loyalty, and values; and post-hire assessments, focused on measuring sales and managerial effectiveness, employee performance and career potential. Profiles serves approximately 4,000 corporate clients and millions of end users in the growing workplace learning industry. Through the Pfeiffer brand, Wiley has a 40-year historyover 120 countries, with assessments available in 32 languages. Profiles generated revenue of serving professional development and resource needs of learning professionals. The combined Inscape and Pfeiffer business increases the Company’s presence$20.3 million in the professional development and skill assessment arena. We believe Inscape’s competitive strengths will also advance a number of Professional Development’s major strategic goals. As a workplace learning business with more than 50% of revenue from a proprietary digital platform, Inscape will enable Wiley to move more rapidly into digital delivery within the growing workplace learning and assessment market and build a significant market position in the category of leadership development. Inscape also enhances Wiley’s global presence, serving customers around the world in more than 30 languages eachfiscal year with approximately 35% of revenue generated outside the U.S through Inscape’s global distributor network.2016.
In November 2012, the Company acquired Efficient Learning Systems, Inc. (“ELS”) for approximately $24 million in cash, net of cash acquired. ELS is an e-learning system provider focused in the areas of professional finance and accounting. ELS’ flagship product, CPAExcel, is a modular, digital platform comprised of online self-study, videos, mobile apps, and sophisticated planning tools that has helped over 65,000 professionals prepare for the CPA exam since 1998. The acquisition enhancesenhanced Wiley’s position in the growing CPA test preparation market and providesprovided the Company with a scalable platform that can be leveraged globally across other areas of its Professional Development business. ELSIn 2013, the Company also acquired Elan Guides for approximately $2.5 million. Elan Guides provides content in multiple formats to help prepare candidates for the CFA examinations. The fiscal year 2016 revenue associated with these businesses was generating annualapproximately $14.1 million.
In 2012, Wiley acquired Inscape Holdings, Inc. (“Inscape”), a leading provider of assessment-based employee training solutions, for approximately $85 million in cash, net of cash acquired. The acquisition combined Wiley’s deep well of valuable content and global reach in leadership and training with Inscape’s talent development content, technology and distribution network, including the innovative EPIC online assessment-delivery platform and an elite global authorized distributor network of over 1,700 independent consultants, trainers, and coaches. Inscape’s solution-focused products are used in thousands of organizations, including major government agencies and Fortune 500 companies. Inscape generated revenue of approximately $7$29.3 million prior toin fiscal year 2016.
Inscape’s solutions-focused DiSC® offerings complement Wiley’s existing offerings, such as Kouzes and Posner’s Leadership Practices Inventory® and The Five Behaviors of a Cohesive TeamTM, in the acquisition and contributed $3.7 million togrowing workplace learning industry. The combined assessment offerings increased the Company’s fiscal year 2013 revenue sincepresence in the acquisition date.
In March 2012, the Company announced that it intended to explore opportunities to sellprofessional training and development arena. We believe Inscape’s competitive strengths will also advance a number of its consumer publishing assetsProfessional Development’s major strategic goals. As a workplace learning business with more than 90% of revenue from a proprietary digital platform, Inscape enables Wiley to move more rapidly into digital delivery within the growing workplace learning and assessment market and build a significant market position in the Professional Development business as they no longer aligncategory of leadership development. Inscape also enhanced Wiley’s global presence, serving customers around the world in more than 30 languages each year, with the Company’s long-term business strategy. Those assets included travel (including the well-known Frommer’s brand), culinary, general interest, nautical, pets, crafts, Webster’s New World, and CliffsNotes. Duringapproximately 28% of fiscal year 2013,2016 revenue generated outside the Company sold substantially all of these publishing assets in a series of individual transactions for approximately $34 million. Fiscal year 2013U.S through Inscape’s dedicated global distributor network.
Publishing Alliances and 2012 revenue associated with the operations of the assets sold were $46 million and $73 million, respectively.Programs:
Publishing alliances and franchise products are central to the Company’s strategy. The ability to bring together Wiley’s product development, sales, marketing, distribution and technological capabilities with a partner’s content and brand name recognition has been a driving factor in its success. Professional Development alliance partners include Bloomberg Press, the American Institute of Architects, the Leader to Leader Institute, Fisher Investments, the CFA Institute, the BPO Certification Institute,ACT (American College Test), Autodesk and many others.
The Company also promotes an active and growing Professional Development custom publishing program. Custom publications are typically used by organizations for internal promotional or incentive programs. The Company’s custom publications include digital and print books written specifically for a customer and customizations of Professional Development’s existing publications to include custom cover art, such as imprints, messages and slogans. Of special note are customized For Dummies publications, which leverage the power of this well-known brand to meet the specific information needs of a wide range of organizations around the world.
Education:
The Company’s Education business produces educational content and servicessolutions, including online programcourse management for colleges and universities and integrated online teaching and learning resourcestools for instructors and students.students and online program services for higher education institutions. Education’s mission is to help teachers teach and students learn by delivering personalized content, tools and services that demonstrate results to students, faculty and institutions throughout the world personalized content, tools and services that demonstrate results.world. Education offers learning solutions, innovative products and services principally delivered through college bookstores, and online distributors and directly to institutions and more recently direct-to-student, with customers having access to content in multi-mediadigital and custom print formats, as well as the traditional print textbook. Education’s cost-effective, flexible solutions are available in each of its publishing disciplines, including the sciences, engineering, computer science, mathematics, business and accounting, statistics, geography, hospitality and the culinary arts, education, psychology and modern languages.
Education accounted for approximately 19%21% of total Company revenue in fiscal year 20132016 and generated revenue growth at a compound annual rate of 7%3% over the past five years, including the acquisition of Deltak.edu, LLC (“Deltak”)Deltak in fiscal year 2013.
Education revenue by product type includes eBooks and Print Textbooks; Digital Books; Online Program Management; WileyPLUS, the Company’s online learning solution;Management (Deltak); Custom Material; Course Workflow (WileyPLUS), and Other Education revenue which includes revenue from the licensing of publishing content rights and Other Nontraditional and Digital Products such as custom publishing and other content adaption’s. adaptions.
The graph below presents Education revenue by product type for fiscal year 2013:2016 and 2015:
The Company is transformingcontinues to transform the Education business from a content publisher to an education solutionsolutions provider. Education’s key growth strategies include developing and acquiring digital products and educational servicessolutions across the educational value chain; continuing the transformation of the business from traditional print products to digital and custom products and services; focusing on institutional relationships and direct-to-student digital products; and developing the Company’s online institutional education services model acquired with Deltak.
In October 2012, the Company acquired Deltak for approximately $220 million in cash, net of cash acquired. Deltak works in close partnership with leading colleges and universities to develop and support online degree and certificate programs. The acquisition positionsThese new services position the Company as an online education services provider and expands the services and content value chain for how people teach and learn. Through Deltak,provider. Wiley will now provideprovides a complete solution to help traditional colleges and universitieshigher education institutions transition their programs into valuable online experiences. Deltak offers market research to validate degree or certification program demand,demand; instructional design, marketing,design; marketing; student recruitmentrecruitment; and retention services, and access to theservices. Deltak uses its Engage Learning Management System with the goal of boostingand Student Relationship Platform to enhance the quality and efficacy of online and hybrid programs. Deltak provides theThe Company withnow has access to high-growth markets and a variety of capabilities and technologies for its expansion into custom online courses and curriculum development. The acquisition will also enable Wiley’s Education business to accelerateCompany leverages its digital learning strategystrong reputation and diversify its service offerings to include operational and academic solutions for higher education institutions. Wiley offers Deltak a stable basefinancial stability for new program investment, the ability to accelerate growth globally, to access to professional consumers and expanded offerings ofcorporations and to expand content and faculty development.development offerings. As of April 30, 2016, the Company had 38 partners and 226 degree programs under contract. Deltak currently supports more than 100 online programs and was generating annualgenerated revenue of approximately $54$96.5 million prior to the acquisition and contributed $33.7 million to the Company’sin fiscal year 2013 revenue since the acquisition date.2016.
Strategic partnerships and relationships with companies such as Microsoft®, Blackboard, Canvas, Snapwiz and the Culinary Institute of America are also an important component of Education’s growth strategy. The ability to join Wiley’s product development, sales, marketing, distribution and technology with a partner’s content, technology and/or brand name has contributed to Education’s success.
Education offers high-quality online learning solutions including Course Workflow (WileyPLUSWileyPLUS), it’sa research-based, online environment for effective course teaching and learning that is integrated with a complete digital textbook. WileyPLUS improves student learning through instant feedback, personalized learning plans, and self-evaluation tools andas well as a full range of course-oriented activities, including online planning, presentations, study, homework and testing. In selected courses, WileyPlus includes a personalized adaptive learning component, Orion, which is based on cognitive science. Orion helps to build student proficiency on topics while improving the effectiveness of their study time. It assists educators in identifying areas that need reinforcement and measures student engagement and proficiency throughout the course.
Education encouragespromotes and supports the customization of its content. Wiley Custom Learning Solutions is a full-service custom publishing program that offers an array of tools and services designed to put creation of customized content creation in instructors’ hands. Our suite of custom products empowers users to create high-quality, economicalaffordable education solutions tailored to meet individual classroom needs. Through Wiley Custom Select, aan online custom textbook system, instructors can easily build print and digital materials tailored to their specific course needs and add their own content to create a customized solution derived from any one or more Wiley resources.of the Company’s three business segments.
The Company also provides the services of the Wiley Faculty Network, a global community of faculty that offers guidance, training, and resources. Through the Wiley Faculty Network, instructors and administrators can collaborate with each other, attend virtual and live events, and utilize a wealth of resources all designed to help them grow as educators. Colleagues can also benefit from taking part in the Wiley Learning Institute, an online center for professional development offering workshops, applied learning, coaching programs, and a unique community experience.
In a recent decision, the United States Supreme Court held that the “first sale” doctrine of US Copyright Law applied to copies of US copyrighted material printed outside of the United States. This decision allows third parties who purchase works meant for sale only within a particular non-US territory to resell those works in the United States. These works are often available outside the US at prices significantly below those of the US editions to meet local market pricing conditions.
In response to the ruling, the Company has implemented changes with respect to the sale of US originated Global Education print works outside the United States. The Company is using a tiered approach in certain non-US markets. In those countries where the Company has sales representatives, direct knowledge of local consumption and face to face management of intermediaries, local pricing will be maintained. In those countries where the Company has significant business through long standing local partners, Preferred Partner Agreements are being executed to minimize the resale of Wiley products outside of their designated markets. Lastly, in all non-US markets where the Company does not have sales representatives or Preferred Partner Agreements, locally price differentiated product is not being sold or distributed. In these countries, Global Education product is available only at North American market prices. All sales orders are now being actively monitored for compliance with this policy. Full implementation of these measures is scheduled for completion by 30 June 2013. Additionally, all products carry RFiD (Radio Frequency Identification) tags to track the original sale location. The Company continues to utilize global product strategies which materially differentiate key US print titles through content adaptation and versioning.
As a result of these changes, the company expects the net difference in revenue and operating profit to be negligible after a period of market transition. These changes are expected to reduce units sold and revenue in non-US markets while increasing units and revenue in the US. The reduction in units, at a lower price per unit, will occur immediately in non-US markets while the corresponding recovery of sale of units at a higher price point of formerly cannibalized US units will follow. The timing difference is due to product available for resale into the US will need to be exhausted over time and not replenished. A portion of the revenue and operating income recovery will come from the difference in lower net units globally offset by higher average positive price globally.
Content-EnabledKnowledge-Enabled Products and Services:
Journal Products:
The Company publishes approximately 1,6001,700 Research and Professional Development journals. Journal subscriptionSubscription revenue and other related publishing income, such as Author-Funded Access, advertising, backfile sales, the licensing of publishing rights, journal reprints and individual article sales accounted for approximately 48% of the Company’s consolidated fiscal year 20132016 revenue. The journal portfolio includes titles owned by the Company, in which case they may or may not be sponsored by a professional society; titles owned jointly with a professional society; and titles owned by professional societies and published by the Company pursuant to long-term contracts.
The Company sells journal subscriptions directly through Company sales representatives; indirectly through independent subscription agents; through promotional campaigns; and through memberships in professional societies for those journals that are sponsored by societies. Journal subscriptions are primarily licensed through contracts for digital content delivered through the Company’s online platform, Wiley Online Library. Contracts are negotiated by the Company directly with customers or their subscription agents. Licenses range from one to three years in duration and typically cover calendar years. Print journals are generally mailed to subscribers directly from independent printers. The Company does not own or manage printing facilities. The print journal content is also available online via Wiley Online Library. Subscription revenue is generally collected in advance, and deferred until the Company has fulfilled its obligation to the customer at which time the revenue is earned. The Company transitioned from issue-based to time-based digital journal subscription agreements for calendar year 2016. Under this new model, the Company provides access to all journal content published within a calendar year and recognizes revenue on a straight-line basis over the calendar year. Under the Company’s previous licensing model, a customer subscribed to a discrete number of online journal issues and revenue was recognized as each issue was made available online. The Company made these changes to simplify the contracting and administration of digital journal subscriptions. Print journal subscription revenue is recognized once the related issue is shipped.
Societies that sponsor or own such journals generally receive a royalty and/or other consideration. The Company may procure editorial services from such societies on a pre-negotiated fee basis. The Company also enters into agreements with outside independent editors of journals that statedefine the duties of the editors, and the fees and expenses for their services. Contributors of articles to the Company’s journal portfolio transfer publication rights to the Company or a professional society, as applicable. Journal articles may be based on funded research through government or charitable grants. In certain cases the terms of the grant may require the grant holder to make articles (either the published version or an earlier unedited version) available free of charge to the general public, typically after an embargo period. Funded open access under the Company’s Wiley Open Access and OnlineOpen business models facilitate the ability of the grant holder to comply.
The Company sells journal subscriptions directly through Company sales representatives; indirectly through independent subscription agents; through promotional campaigns; and through memberships in professional societies for those journals that are sponsored by societies. Journal subscriptions are primarily licensed through contracts for online content delivered through the Company’s online platform, Wiley Online Library. Contracts are negotiated by the Company directly with customers or their subscription agents. Licenses range from one to three years in duration and typically cover calendar years.
Print journals are generally mailed to subscribers directly from independent printers. The Company does not own or manage printing facilities. The print journal content is also available online via Wiley Online Library. Subscription revenue is generally collected in advance, and deferred until the related issue is shipped or made available online at which time the revenue is earned.
For calendar year 2013, the Company piloted an alternative journal subscription license model for a group of customers. Under this alternative model, the Company provides access to all content published in the calendar year and provides for recognition of revenue on a straight-line basis over the calendar year covered by the alternative license model.
Book Products:
Book products and other book related publishing revenue, such as advertising and the sale of publishing rights, accounted for approximately 48%41% of the Company’s consolidated fiscal year 20132016 revenue. Materials for book publications are obtained from authors throughout most of the world through the efforts of an editorial staff, outside editorial advisors, and advisory boards. Most materials originate withare originated by the authors themselves or as a result of suggestion or solicitations by editors and advisors. The Company enters into agreements with authors that state the terms and conditions under which the materials will be published, the name in which the copyright will be registered, the basis for any royalties, and other matters. Most of the authors are compensated bywith royalties, which vary withdepending on the nature of the product. The Company may make advance payments against future royalties to authors of certain publications. Royalty advances are reviewed for recoverability and a reserve for loss is maintained, if appropriate.
The Company continues to add new titles, revise existing titles, and discontinue the sale of others in the normal course of its business, and also creates adaptations of original content for specific markets based on customer demand. The Company’s general practice is to revise its textbooks approximately every two to fivethree years, if warranted, and to revise other titles as appropriate. Subscription-based products are updated on a more frequent basis.
Professional books are sold to bookstores and online booksellers serving the general public; wholesalers who supply such bookstores; warehouse clubs; college bookstores for their non-textbook requirements;bookstores; individual practitioners; and research institutions, libraries (including public, professional, academic, and other special libraries), industrial organizations, and government agencies. The Company employs sales representatives who call upon independent bookstores, national and regional chain bookstores and wholesalers. Sales of professional books also result from direct mail campaigns, telemarketing, online access, advertising and reviews in periodicals. Trade sales to bookstores and wholesalers are generally made on a returnable basis with certain restrictions. The Company provides for estimated future returns on sales made during the year based on historical return experience and current market trends.
Adopted education textbooks and related supplementary material and onlinedigital products such as WileyPLUS, are sold primarily to bookstores and online booksellers, serving both for-profit, and nonprofit educational institutions.institutions and direct-to-students. The Company employs sales representatives who call on faculty responsible for selecting books to be used in courses, and on the bookstores that serve such institutions and their students. Textbook sales are generally made on a returnable basis with certain restrictions. The textbook business is seasonal, with the majority of textbook sales occurring during the June through August and November through January periods. There are active used and rental textbook markets, which adversely affect the sale of new textbooks.
Like most other publishers, theThe Company generally contracts with independent printers and binderies globally for their services. The Company purchases its paper from independent suppliers and printers. The fiscal year 20132016 weighted average U.S. paper prices decreased approximately 2%1% from fiscal year 2012.2015. Approximately 65%75% of the Company’s paper inventory is held in the United States. Management believes that adequate printing and binding facilities, sources of paper and other required materials are available to it, and that it is not dependent upon any single supplier. Printed book products are distributed from both Company-operated warehouses and independent distributors.
The Company develops content in a digital format that can be used for onlineboth digital and print products, resulting in productivity and efficiency savings, and enabling print-on-demand delivery. Book content is available online through Wiley Online Library, WileyPLUS, Wiley Custom Select and other proprietary platforms. EbooksDigital books are delivered to intermediaries including Amazon, Apple and Google, for re-sale to individuals in various industry-standard formats, which are now also the preferred deliverable for licensees of all types, including foreign language publishers. Digital books are also licensed to libraries through aggregators. Specialized formats for digital textbooks go to distributors servicing the academic market, and digital book collections are sold by subscription through independent third-party aggregators servicing distinct communities. Custom deliverables are provided to corporations, institutions and associations to educate their employees, generate leads for their products, and extend their brands. Content from digital books is also used to create website articles, mobile apps, newsletters and promotional collateral. This continual re-use of content improves margins, speeds delivery and helps satisfy a wide range of customer needs.
The Company’s online presence not only enables it to deliver content online, but also to sell more books. The growth of online booksellers benefits the Company because they provide unlimited virtual “shelf space” for the Company’s entire backlist.
Marketing and distribution services are made available to other publishers under agency arrangements. The Company also engages in co-publishing of titles with international publishers and in publication of adaptations of works from other publishers for particular markets. The Company also receives licensing revenue from photocopies, reproductions, translations, and digital uses of its content.
Other Digital Products and Services:Solutions:
Revenue from Other Digital Products and Services was approximately $64.1 million in fiscal year 2013. The Company believes that the demand for new digital products and serviceslearning solutions will continue to increase for the foreseeable future. In order to meet this demand, and remain competitive, the Company is focused on delivering content-enabledknowledge-enabled services, which improve learning, career managementdevelopment and effectivenessemployment management for its target communities. With the goal of servicing its customers across the arc of their careers the Company is creating new revenue streams through organic development and acquisition. The acquisitions of Deltak, Inscape, ELS, Profiles and ELS acquisitionsCrossKnowledge have enhanced the Company’s portfolio of content-enabledknowledge-enabled digital services and provided the Company with new capabilities and expertise, including new channels to market and direct end-user engagement. The Inscape, ELS, Profiles and ELSCrossKnowledge acquisitions highlight the Company’s focus on providing digital content andcontent; workflow solutions around professional career development and talent assessment, while the Deltak acquisition positions the Company as an online higher educational solutions provider with a variety of capabilities and technologies for its expansion into custom online course and curriculum development. In addition, Education’s Course Workflow (WileyPLUS) platform improves student learning through instant feedback, personalized learning plans and self-evaluation tools.
Corporate Learning:
The Corporate Learning (CrossKnowledge) business offers digital learning solutions for global corporations, universities, and small and medium-sized enterprises, which are sold on a subscription or fee basis. CrossKnowledge’s solutions include a variety of managerial and leadership topics such as leadership, diversity, value creation, client orientation, change and corporate strategy, that are delivered on a cloud-based LMS platform with over 19,000 learning objects in 17 languages. Its Mohive offering also provides a collaborative e-learning publishing and program creation system. Revenue growth is derived from legacy markets, such as Europe, Asia and the Nordics, and in newer markets, such as the U.S. and Latin America. In addition, content and LMS offerings are continuously refreshed and expanded to serve a wider variety of customer needs. Corporate Learning revenue was approximately $50.7 million in fiscal year 2016.
Assessments:
The Inscape and ELSProfiles businesses along withrepresent the core of the Company’s Pfeiffer brand, represent the Company’s professional training and assessment services. These businesses offer a varietyfour of classroom learning solutions and e-learning activities thatthe leading assessment brands available in the market today. The offerings are delivered to customers directly through online digital delivery platforms and alsoeither directly or through an authorized distributor network of independent consultants, trainers and coaches. The Company’s professional training and assessment services offer highly flexible packages and modules for its customers that include online pre-workpre and profile assessments,post-hire assessments. Revenue for these products and services are deferred until the Company’s obligation has been performed, typically when an online assessment has been completed. Assessment revenue was approximately $57.4 million in fiscal year 2016.
Professional Online Test Preparation and Certifications:
The Company’s acquisitions of ELS and Elan Guides represent the Company’s professional Online Test Preparation and Certification services. These businesses offer a variety of online learning solutions and training activities that are delivered to customers directly through online digital delivery platforms. ELS’ flagship product, CPAExcel, is a modular, digital platform comprised of online self-study, materials, online videos, mobile apps, and other sophisticated planning tools.tools to help professionals prepare for the CPA exam. Elan Guides provides content in multiple formats to help prepare candidates for the Certified Financial Analyst examinations. Revenue for these products and services are deferred until the Company’s obligation has been performed, typically when an online training program and/or assessment has been completed or over the timeframe covered by a license to use the online training and study materials. PD’s Online Test Preparation and Certification revenue was approximately $28.2 million in fiscal year 2016.
Online Program Management (Deltak):
As student demand continues to drive traditional schoolshigher education institutions to offer online degree and certificate programs, institutions are partnering with online program management businesses to develop and support these programs. As a result ofThrough the Deltak acquisition, the Company has entered this high-growth market, accelerated its digital learning strategy and diversified the service offerings of its Education business to include both operational and academic solutions for higher education institutions. Through Deltak, the Company acquired capabilities and technologies for its expansionto expand into custom online course and curriculum development. Deltak services include market research, marketing, student recruitment, enrollment support, proactive retention support, academic services to design courses, faculty support and access to the Deltak Engage Learning Management System. Deltak’s online program management revenue is derived from pre-negotiated contracts with institutions that provide for a pre-negotiated share of tuition generated from students who enroll in programs that Deltak develops and manages for its institutional partners. Service covered under contracts with institutions include market research, marketing, student recruitment, enrollment support, proactive retention support, academic services to design courses and support faculty and access to the Deltak Engage Learning Management System. Online program management revenue is deferred and recognized over the timeframe that each student is enrolled in the online program. TheAs of April 30, 2016 the Company currently supports 31 universityhad 38 partners with 100 online revenue generating programs and 46226 degree programs under contractcontract. Deltak generated revenue of $96.5 million in fiscal year 2016.
Course Workflow (WileyPLUS):
Through Education’s WileyPLUS platform, the Company offers an online environment for effective teaching and learning that is fully integrated with a complete digital or print textbook. WileyPLUS improves student learning through instant feedback, personalized learning plans, and self-evaluation tools as well as a full range of course-oriented activities, including online planning, presentations, study, homework and testing. WileyPLUS revenue is deferred and recognized over the timeframe that each student is enrolled in development but not yet generating revenue.the online course. WileyPLUS revenue was approximately $58.6 million in fiscal year 2016.
Advertising Revenue:
The Company generates advertising revenue from print and online journal subscription products; its online publishing platform, Wiley Online Library; the Wiley Job Network, a full service online job board; online events such as webinars and virtual conferences; community interest websites such as spectroscopyNOW.com and websites for the Company’s leading brands like Dummies.com. These revenues accounted for approximately 3%2% of the Company’s consolidated fiscal year 20132016 revenue.
Advertisements are sold by company and independent sales representatives to advertising agencies representing the Company’s target customers. Typical customers include worldwide pharmaceutical companies; equipment manufacturers and distributors servicing the pharmaceutical industry; recruiters; and a variety of businesses targeting the Company’s leading brand customers. The Company’s advertising growth strategy focuses on increasing the volume of advertising on its online publishing platform; leveraging the brand recognition of its titles and society partnerships; the development of new advertising products such as online video promotions or event sponsorship arrangements; and advertising in new and emerging technologies such as the mobile devices market (i.e. applications for smartphones and tablets).
Global Operations
The Company’s publications and services are sold throughout most of the world through operations primarily located in Europe, Canada, Australia, Asia, and the United States. All operations market their indigenous publications, as well as publications produced by other partspublishing locations of the Company. The Company also markets publications through independent agents as well as independent sales representatives in countries not served by the Company. John Wiley & Sons International Rights, Inc., a wholly owned subsidiary of the Company, sells reprint and translations rights worldwide. The Company publishes or licenses others to publish its products, which are distributed throughout the world in many languages. Approximately 48%49% of the Company’s consolidated fiscal year 20132016 revenue was billed in non-U.S. markets.
The global nature of the Company’s business creates an exposure to foreign currency fluctuations relative to the U.S dollar.currency. Each of the Company’s geographic locations sells products worldwide in multiple currencies. The percentage of Consolidated Revenue and deferred revenue, although billed in multiple currencies are accounted for in the local currency of the selling location. Fiscalfiscal year 2013 revenue was2016 recognized in the following currencies (on an equivalent U.S. dollar basis): were: approximately 56%57% U.S dollar; 27%28% British pound sterling; 8% euro and 9%7% other currencies.
Competition and Economic Drivers within the Publishing Industry
The sectors of the publishing and information services industry in which the Company is engaged are competitive. The principal competitive criteria for the publishing industry are considered to be the following: product quality, customer service, suitability and searchability of format and subject matter, author reputation, price, timely availability of both new titles and revisions of existing books, digital availability of published products, and timely delivery of products to customers.
The Company is in the top rank of publishers of research journals worldwide, a leading commercial research chemistry publisher; the leading professional society journal publisher; one of the leading publishers of university and college textbooks and related materials for the “hardside” disciplines, (i.e. sciences, engineering, and mathematics), and a leading publisher in its targeted Professional Development markets. The Company knows of no reliable industry statistics that would enable it to determine its share of the various international markets in which it operates.
Performance Measurements
The Company measures its performance based upon revenue, operating income, earnings per share and cash flow, excluding unusual or one-time events, and considering worldwide and regional economic and market conditions. The Company evaluates market share statistics for publishing programs in each of its businesses. Research uses various reports to monitor competitor performance and industry financial metrics. Specifically for Research journal titles, the ISI Impact Factor, published periodically by the Institute for Scientific Information, isThomson Reuters® Journal Citation Reports are used as a key metric of a journal title’s influence in scientific publishing. For Professional Development, the Company evaluates market share statistics periodically published by BOOKSCAN, a statistical clearinghouse for book industry point of sale data in the United States. The statistics include survey data from all major retail outlets, online booksellers, mass merchandisers, small chain and independent retail outlets. For Education, the Company subscribes to Management Practices Inc., which publishes customized comparative sales reports.reports, and also uses industry statistics and reports produced by the Association of American Publishers.
Results of Operations
Throughout this report, references to amountsvariances “excluding foreign exchange”, “currency neutral basis” and “performance basis” exclude both foreign currency translation effects and transactional gains and losses. Foreign currency translation effects are based on the change in average exchange rates for each reporting period multiplied by the current period’s volume of activity in local currency for each non-U.S. location. For fiscal years 20132016 and 2012,2015, the average annual exchange rates to convert British pounds sterling to U.S. dollars were 1.581.50 and 1.59, respectively. The1.60; the average annual exchange rates to convert euros into U.S. dollars forwere 1.11 and 1.25, respectively; and the same periodsaverage annual exchange rates to convert Australian dollars into U.S. dollars were 1.290.74 and 1.37,0.86, respectively. Unless otherwise noted, all variance explanations below are on a currency neutral basis.
Fiscal Year 2013 Summary ResultsFISCAL YEAR 2016 SUMMARY RESULTS
Revenue:
Revenue for fiscal year 20132016 decreased 1%5% to $1,760.8$1,727.0 million, but was flator 2% excluding the unfavorable impact of foreign exchange. IncrementalThe decrease was mainly driven by a decline in print books ($44 million) and the previously announced transition to time-based digital journal subscription agreements for calendar year 2016 ($37 million), partially offset by growth in Online Program Management (Deltak) ($14 million); Corporate Learning (CrossKnowledge) ($13 million); online test preparation and certification ($6 million); new product formats in Education ($6 million); digital books ($4 million) and other ($4 million).
As previously announced the Company transitioned from issue-based to time-based digital journal subscription agreements for calendar year 2016. The transition to time-based digital journal subscription agreements shifted approximately $37 million of revenue from fiscal year 2016 to the Deltak, Inscaperemainder of calendar year 2016 (fiscal year 2017). The change had no impact on free cash flow. The Company made these changes to simplify the contracting and ELS acquisitions ($56 million) was offset by the divestmentadministration of Professional Development (“PD”) consumer publishing programs ($27 million) and lower other print book revenue in each of the Company’s three core businesses.digital journal subscriptions.
Cost of Sales and Gross Profit:
Cost of sales for fiscal year 20132016 decreased 2%7% to $532.2$465.9 million, or 1%4% excluding the favorable impact of foreign exchange. On a currency neutral basis and excluding incremental cost of sales from acquisitions ($11 million), cost of sales declined in each of the Company’s three core businesses. A decline in PD ($9 million) principally reflects lower sales volume in the divested consumer publishing programs; a decline in Education ($5 million)The decrease was mainly driven by lower print textbook sales;sales volume ($8 million); cost savings from outsourcing and a decline in Research ($3 million) reflects the ongoing transition toprocurement initiatives and lower cost digital products ($13 million); lower royalty cost due to the transition to time-based digital journal subscription agreements ($5 million) and other ($4 million), mainly lower composition costs, partially offset by higher royalty rates.rates on society owned journals ($5 million); growth in Corporate Learning (CrossKnowledge) ($4 million) and Online Program Management (Deltak) ($2 million).
Gross profit for fiscal year 2013 of 69.8% was 30 basis points higher than prior year. Excluding the impact of higher margin incremental revenue from acquisitions, gross profit margin declined 10 basis points to 69.4% principally due to higher royalty rates.
Gross profit margin for fiscal year 2016 increased 40 basis points to 73.0% mainly driven by growth in higher margin digital products (70 basis points), partially offset by the impact of transitioning to time-based digital journal subscription agreements.
Operating and Administrative Expenses:
Operating and administrative expensesexpense for fiscal year 2013 increased2016 decreased 1% to $933.1$994.6 million, orbut increased 2% excluding the favorable impact of foreign exchange. The increase was mainly driven by incremental operatingreflects higher student recruitment costs to support new Online Program Management (Deltak) programs ($14 million); investment in the Company’s Enterprise Resource Planning and administrative expenses from acquisitionsrelated systems ($3113 million) and other technology development and maintenance ($17 million); higher technologyemployment costs ($913 million), mainly merit increases and higher accrued variable incentive compensation; investments in Corporate Learning (CrossKnowledge) ($11 million); and higher employmentprocess reengineering consulting ($4 million) and legal costs ($4 million), partially offset by. Restructuring and other cost containmentsavings initiatives ($941 million); a reduction related tosynergies from the divestment of the PD consumer publishing programsTalent Solution-Assessment business ($86 million); lower journal and booklower distribution costs due to lower volumesales volumes of print books and the migration from print to digital products ($4 million); lower facility costsjournals ($2 million); and a lower bad debt provision ($1 million). Prior year facility costs included duplicate rent as partially offset the Company was transitioning to new facilities.cost increases.
Restructuring Charges:
InBeginning in fiscal year 2013, the Company recorded restructuring charges of $29.3 million, $19.8 million after tax ($0.33 per share), which are described in more detail below:
Restructuring and Reinvestment Program
In fiscal year 2013, the Company announcedinitiated a program (the “Restructuring and Reinvestment Program”) to restructure and realign the Company’sits cost base with current and anticipated future market conditions. The Company is targeting a majority of the cost savings achieved to improve margins and earnings, while the remainder will be reinvested in high growth digital business opportunities.
In the fourth quarter of fiscal year 2013,years 2016 and 2015, the Company recorded pre-tax restructuring charges of $24.5$28.6 million or $16.3($0.32 per share) and $28.8 million after tax ($0.270.34 per share), respectively, related to this program. These charges are reflected in Restructuring Charges in the RestructuringConsolidated Statements of Income and Reinvestment Program. The restructuring charge includes accrued redundancysummarized in the following table (in thousands):
| | | | | Total Charges |
| 2016 | | 2015 | | Incurred to Date |
Charges by Segment: | | | | | |
Research | $5,048 | | $4,555 | | $20,273 |
Professional Development | 2,277 | | 4,385 | | 24,806 |
Education | 1,206 | | 1,571 | | 4,786 |
Shared Services | 20,080 | | 18,293 | | 74,724 |
Total Restructuring Charges | $28,611 | | $28,804 | | $124,589 |
| | | | | |
Charges by Activity: | | | | | |
Severance | $16,443 | | $17,093 | | $79,204 |
Process reengineering consulting | 7,191 | | 301 | | 18,666 |
Other activities | 4,977 | | 11,410 | | 26,719 |
Total Restructuring Charges | $28,611 | | $28,804 | | $124,589 |
Other Activities reflects leased facility consolidations, contract termination costs and separation benefitsthe curtailment of $19.1 million, process reengineering consulting costs of $2.7 million and termination/curtailment costs related to the U.S.certain defined benefit pension planplans. The fiscal year 2016 restructuring charges of $2.7 million. Approximately $2.9$28.6 million $6.3 million and $1.1 million of the restructuring charge was recorded within the Research, PD, and Education reporting segments, respectively, with the remainder recognized in Shared Service costs. The charge isare expected to be fully recovered by April 30, 2014. The Company expects to record an additional charge or charges during fiscal year 2014 as it implements successive phases of the program. Given progress to date, the Company expects that it will be in a position to begin implementation ofwithin the next phase of the restructuring initiative mid-fiscal year 2014 which will generate a charge for additional employee separation-related benefits of a similar size to that taken in the fourth quarter of fiscal year 2013.18 months.
Other Restructuring Programs
As part of the Company’s ongoing transition and transformation to digital products and services, certain activities have been identified that will either be discontinued, outsourced, or relocated to a lower cost region. As a result, the Company recorded a restructuring charge of approximately $4.8 million, $3.5 million after tax ($0.06 per share), in the first quarter of fiscal year 2013 for redundancy and separation benefits. Approximately $3.0 million, $1.3 million and $0.2 million of the restructuring charge was recorded within the Research, PD and Education reporting segments, respectively, with the remainder recognized in Shared Service costs. The charge is expected to be fully recovered by January 31, 2014.
Impairment Charges:
In fiscal year 2013, in conjunction with the restructuring programs the Company recognized asset impairment charges of $30.7 million, $21.0 million after tax ($0.35 per share), which are described in more detail below:
Consumer Publishing Programs
In September 2012, the Company entered into negotiations with Houghton Mifflin Harcourt (“HMH”) regarding the sale of the Company’s culinary, CliffsNotes, and Webster’s New World Dictionary consumer publishing programs. As a result, the Company began accounting for these publishing programs as Assets Held for Sale and recorded an impairment charge of $12.1 million, $7.5 million after tax ($0.12 per share), in the second quarter of fiscal year 2013 to reduce the carrying value of the assets within these programs to their fair value based on the estimated sales price, less costs to sell. In addition, in the second quarter of fiscal year 2013, the Company recorded a pre-tax impairment charge of $3.4 million, or $2.1 million after tax ($0.04 per share) to reduce the carrying value of inventory and royalty advances within its other consumer publishing programs to their estimated realizable value.
Controlled Circulation Publishing Assets
In fiscal year 2013, the Company identified certain controlled circulation publishing programs that no longer align with the Company’s long-term strategy and has shifted key resources from these programs to other publishing programs within the Research business. As a result, the Company performed an impairment test on the intangible assets related to these controlled circulation publishing programs in the fourth quarter of fiscal year 2013, which resulted in a $9.9 million impairment charge, $8.2 million after tax ($0.14 per share). The intangible assets principally consisted of acquired publishing rights. The impairment charge resulted in a full write-off of the carrying value of these intangible assets based on their estimated fair values as determined by the Company.
Technology Investments
In fiscal year 2013, the Company identified certain technology investments which are no longer a long-term strategic fit and resources supporting these investments have been shifted to other areas. As a result, the Company recorded an asset impairment charge of $5.3 million, $3.2 million after tax ($0.05 per share), to write-off the full carrying value of the related assets.
Amortization of Intangibles:
Amortization of intangibles increased $5.2 million to $42.0decreased $1.5 million in fiscal year 2013. The increase was2016 mainly driven by incremental amortization relateddue to the Deltak ($2.7 million) and Inscape ($2.2 million) acquisitions.
Gain (Neteffect of Losses) on Sale of Consumer Publishing Programs:
Sale of Travel Publishing Program
On August 10, 2012, the Company entered into a definitive agreement with Google, Inc. (“Google”) for the sale of its travel publishing program, including all of its interests in the Frommer’s, Unofficial Guides, and WhatsonWhen brands for $22 million in cash, of which $3.3 million is held in escrow related to standard commercial representations and warranties and is expected to be released to the Company by the end of fiscal year 2014. The effective date of the transaction was August 31, 2012. As a result, the Company recorded a $9.8 million gain on the sale, $6.2 million after tax ($0.10 per share), in the second quarter of fiscal year 2013. In connection with the sale, the Company also entered into a transition services agreement which will end on December 31, 2013. Fees earned by the Company in fiscal year 2013 in connection with the service agreement were approximately $0.5 million.
Sale of Culinary, CliffsNotes and Webster’s New World Publishing Programs
On November 5, 2012, the Company completed the sale of the Company’s culinary, CliffsNotes, and Webster’s New World Dictionary consumer publishing programs to HMH for $11.0 million in cash, which approximated the carrying value of related assets sold, of which $1.1 million is held in escrow related to standard commercial representations and warranties and is expected to be released to the Company by the end of fiscal year 2014. In connection with the sale, the Company also entered into a transition services agreement which ended in March 2013. Fees earned by the Company in fiscal year 2013 in connection with the service agreement were approximately $1.5 million.
Sale of Other Publishing Programs
In the fourth quarter of fiscal year 2013, the Company completed the sale of its other consumer publishing programs to multiple buyers for approximately $1 million in cash and a future royalty interest. The Company recorded a $3.8 million loss on the sales ($3.6 million after tax or $0.06 per share).foreign exchange.
Interest Expense/Income, Foreign Exchange and Other:
Interest expense for fiscal year 2013 increased $4.02016 decreased $0.4 million to $13.1 million. Higher$16.7 million due to a decrease in the Company’s average borrowing rate from 2.1% to 2.0%, partially offset by higher average debt and higher interest rates contributed approximately $2.2 million and $1.9balances outstanding. Foreign exchange transaction gains decreased from $1.7 million to the increase, respectively. The increase$0.5 million in debt was mainly due to financing acquisitions. The Company’s average cost of borrowing during fiscal years 2013 and 2012 was 1.9% and 1.6%, respectively.year 2016.
Provision for Income Taxes:
The effective tax rate for fiscal year 20132016 was 22.8%16.6% compared to 21.8%21.6% in the prior year. During the first quarters ofIn fiscal years 2013 and 2012,year 2016, the Company recorded non-cash deferred tax benefits of $8.4$5.9 million ($0.140.10 per share) and $8.8 million ($0.14 per share), respectively, principally associated with new tax legislation enacted in the United Kingdom (U.K.(“U.K.”) that reduced the future U.K. statutory income tax rates by 2% in each period.. The benefits recognized by the Company reflect the measurementremeasurement of all applicable U.K. deferred tax balances to the new income tax rates. The U.K. statutory tax rate asrates of 19% effective April 30, 2013 is 23%.
1, 2017 and 18% effective April 1, 2020. In the fourth quarter of fiscal year 2013,2015, the Company recordedrecognized a non-recurring tax chargebenefit of $2.1$3.1 million ($0.040.05 per share) due to recently published IRS tax positions related to tax deductions claimed on the Company’s abilitywrite-up of certain foreign tax assets to take certain deductions in the U.S. and in the third quarter of fiscal year 2012, the Company released an income tax reserve of approximately $7.5 million ($0.12 per share) due to the expiration of the statute of limitations. The $7.5 million was originally recorded in conjunction with the purchase accounting for the Blackwell acquisition.fair market value. Excluding the impact of the tax benefits and tax charges described above, the Company’s effective tax rate decreased from 27.8%22.9% to 26.2%19.9% principally due to lower foreign tax rates, a favorable mixtax reserve release and a lower proportion of earnings that resultedincome from lowerthe U.S. earnings in fiscal year 2013 and lower U.K.at higher tax rates.
Earnings Per Share:
Earnings per diluted share for fiscal year 20132016 decreased 31% to $2.39$0.49 per share reflectingto $2.48 per share, or $0.43 per share excluding the restructuring and impairment chargescurrent ($0.680.32 per share); and prior year ($0.34 per share) restructuring charges, the current year deferred tax benefit on the U.K. rate change ($0.10 per share), the prior year incomenon-recurring tax reserve releasebenefit ($0.12 per share), the current year tax charge ($0.040.05 per share) and the unfavorable impact of foreign exchange ($0.040.13 per share). The decline was mainly driven by the transition to time-based digital journal subscription agreements ($0.42 per share); investments in the Company’s Enterprise Resource Planning and related systems, Online Program Management (Deltak) and Corporate Learning (CrossKnowledge), partially offset by restructuring and other cost savings initiatives.
BUSINESS SEGMENT RESULTS:
As part of Wiley’s Restructuring and Reinvestment Program, the net gain on saleCompany consolidated its marketing services functions into a single global shared service function. This newly centralized service group enables significant cost reduction opportunities, including efficiencies gained from standardized technology and centralized management. The costs of these functions were previously reported as direct operating expenses in each business segment but are now reported within Shared Services and Administrative Costs and are allocated to each business segment. In addition, the consumer publishing programs ($0.04 per share). ExcludingCompany modified its product/service revenue categories for the Research segment. As a result, prior year amounts have been restated to reflect these items, earnings per diluted share decreased 7% mainly duesame reporting methodologies. The Company uses occupied square footage of space; number of employees; units shipped; specific identification/activity-based; gross profit; revenue and number of invoices to the divested consumer publishing programs ($0.07 per share) and lower print book revenue, partially offset by acquisitions ($0.05 per share).allocate shared service costs to each business segment.
Fiscal Year 2013 Segment Results:
| | | % change |
RESEARCH: | 2016 | 2015 | % change | w/o FX (a) |
Revenue: | | | | |
Journal Revenue: | | | | |
Journal Subscriptions | $611,403 | $672,218 | -9% | -6% |
Author-Funded Access | 25,669 | 22,388 | 15% | 21% |
Licensing, Reprints, Backfiles, and Other | 178,542 | 188,326 | -5% | 0% |
Total Journal Revenue | 815,614 | 882,932 | -8% | -4% |
| | | | |
Books and References: | | | | |
Print Books | 90,586 | 99,746 | -9% | -6% |
Digital Books | 44,788 | 42,512 | 5% | 9% |
Licensing and Other | 14,266 | 15,605 | -9% | 0% |
Total Books and References Revenue | 149,640 | 157,863 | -5% | -1% |
| | | | |
Total Revenue | $965,254 | $1,040,795 | -7% | -3% |
| | | | |
Cost of Sales | (262,693) | (275,487) | -5% | -1% |
| | | | |
Gross Profit | $702,561 | $765,308 | -8% | -4% |
Gross Profit Margin | 72.8% | 73.5% | | |
| | | | |
Direct Expenses | (229,666) | (245,278) | -6% | -2% |
Amortization of Intangibles | (27,546) | (28,190) | -2% | 2% |
Restructuring Charges (see Note 6) | (5,048) | (4,555) | | |
| | | | |
Direct Contribution to Profit | $440,301 | $487,285 | -10% | -6% |
Direct Contribution Margin | 45.6% | 46.8% | | |
| | | | |
Shared Services and Administrative Costs: | | | | |
Distribution and Operation Services | (39,348) | (44,620) | -12% | -7% |
Technology and Content Management | (98,442) | (96,486) | 2% | 5% |
Occupancy and Other | (29,516) | (30,405) | -3% | 2% |
| | | | |
Contribution to Profit | $272,995 | $315,774 | -14% | -10% |
Contribution Margin | 28.3% | 30.3% | | |
In fiscal year 2013, the Company renamed its operating segments to better reflect its focus on providing knowledge and knowledge-based services in areas of research, professional development and education. As a result, Scientific, Technical, Medical and Scholarly has been renamed Research; Professional/Trade has been renamed Professional Development; and Global Education has been renamed Education. In fiscal year 2013, the Company also changed its internal reporting of segment measures for the purposes of assessing performance and making resource allocation decisions. As a result, the Company now reports on segment performance identified as Contribution to Profit after the allocation of certain direct Shared Services and Administrative Costs. These costs were previously reported as independent activities and not reflected within each segment's operating results. We will continue to report total Shared Services and Administrative Costs by function as management believes they are useful in understanding the Company’s overall performance. In addition, management responsibility and reporting of certain Professional Development and Education product lines were realigned as of May 1, 2012. Prior year results have been restated for comparative purposes for each of the changes described above.
| Research: | | | | | | | |
| | | | | | | % change | |
| Dollars in thousands | | 2013 | | 2012 | % change | w/o FX (a) | |
| Journal Subscriptions | | $ | 641,584 | | | $ | 650,938 | | | -1% | | | 0% | |
| Books | | | 164,750 | | | | 179,204 | | | -8% | | | -7% | |
| Other Publishing Income | | | 203,491 | | | | 210,585 | | | -3% | | | -1% | |
| TOTAL REVENUE | | $ | 1,009,825 | | | $ | 1,040,727 | | | -3% | | | -2% | |
| | | | | | | | | | | | | | | |
| Cost of Sales | | | (271,405 | ) | | | (278,427 | ) | | -3% | | | -1% | |
| | | | | | | | | | | | | | | |
| GROSS PROFIT | | | 738,420 | | | | 762,300 | | | -3% | | | -2% | |
| Gross Profit Margin | | | 73.1% | | | | 73.2% | | | | | | | |
| | | | | | | | | | | | | | | |
| Direct Expenses | | | (274,714 | ) | | | (283,840 | ) | | -3% | | | -2% | |
| Amortization of Intangibles | | | (26,915 | ) | | | (26,186 | ) | | 3% | | | 4% | |
| Restructuring Charges (see Note 10) | | | (5,911 | ) | | | - | | | | | | | |
| Impairment Charges (see Note 11) | | | (9,917 | ) | | | - | | | | | | | |
| | | | | | | | | | | | | | | |
| DIRECT CONTRIBUTION TO PROFIT | | $ | 420,963 | | | $ | 452,274 | | | -7% | | | -2% | |
| Direct Contribution Margin | | | 41.7% | | | | 43.5% | | | | | | | |
| | | | | | | | | | | | | | | |
| Allocated Shared Services and Administrative Costs: | | | | | | | | | | | | | | |
| Distribution | | | (46,009 | ) | | | (47,995 | ) | | -4% | | | -3% | |
| Technology Services | | | (66,105 | ) | | | (65,734 | ) | | 1% | | | 1% | |
| Occupancy and Other | | | (22,343 | ) | | | (21,085 | ) | | 6% | | | 7% | |
| CONTRIBUTION TO PROFIT | | $ | 286,506 | | | $ | 317,460 | | | -10% | | | -3% | |
| Contribution Margin | | | 28.4% | | | | 30.5% | | | | | | | |
(a) Adjusted to exclude the fiscal year 2013 restructuring2016 and impairment charges.2015 Restructuring Charges
Revenue:
Research revenue for fiscal year 20132016 decreased 3%7% to $1.01 billion,$965.3 million, or 2%3% excluding the unfavorable impact of foreign exchange. As previously announced, the Company transitioned from issue-based to time-based digital journal subscription agreements for calendar year 2016. The declinechange shifted approximately $37 million of revenue from fiscal year 2016 to the remainder of calendar year 2016 (fiscal year 2017). The change had no impact on free cash flow. The Company made these changes to simplify the contracting and administration of digital journal subscriptions. Excluding the impact of the transition to time-based subscriptions and foreign exchange, Research revenue was largely driven by lower print book revenue and other publishing income.flat with the prior year.
Journal Subscriptions
Journal subscription revenue for fiscal year 2013 decreased 1% to $641.6 million, but was flat excluding6% on a currency neutral basis mainly due the unfavorable impact of foreign exchange. Increased revenue from new society business ($4 million) andmoving to time-based digital journal subscriptions ($4 million) was offset by publication scheduling ($537 million) and the timingtrailing effects of revenue associated with a pilot for a new subscription licensing modelthe Swets bankruptcy ($3 million) further described below. Calendar year 2013. As previously disclosed, Swets Information Services, a global library subscription agent based in Amsterdam, declared bankruptcy in late September 2014. Excluding the impact of transitioning to time-based journal subscription billings asagreements and foreign exchange, Journal Subscription revenue was flat with the prior year. As of April 30, 2013 are up 3% over2016, calendar year 2012 mainly due to new society2016 journal subscription renewals were 1% higher than calendar year 2015 billings on a constant currency basis with approximately 95% of targeted business and growth inunder contract for the U.S. and Asia.2016 calendar year.
For calendar
Author-Funded Access, which represents article publication fees that provide for free access to articles, grew $3.3 million in fiscal year 2013,2016. Licensing, Reprints, Backfiles and Other revenue of $178.5 million was flat with the Company piloted an alternative journal subscription license model for a group of customers. Previously, those customers’ licenses were basedprior year on a commitmentconstant currency basis.
On a currency neutral basis, Print Books declined 6% to $90.6 million in fiscal year 2016. Digital Books grew 9% on a currency neutral basis which was mainly driven by the Company to provide a discrete number of online journal issues which provided for recognition of revenue by the Company as issues were published. Under this alternative model, the Company provides access to all content publishedsingle $4 million digital book sale in the calendarcurrent year. Licensing and Other revenue of $14.3 million was flat with the prior year and provides for recognition of revenue on a straight-line basis over the calendar year covered by the alternative license model. The new licensing terms result in a $3.0 million shift of revenue from fiscal year 2013 to fiscal year 2014 but will have no impact on current or future calendar year journal revenue.currency neutral basis.
Books
Book revenue for fiscal year 2013 declined 8% to $164.8 million, or 7% excluding the unfavorable impact of foreign exchange as lower print book revenue ($16 million) was partially offset by growth in digital books ($3 million).
Other Publishing Income
Other publishing income for fiscal year 2013 decreased 3% to $203.5 million, or 1% excluding the unfavorable impact of foreign exchange. The decline was driven by lower sales of journal reprints ($6 million), backfiles ($4 million) and advertising ($4 million), partially offset by increased sales of publishing rights ($5 million), funded open access ($4 million) and other fees ($2 million).
Total Research Revenue by Region (on a currency neutral basis)is as follows:
· | Americas declined 1% to $388.2 million
|
· | EMEA decreased 2% to $557.3 million
|
· | Asia-Pacific decreased 3% to $64.3 million
|
| | % of | % change |
| 2016 | 2015 | Revenue | w/o FX |
Revenue by Region: | | | | |
Americas | $370,111 | $398,573 | 38% | -6% |
EMEA | 540,562 | 585,693 | 56% | -3% |
Asia-Pacific | 54,581 | 56,529 | 6% | 7% |
Total Revenue | $965,254 | $1,040,795 | 100% | -3% |
Cost of Sales:
Cost of salesSales for fiscal year 20132016 decreased 3%5% to $271.4$262.7 million, or 1% excluding the favorable impact of foreign exchange. The declinedecrease was mainly driven by growth inlower royalty costs due to the transition to time-based digital journal subscription agreements ($5 million) and cost savings from outsourcing and procurement initiatives and lower cost digital products ($7 million) and lower print volume ($4 million), partially offset by higher royalty rates on new society owned journals ($75 million) and higher print inventory obsolescence provisions ($1 million).
Gross Profit:
Gross profit margin forProfit Margin decreased 70 basis points to 72.8% in fiscal year 2013 of 73.1% was 10 basis points lower than prior year2016 mainly due to higher royalty rates on new society journals (70 basis points), partially offset by higher marginthe impact of transitioning to time-based digital products.journal subscription agreements.
Direct Expenses and Amortization:
Direct expensesExpenses for fiscal year 2013 of $274.72016 decreased 6% to $229.7 million, decreased 3% from prior year, or 2% excluding the favorable impact of foreign exchange. The declinedecrease was mainly driven by the curtailment of a Company defined benefit pension plan ($3 million) and other restructuring savings and cost containment initiatives ($6 million), partially offset by merit increases ($2 million), a prior year bad debt provision related to an outstanding receivable with a university in Iran; higher legal and process reengineering consulting fees ($2 million); and higher accrued incentive compensation ($1 million) and lower employment costs ($1 million) mainly due to lower accrued incentive compensation.
. Amortization of intangibles increased $0.7Intangibles decreased $0.6 million to $26.9$27.5 million in fiscal year 20132016 mainly due to the acquisitionfavorable impact of publication rights for new society journals.foreign exchange.
Contribution to Profit:
Contribution to profitProfit for fiscal year 20132016 decreased 10%14% to $286.5$273.0 million, or 3%10% excluding the unfavorable impact of foreign exchange and the current and prior year Restructuring Charges. The decrease was principally driven by the impact of the transition to time-based journal subscriptions; higher royalty rates on society owned journals; and higher employment costs, partially offset by restructuring and impairment charges.other cost savings from outsourcing and procurement initiatives. Contribution margin declined 210 basis pointsMargin was 28.3% compared to 28.4%30.3% in fiscalthe prior year 2013, or 50 basis points excluding the restructuring and impairment charges and the unfavorable impact of foreign exchange mainly due to top-line results.period.
Society Partnerships
· | 426 new society journals were signed with combined annual revenue of approximately $31$12 million |
· | 8187 renewals/extensions were signed with approximately $52$54 million in combined annual revenue |
· | 418 journals were lost or not renewed with combined annual revenue of approximately $7$11 million |
New Society Contracts
· | 23 journals for the American Geophysical Union, the world’s leading society of Earth and space science |
· | Journal of Brewing and Distilling and Brewer & Distiller International for the Institute of Brewing and Distilling (IBD) |
· | Journal of Engineering Education for the American Society for Engineering Education (ASEE)
|
· | Journal of the Experimental Analysis of Behavior (JEAB) and the Journal of Applied Behavior Analysis (JABA) for the Society for Experimental Analysis of Behavior (SEAB)
|
· | Psychoanalytic Quarterly previously self-published
|
· | Journal of Hepato-Pancreatic-Biliary Sciences, for the Society of Hepato-Pancreatic-Biliary Surgery (Japan)
|
· | Cell Biology International, the official journal of the International Federation for Cell Biology as well as the open access spin off journal Cell Biology International Reports previously published by Portland Press
|
· | Asia and the Pacific Policy Studies which is a new-start, society-funded open access journal, co-owned with the Crawford School of Public Policy at the Australian National University
|
· | Journal of Clinical Pharmacology for the American College of Clinical Pharmacology
|
· | Mining + Geo in cooperation with the DGGT- German Society for Geotechnic
|
· | Political Science Quarterly for the Academy of Political Science
|
· | World Psychiatry for the World Psychiatric Association
|
· | Geoscience Data Journal for the Royal Meteorological Society
|
· | Australian and New Zealand Journal of Family Therapy for Australian Association of Family Therapy
|
· | Respirology Case Reports, for the Asia Pacific Society of Respirology
|
· | ACEP News for the American College of Emergency Physicians
|
· | Clinical Neurology for the Japanese Society of Neurology
|
· | Radiographer & Spectrum for five years from 2013
|
· | Sexual Medicine and Sexual Medicine Reviews a new start for the International Society for Sexual Medicine
|
Acquisitions
· | In January 2013, Wiley acquired the assets of the FIZ Chemie Berlin, a provider of online database products for organic and industrial chemists. The products include the ChemInform weekly abstracting service and reaction database (CIRX), as well as the abstracting journal Chemisches Zentralblatt, the InfoTherm database of thermophysical properties, and eLearning tools and services.
|
· | In May 2012, Wiley acquired Harlan Davidson Inc. (HDI), a small family owned publishing company in Wheeling, IL, for approximately $1.4 million. The acquisition builds on Wiley’s existing high quality American History portfolio, and strengthens growing curriculum areas such as World History, Atlantic History and State History. Fiscal year 2013 revenue generated by HDI was approximately $0.6 million. |
Open Access Survey and Initiatives
· | In October 2012, Wiley announced the results of an author survey on open access. Over ten thousand authors from Wiley’s journal portfolio responded to questions about gold open access, where their institution or funding body pays a fee to ensure the article is made open access. The research explored the factors that authors assess when deciding where to publish, and whether to publish gold open access. Among the top factors considered by authors were the relevance and scope of the journal, the journal’s impact factor and the international reach of the journal. Of the 10,600 respondents, 30% had published at least one gold open access paper, and 79% stated that open access was more prevalent in their discipline than three years ago. Among authors yet to publish open access, the list of reasons given included a lack of high profile open access journals (48%), lack of funding (44%) and concerns about quality (34%). Authors said they would publish in an open access journal if it had a high impact factor, if it were well regarded and if it had a rigorous peer review process. Wiley’s open access revenue grew approximately $4 million in fiscal year 2013. An open access option is available for individual journal articles to authors in 81% of the journals Wily publishes. |
· | In July 2012, Wiley announced that its open access option for individual journal articles, OnlineOpen, will be available to authors in 81% of the journals it publishes. For a publication service charge, OnlineOpen gives authors the option to publish an open access paper in their journal of choice where it will benefit from maximum impact. OnlineOpen, Wiley’s hybrid open access model for subscription journals launched in 2004, is available to authors of primary research articles who wish to make their article available to non-subscribers on publication, or whose funding agency requires grantees to archive the final version of their article. As of April 30, 2013, OnlineOpen is available in over 1,200 subscription journals. |
· | In June 2012, Wiley announced the creation of a new role, the Vice President and Director of Open Access, to lead the Company’s open access initiatives. Working with colleagues, societies, funders, and academic institutions, the role will facilitate the identification of open access opportunities and lead the development of products, policy, technology, processes, sales, and marketing initiatives necessary to provide first class support to authors. |
Impact FactorsIndex
In July 2012,2015, Wiley announced a strong performance in the number of its journal titles indexed in the Thomson ISI® 2011Reuters® 2014 Journal Citation Reports (JCR) showed that. A total of 1,200 Wiley continues to increase both the number and proportion of its journal titles were indexed, with an impact factor, with 1,156 titles (76% of our total) included. This is up from 73% in the 2010 report. Impact factors are a metric that reflect the frequency that peer-reviewed24 Wiley journals are cited by researchers, making them an important tool for evaluating a journal’s quality. Approximately 34% of the JCR Subject Categories have a Wiley Journal ranked inachieving the top three.rank in their respective categories and 240 achieving a top 10 ranking. The Thomson Reuters index is a barometer of journal influence across the research community.
Nobel Prize Winners
Wiley announced that eight 2012 Nobel Prize winners have published their work with Wiley. To celebrate the achievements of all Nobel winners, Wiley is making a selection of content from this and past years’ winners of Nobel Prizes in all areas free to access until the end of the year. Wiley-published winners include: Sir John B. Gurdon, UK, and Professor Shinya Yamanaka, Japan, awarded the Nobel Prize in Physiology or Medicine; Professor Robert J. Lefkowitz and Professor Brian K. Kobilka, USA, awarded the Nobel Prize in Chemistry; and professor Serge Haroche, France, and Dr. David J. Wineland, USA, awarded the Nobel Prize in Physics. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2012 has been awarded jointly to Professors Alvin E. Roth and Llyod S. Shapley, of the USA.
Global Citizenship and Research4Life
The Company and other Research4Life partners announced that they have agreed to extend their partnership through 2020. Wiley also announced that its 12,200 online books would be made available through the Research4Life initiatives of HINARI, AGORA and OARE, benefitting research and academic communities in 80 low- and middle-income countries. Research4Life provides 6,000 institutions in developing countries with free or low cost access to peer-reviewed online content from the world’s leading scientific, technical and medical publishers. The addition of Wiley’s online books brings the total number of peer reviewed scientific journals, books and databases now available through the public-private Research4Life partnership to almost 30,000.
| Professional Development (PD): | | | | | | | |
| | | | | | | % change | |
| Dollars in thousands | | 2013 | | | 2012 | | % change | | w/o FX (a) | |
| Books | | $ | 339,693 | | | $ | 371,689 | | | -9% | | | -8% | |
| Online Training & Assessment | | | 29,854 | | | | 7,553 | | | | | | | |
| Other Publishing Income | | | 46,948 | | | | 48,320 | | | -3% | | | -2% | |
| TOTAL REVENUE | | $ | 416,495 | | | $ | 427,562 | | | -3% | | | -2% | |
| | | | | | | | | | | | | | | |
| Cost of Sales | | | (151,239 | ) | | | (158,841 | ) | | -5% | | | -4% | |
| | | | | | | | | | | | | | | |
| GROSS PROFIT | | | 265,256 | | | | 268,721 | | | -1% | | | -1% | |
| Gross Profit Margin | | | 63.7% | | | | 62.8% | | | | | | | |
| | | | | | | | | | | | | | | |
| Direct Expenses | | | (153,411 | ) | | | (154,549 | ) | | -1% | | | -1% | |
| Amortization of Intangibles | | | (8,092 | ) | | | (5,741 | ) | | 41% | | | 41% | |
| Restructuring Charges (see Note 10) | | | (7,537 | ) | | | - | | | | | | | |
| Impairment of Consumer Publishing Programs (see Note 11) | | | (15,521 | ) | | | - | | | | | | | |
| Net Gain on Sale of Consumer Publishing Programs (see Note 5) | | | 5,983 | | | | - | | | | | | | |
| | | | | | | | | | | | | | | |
| DIRECT CONTRIBUTION TO PROFIT | | $ | 86,678 | | | $ | 108,431 | | | -20% | | | -4% | |
| Direct Contribution Margin | | | 20.8% | | | | 25.4% | | | | | | | |
| | | | | | | | | | | | | | | |
| Allocated Shared Services and Administrative Costs: | | | | | | | | | | | | | | |
| Distribution | | | (40,664 | ) | | | (45,118 | ) | | -10% | | | -9% | |
| Technology Services | | | (29,187 | ) | | | (25,248 | ) | | 16% | | | 16% | |
| Occupancy and Other | | | (11,381 | ) | | | (13,011 | ) | | -13% | | | -13% | |
| CONTRIBUTION TO PROFIT | | $ | 5,446 | | | $ | 25,054 | | | -78% | | | -9% | |
| Contribution Margin | | | 1.3% | | | | 5.9% | | | | | | | |
| | | % change |
PROFFESIONAL DEVELOPMENT (PD): | 2016 | 2015 | % change | w/o FX (a) |
Revenue: | | | | |
Knowledge Services: | | | | |
Print Books | $192,149 | $206,086 | -7% | -4% |
Digital Books | 47,089 | 49,672 | -5% | -3% |
Online Test Preparation and Certification | 28,169 | 22,119 | 27% | 27% |
Other Knowledge Service Revenue | 28,813 | 30,094 | -4% | -2% |
| 296,220 | 307,971 | -4% | -2% |
Talent Solutions: | | | | |
Assessment | $57,369 | $57,035 | 1% | 1% |
Corporate Learning | 50,692 | 42,017 | 21% | 31% |
| 108,061 | 99,052 | 9% | 14% |
| | | | |
Total Revenue | $404,281 | $407,023 | -1% | 2% |
| | | | |
Cost of Sales | (103,652) | (114,014) | -9% | -7% |
| | | | |
Gross Profit | $300,629 | $293,009 | 3% | 6% |
Gross Profit Margin | 74.4% | 72.0% | | |
| | | | |
Direct Expenses | (118,638) | (131,969) | -10% | -7% |
Amortization of Intangibles | (12,691) | (13,498) | -6% | -3% |
Restructuring Charges (see Note 6) | (2,277) | (4,385) | | |
| | | | |
Direct Contribution to Profit | $167,023 | $143,157 | 17% | 17% |
Direct Contribution Margin | 41.3% | 35.2% | | |
| | | | |
Shared Services and Administrative Costs: | | | | |
Distribution and Operation Services | (28,364) | (30,838) | -8% | -5% |
Technology and Content Management | (40,951) | (48,002) | -15% | -13% |
Occupancy and Other | (23,160) | (26,180) | -12% | -8% |
| | | | |
Contribution to Profit | $74,548 | $38,137 | 95% | 84% |
Contribution Margin | 18.4% | 9.4% | | |
(a) Adjusted to exclude the fiscal year 2013 restructuring2016 and impairment charges and the net gain on sale of the consumer publishing programs.2015 Restructuring Charges
PD revenue for fiscal year 20132016 decreased 3%1% to $416.5$404.3 million, orbut increased 2% excluding the unfavorable impact of foreign exchange. Lower book revenueThe increase on a currency neutral basis was driven by growth in Talent Solutions, and other publishing income wasOnline Test Preparation and Certification partially offset by incremental revenue from the acquired Inscape ($18 million) and ELS ($4 million) online training and assessment businesses. Thea decline in book revenue was driven by divested consumer titles ($29 million) and continued softness in global retail channels for printBook Revenue.
books. Ebook
Knowledge Services revenue grew 17% in fiscal year 2013decreased 4% to approximately $47 million. The decline in other publishing income reflects lower advertising ($2 million) and copyright revenue ($1 million), partially offset by revenue from the Company’s transition services agreements related to the sales of the consumer publishing programs ($2 million).
Total PD revenue by Region (on a currency neutral basis)
· | Americas fell 3% to $328.6 million
|
· | EMEA was flat at $57.2 million
|
· | Asia-Pacific fell 1% to $30.7 million
|
Total PD Revenue by Major Category (on a currency neutral basis)
· | Business grew 16% to $164.0 million, with solid growth from Inscape and the CFA product launch
|
· | Divested Consumer titles fell 38% to $45.6 million
|
· | Consumer-Lifelong Learning titles decreased 10% to $45.5 million
|
· | Technology was flat with the prior year at $86.3 million
|
· | Professional Education was flat at $27.7 million
|
· | Architecture fell 7% to $23.2 million
|
· | Psychology grew 4% to $13.4 million
|
Cost of Sales:
Cost of sales for fiscal year 2013 decreased 5% to $151.2$296.2 million, or 4% excluding the favorable impact of foreign exchange. The decline was driven by lower sales volume in the divested consumer publishing programs ($12 million), partially offset by higher royalty rates ($3 million) and incremental costs from acquisitions ($2 million).
Gross profit margin for fiscal year 2013 of 63.7% was 90 basis points higher than prior year reflecting higher margin digital revenue from acquisitions (140 basis points), partially offset by higher royalty rates.
Direct Expenses and Amortization:
Direct expenses for fiscal year 2013 decreased 1% to $153.4 million reflecting planned headcount reductions ($7 million), cost containment initiatives ($3 million) and lower incentive compensation ($1 million), partially offset by incremental costs from acquisitions ($10 million). The divestment of the consumer publishing programs contributed $8 million towards the improvement in direct expenses.
Amortization of intangibles increased $2.4 million to $8.1 million in fiscal year 2013 mainly due to acquired intangible assets associated with Inscape.
Contribution to profit decreased $19.6 million to $5.4 million in fiscal year 2013. Contribution margin was 1.3% compared to 5.9% in the prior year. Excluding the restructuring and impairment charges and the net gain on sale of the consumer publishing programs the contribution margin declined 50 basis points to 5.4%, principally due to lower print book revenue and higher technology costs, partially offset by cost containment and lower distribution costs.
Acquisitions and Alliances
· | In August 2012, the Company acquired the assets of Trader’s Library for approximately $1.5 million, assuming sales for 154 products, mostly videos. Traders' Library is a book publishing and distribution company targeting the full spectrum of the investment arena - from individual investors and financial advisors to professional traders.
|
· | In November 2012, the Company acquired Efficient Learning Systems, Inc. (“ELS”) an e-learning system provider focused in the areas of professional finance and accounting, for $24 million. The acquisition helps Wiley become a leader in the growing global online CPA exam preparation market and will accelerate our e-learning strategies with capabilities that can be leveraged with other accounting and financial certifications. Revenue report for fiscal year 2013 was $3.7 million, in line with expectations. |
· | In December 2012, the Company acquired the assets of Stevenson, Inc., a leading resource for newsletters and online events in fundraising, nonprofit management, and communications. The assets include six well-respected newsletters and a variety of online events. The acquisition will enable Wiley to expand its strategy for digital delivery of content to the growing nonprofit market globally, providing practical information to nonprofit professionals. |
· | In the third quarter of fiscal year 2013, Wiley signed a Financial Industry Regulatory Authority (FINRA) series test preparation agreement with the Securities Institute of America (SIA) to provide preparatory exam content for financial brokers and advisors. |
Online Training and Assessment Update
The Company has merged its Inscape and Pfeiffer business into a single Workplace Learning Solutions group. Inscape’s performance for fiscal year 2013 exceeded the company’s earnings expectations. The results reflect the Company’s successful migration to a new 3rd generation Everything DiSC application. Year-over-year comparative revenue growth from Inscape was 8%. Sales through Inscape’s North American distributor sales channels grew 7.5%, while sales through other global distributor channels increased 8.9%. The Company added a second product development studio, doubled the number of assessment-related training products under development and added leadership focus and brand management resources to our Everything DiSC and Leadership Challenge Lines.
The Company’s indigenous test prep program showed solid growth in fiscal year 2013 with the addition of the Certified Managerial Accountant (CMA) exam prep to our historic and growing CPA Test Prep. Total revenue nearly doubled to $6 million. During the year, Wiley also completed the acquisition of ELS, a provider of the full online CPA Review course ‘CPA Excel’, which contributed revenue of $4 million to the Company’s results.
· | Tax Preparer launched in October 2012. RTRPTestBank.com contains 1000+ multiple choice questions that allow users studying for the Registered Tax Return Preparer exam to create unlimited practice tests and custom quizzes in a format similar to the actual exam. Candidates can purchase subscriptions through the marketing website, PasstheTaxExam.com, which also sells additional products and provides social features.
|
· | CMA Review (1st of two phases) launched in October 2012, WileyCMA.com provides Certified Management Accountant exam candidates with review guides, practice software, study tips, and exam resources. In partnership with the Institute of Management Accountants (“IMA”), Wiley is responsible for production and sales of all CMA review titles.
|
· | Pfeiffer Assessment Platform Release – an upgrade in September 2012 added 2 new assessments to the website (Treasurer Self and Treasurer 360), improved registration functionality and enhanced certain administrative tools.
|
· | Sybex Video Training DVDs and Streaming Websites - released in September and October 2012, these products are available as DVD-ROMs, online streaming products, or as downloadable files. Using hands-on lessons with step-by-step instruction, the high-definition video training products cover the essential features of the top-selling software packages from Autodesk, a software and services developer for design, engineering and entertainment professionals.
|
| Education: | | | | | | | |
| | | | | | | % change | |
| Dollars in thousands | | 2013 | | | 2012 | % change | | w/o FX (a) | |
| Print Books | | $ | 184,131 | | | $ | 215,679 | | | -15% | | | -14% | |
| Non-Traditional & Digital Content | | | 105,662 | | | | 88,006 | | | 20% | | | 20% | |
| Online Program Management (Deltak) | | | 33,745 | | | | - | | | | | | | |
| Other Publishing Income | | | 10,920 | | | | 10,768 | | | 1% | | | 3% | |
| TOTAL REVENUE | | $ | 334,458 | | | $ | 314,453 | | | 6% | | | 7% | |
| | | | | | | | | | | | | | | |
| Cost of Sales | | | (109,588 | ) | | | (106,128 | ) | | 3% | | | 4% | |
| | | | | | | | | | | | | | | |
| GROSS PROFIT | | $ | 224,870 | | | $ | 208,325 | | | 8% | | | 8% | |
| Gross Profit Margin | | | 67.2% | | | | 66.2% | | | | | | | |
| | | | | | | | | | | | | | | |
| Direct Expenses | | | (112,779 | ) | | | (95,791 | ) | | 18% | | | 18% | |
| Amortization of Intangibles | | | (6,975 | ) | | | (4,823 | ) | | 45% | | | 45% | |
| Restructuring Charges (see Note 10) | | | (1,288 | ) | | | - | | | | | | | |
| | | | | | | | | | | | | | | |
| DIRECT CONTRIBUTION TO PROFIT | | $ | 103,828 | | | $ | 107,711 | | | -4% | | | -2% | |
| Direct Contribution Margin | | | 31.0% | | | | 34.3% | | | | | | | |
| | | | | | | | | | | | | | | |
| Allocated Shared Services and Administrative Costs: | | | | | | | | | | | | | | |
| Distribution | | | (15,277 | ) | | | (15,945 | ) | | -4% | | | -4% | |
| Technology Services | | | (30,727 | ) | | | (27,572 | ) | | 11% | | | 11% | |
| Occupancy and Other | | | (7,079 | ) | | | (5,771 | ) | | 23% | | | 23% | |
| CONTRIBUTION TO PROFIT | | $ | 50,745 | | | $ | 58,423 | | | -13% | | | -11% | |
| Contribution Margin | | | 15.2% | | | | 18.6% | | | | | | | |
(a) | Adjusted to exclude the fiscal year 2013 restructuring charges. |
Revenue:
Education revenue for fiscal year 2013 increased 6% to $334.5 million, or 7% excluding the unfavorable impact of foreign exchange mainly driven by incremental revenue from the Deltak acquisition ($34 million) and growth in non-traditional and digital content, partially offset by lower revenue from print textbooks. Digital revenue, including Deltak, grew $51.4 million in fiscal year 2013 and accounted for 30% of total Education revenue in fiscal year 2013 as compared to 15% in the prior year.
Print Books
Print book revenue for fiscal year 2013 decreased 15% to $184.1 million, or 14%2% excluding the unfavorable impact of foreign exchange. The decrease was mainly driven by enrollment declines,Print ($9 million) and Digital ($2 million) Books and Other Knowledge Services Revenue ($1 million), partially offset by growth in Online Test Preparation and Certification ($6 million). Print and Digital Books results reflected continued retail softness, particularly in EMEA and Asia, partially offset by lower sales return provisions. The increase in Online Test Preparation and Certification was driven by new editions of GMAT titles and growth in proprietary sales of the for-profit sector,Company’s CPA, CFA and CMA online certification products. The decline in Other Knowledge Services was driven by lower revenue from the licensing of intellectual content.
Talent Solutions revenue increased 9% to $108.1 million, or 14% excluding the unfavorable impact of rentals onforeign exchange. Revenue growth in Corporate Learning came from new customers, including the traditional textbook business.expansion into the U.S. market, and renewals for existing customers, with France, U.S. and Central and South American markets driving the results. Assessment revenue grew 1% in fiscal year 2016 and was driven by higher post-hire assessment revenue, partially offset by an expected decline in pre-hire assessment revenue following portfolio actions to optimize longer-term profitable growth.
Revenue by Region is as follows:
| | % of | % change |
| 2016 | 2015 | Revenue | w/o FX |
Revenue by Region: | | | | |
Americas | $291,258 | $288,882 | 72% | 1% |
EMEA | 92,106 | 95,613 | 23% | 4% |
Asia-Pacific | 20,917 | 22,528 | 5% | 0% |
Total Revenue | $404,281 | $407,023 | 100% | 2% |
Cost of Sales:
Cost of Sales for fiscal year 2016 decreased 9% to $103.7 million, or 7% excluding the favorable impact of foreign exchange. The decrease was mainly driven by lower cost digital products ($6 million); lower royalty and print inventory obsolescence provisions ($4 million); and lower sales volume ($2 million), partially offset by growth in the Corporate Learning business ($4 million).
Gross Profit:
Gross Profit Margin increased by 240 basis points to 74.4% in fiscal year 2016. The improvement was mainly driven by higher margin digital revenue (170 bps) and lower royalty and print inventory obsolescence provisions (70 bps).
Direct Expenses and Amortization:
Direct Expenses for fiscal year 2016 decreased 10% to $118.6 million, or 7% excluding the favorable impact of foreign exchange. The reduction was driven by restructuring and other cost savings ($18 million) and lower process reengineering consulting fees ($1 million), partially offset by Corporate Learning business growth ($8 million); higher accrued variable incentive compensation ($2 million); and merit increases ($1 million). Amortization of Intangibles decreased $0.8 million to $12.7 million in fiscal year 2016.
Contribution to Profit:
Contribution to Profit for fiscal year 2016 was $74.5 million compared to $38.1 million in the prior year. The improvement was mainly driven by restructuring and other cost savings, gross margin improvement and reduced technology investment. Contribution Margin for fiscal year 2016 increased from 9.4% to 18.4%.
Non-Traditional & Digital Content
Non-traditionalTest Preparation Partnership
Wiley announced a partnership with ACT, the nation’s leader in college and career readiness, to enhance both organizations’ test prep product offerings and take over as the exclusive publisher for ACT’s The Real ACT® Prep Guide beginning in January 2016. Maker of the ACT test and ACT WorkKeys®, among other respected assessment programs, ACT (American College Test) is committed to providing insights that help individuals better prepare for success throughout their lives—from education through career.
Junior Achievement Program
CrossKnowledge and Junior Achievement USA® announced a joint partnership that will bring digital content revenue, which includes WileyPLUS, eBooks, digital content sold directlylearning solutions to institutions, binder editionsthousands of students and custom publishing, increased 20%educators. As part of the agreement, CrossKnowledge has donated the use of its Learning Management System (LMS) to $105.7Junior Achievement USA (JA) for the next five years (starting in 2016) through the CrossKnowledge Foundation. This in-kind contribution is one of the largest of its kind in the history of JA. By 2020, we expect that CrossKnowledge programs will reach 1.6 million in fiscal year 2013. The growth mainly reflects higher revenue from WileyPLUS and eBooks.JA users.
CrossKnowledge/L’Oréal platform:
Total Education Revenue by Region (on a currency neutral basis)CrossKnowledge announced the creation of MySalon-Edu.com, an online platform that focuses on salon education, in conjunction with L’Oréal group. The e-cademy massive online open course (MOOC) was created for professional hairdressers and beauticians.
| | | % change |
EDUCATION: | 2016 | 2015 | % change | w/o FX (a) |
Revenue: | | | | |
Books: | | | | |
Print Textbooks | $107,636 | $144,500 | -26% | -20% |
Digital Books | 34,462 | 34,086 | 1% | 5% |
| 142,098 | 178,586 | -20% | -15% |
| | | | |
Custom Materials | 51,842 | 50,659 | 2% | 2% |
| | | | |
Course Workflow Solutions (WileyPLUS) | 58,551 | 54,200 | 8% | 10% |
| | | | |
Online Program Management (Deltak) | 96,469 | 81,593 | 18% | 18% |
| | | | |
Other Education Revenue | 8,542 | 9,584 | -11% | -11% |
| | | | |
Total Revenue | $357,502 | $374,622 | -5% | -2% |
| | | | |
Cost of Sales | (99,573) | (110,182) | -10% | -8% |
| | | | |
Gross Profit | $257,929 | $264,440 | -2% | 0% |
Gross Profit Margin | 72.1% | 70.6% | | |
| | | | |
Direct Expenses | (128,821) | (125,613) | 3% | 5% |
Amortization of Intangibles | (9,527) | (9,527) | 0% | 0% |
Restructuring Charges (see Note 6) | (1,206) | (1,571) | | 0% |
| | | | |
Direct Contribution to Profit | $118,375 | $127,729 | -7% | -3% |
Direct Contribution Margin | 33.1% | 34.1% | | |
| | | | |
Shared Services and Administrative Costs: | | | | |
Distribution and Operation Services | (15,207) | (12,863) | 18% | 24% |
Technology and Content Management | (51,612) | (54,272) | -5% | -3% |
Occupancy and Other | (15,688) | (13,950) | 12% | 15% |
| | | | |
Contribution to Profit | $35,868 | $46,644 | -23% | -18% |
Contribution Margin | 10.0% | 12.5% | | |
·(a) | Americas increased 11%Adjusted to $250.6, including incremental Deltak revenue of $33.7 million
|
· | EMEA fell 10% to $19.4 million
|
· | Asia-Pacific fell 1% to $64.5 million exclude the fiscal year 2016 and 2015 Restructuring Charges |
Revenue:
Education Revenuerevenue for fiscal year 2016 decreased 5% to $357.5 million, or 2% excluding the unfavorable impact of foreign exchange. Print Textbooks decreased 20% to $107.6 million due to higher returns; retail channel consolidation; lower enrollments; increased market penetration by Major Subject* (onrental; and a shift to lower priced alternatives such as Digital Books, Custom Materials and Course Workflow Solutions (WileyPLUS). Digital books increased 5% to $34.5 million, Custom Materials increased 2% to $51.8 million, and Course Workflow Solutions (WileyPLUS) increased 10% to $58.6 million on a currency neutral basis)
· | Engineering and Computer Science grew 4% to $43.2 million
|
· | Science declined 11% to $62.2 million
|
· | Business and Accounting declined 6% to $78.6 million
|
· | Social Science declined 4% to $49.2 million
|
· | Math declined 9% to $23.6 million
|
· | Microsoft Official Academic Course (MOAC) grew 4% to $10.9 million
|
basis due to new and digital formats. Other Education Revenue decreased 11% to $8.5 million principally due to lower revenue from the licensing of intellectual content.
*The above excludes approximately $28.1Revenue from Online Program Management (Deltak) grew 18% to $96.5 million reflecting higher enrollments; an increase in fiscal year 2013institutional partners and programs generating revenue; and growth in fee-for-service agreements. As of April 30, 2016, Deltak had 38 partners and 226 degree programs under contract, compared to 38 partners and 200 programs as of April 30, 2015. As of April 30, 2016, 186 of Deltak’s 226 degree programs were revenue related to the school business in Australia and approximately $33.7 million related to Deltak.generating.
Revenue by Region is as follows:
| | % of | % change |
| 2016 | 2015 | Revenue | w/o FX |
Revenue by Region: | | | | |
Americas | $295,296 | $300,174 | 83% | -1% |
EMEA | 15,764 | 19,265 | 4% | -15% |
Asia-Pacific | 46,442 | 55,183 | 13% | -4% |
Total Revenue | $357,502 | $374,622 | 100% | -2% |
Cost of Sales:
Cost of Sales
Cost of sales for fiscal year 20132016 decreased 10% to $99.6 million, or 8% excluding the favorable impact of foreign exchange. The decrease was mainly driven by lower sales volume ($7 million); savings from procurement initiatives and lower cost digital products ($3 million); and lower composition costs ($3 million), partially offset by higher Online Program Management (Deltak) costs due to program growth ($2 million) and higher royalty costs due to mix ($2 million).
Gross Profit:
Gross Profit Margin for fiscal year 2016 improved 150 basis points to 72.1% principally due higher margin growth from Online Program Management (Deltak) (80 bps) and lower inventory and composition costs.
Direct Expenses and Amortization:
Direct Expenses increased 3% to $109.6$128.8 million, or 4%5% excluding the favorable impact of foreign exchange. The increase was mainly driven by incrementalstudent recruitment costs from the Deltak acquisitionto support new Online Program Management (Deltak) programs ($914 million) and merit increases ($1 million), partially offset by restructuring and other cost savings ($5 million); lower print book volumeaccrued variable incentive compensation ($42 million); and other, mainly lower cost digital productsthird-party advertising and promotional expenses ($12 million).
Gross Profit:
Gross profit margin for fiscal year 2013 improved 100 basis points to 67.2% principally due to higher margin incremental Deltak revenue (80 basis points) and growth in digital products.
Direct Expenses and Amortization:
Direct expenses increased 18% to $112.8 Amortization of Intangibles was $9.5 million in fiscal year 2013 principally due to incremental costs from the Deltak acquisition ($18 million)years 2016 and employment costs ($3 million), partially offset by cost containment initiatives ($3 million).2015.
Amortization of intangibles increased $2.2 million to $7.0 million in fiscal year 2013 primarily due to acquired intangible assets associated with Deltak.34
Contribution to Profit:
Contribution to profitProfit for fiscal year 20132016 decreased 13%23% to $50.7$35.9 million, or 11%18% excluding the current and prior year Restructuring Charges and the unfavorable impact of foreign exchange. The decline was mainly driven by lower print book revenue; investment in Online Program Management (Deltak) programs; and higher digital fulfillment and marketing support costs, partially offset by restructuring and other cost savings and reduced technology investments. Contribution Margin was 10.0% compared to 12.5% in the prior year.
SHARED SERVICES AND ADMINISTRATIVE COSTS:
As part of Wiley’s Restructuring and Reinvestment Program, the Company consolidated its marketing services functions into a single global shared service function. This newly centralized service group enables significant cost reduction opportunities, including efficiencies gained from standardized technology and centralized management. The costs of these functions were previously reported as direct operating expenses in each business segment but are now reported within Shared Services and Administrative Costs and are allocated to each business segment. As a result, prior year amounts have been restated to reflect these same reporting methodologies. The Company uses occupied square footage of space; number of employees; units shipped; specific identification/activity-based; gross profit; revenue and number of invoices to allocate shared service costs to each business segment.
| | | | % Change |
Dollars in thousands | 2016 | 2015 | % Change | w/o FX (a) |
Distribution and Operation Services | $83,109 | $89,024 | -7% | -3% |
Technology and Content Management | 257,822 | 244,850 | 5% | 8% |
Finance | 49,798 | 52,796 | -6% | -2% |
Other Administration | 126,777 | 115,469 | 10% | 13% |
Restructuring Charges (see Note 6) | 20,080 | 18,293 | | |
Total | $537,586 | $520,432 | 3% | 6% |
(a) Adjusted to exclude the fiscal year 2016 and 2015 Restructuring Charges
Shared Services and Administrative Costs for fiscal year 2016 increased 3% to $537.6 million, or 6% on a currency neutral basis and excluding the restructuring charges. Contribution margin was 15.2% comparedcurrent and prior year Restructuring Charges. Lower Distribution and Operation Services costs mainly reflect lower journal shipping and handling costs ($2 million). Technology and Content Management increased mainly due to 18.6%incremental investments in the prior year reflectingCompany’s Enterprise Resource Planning and related systems ($13 million); higher license, maintenance and hosting costs ($11 million); investments in Corporate Learning (CrossKnowledge) and Online Program Management (Deltak) programs ($3 million); and merit increases ($2 million), partially offset by restructuring and other cost savings ($14 million). Finance costs decreased 2% on a currency neutral basis mainly due to restructuring and other cost savings ($1 million). Other Administration costs increased mainly due to higher employment costs ($8 million); higher legal costs ($3 million); Online Program Management (Deltak) program growth ($2 million); and process reengineering consulting costs ($2 million).
U.S. Distribution Outsourcing:
As part of the Company’s restructuring charges and lowerinitiatives, in November 2015, Wiley entered into an agreement to outsource its US-based print textbook revenue. Contribution margin from Deltakfulfillment operations to Cengage Learning, with the aim of approximately 6% reflects the continued investment in new university partner programs which are in the development stage.creating a more efficient and variable cost model. As of April 30, 2016 these operations were fully transitioned to Cengage.
Deltak Acquisition and Update
On October 25, 2012, the Company acquired Deltak.edu (“Deltak”) for approximately $220 million, net of cash acquired. Deltak, one of the leading Online Program Management (“OPM”) providers in the United States, contributed $33.7 million in revenue in its first six months as a Wiley entity as compared to approximately $54 million in annual revenue at the time of acquisition. Deltak is a high-growth business that works in close partnership with leading colleges and universities to develop and support fully online degree and certification programs, with tuition revenue being shared by both partners under long-term contracts. The business, founded in 1997, provides technology platforms and services including market research validating program demand, instructional design, marketing, and student recruitment and retention services to leading national and regional colleges and universities throughout the United States.
In the fourth quarter of fiscal year 2013, Deltak added two new university partners. Since the acquisition closed in October, Deltak has added five new university partners, American University, Case Western Reserve University, Queens University of Charlotte, Butler University and the University of Dayton for a total of 31. In the fourth quarter, Deltak contracted 24 new programs from among new and existing partners. Across Deltak’s partner base as of April 30, 2013 there are approximately 100 revenue-generating programs and 46 programs under contract and in development but not yet generating revenue. Deltak’s business is in a period of significant growth in market development, providing a runway for continued high growth. During the fourth quarter, the Company received a commitment from Queens University of Charlotte for a campus-wide implementation of the Deltak Engage Learning Management system.
Alliances
In May 2012, Wiley announced a partnership with Quantum Simulations, Inc., a developer of intelligence-based education products and services, to offer intelligent adaptive learning and assessment software with Wiley’s print and digital accounting textbooks, starting with Introductory Accounting through Intermediate Accounting. Wiley and Quantum will combine advanced intelligence technology, proven pedagogical techniques and content expertise to create individualized learning paths for every student.
Total Shared Services and Administrative Costs
| | | | | | | | | | % Change |
| Dollars in thousands | | 2013 | | 2012 | % Change | w/o FX |
| | | | | | | | | | | |
| Distribution | | $ | 102,078 | | | $ | 109,079 | | | -6% | | | -6% | |
| Technology Services | | | 159,063 | | | | 144,418 | | | 10% | | | 11% | |
| Finance | | | 43,822 | | | | 45,106 | | | -3% | | | -2% | |
| Other Administration | | | 87,281 | | | | 89,394 | | | -2% | | | -2% | |
| Restructuring Charges (see Note 10) | | | 14,557 | | | | - | | | | | | | |
| Impairment Charges (see Note 11) | | | 5,241 | | | | - | | | | | | | |
| Total | | $ | 412,042 | | | $ | 387,997 | | | 6% | | | 7% | |
Shared services and administrative costs for fiscal year 2013 increased 6% to $412.0 million mainly due to the restructuring and impairment charges ($20 million); higher technology consulting and maintenance costs ($11 million) including incremental costs from the Deltak acquisition ($2 million); and higher employment costs ($2 million), partially offset by lower journal and book distribution costs due to the migration from print to digital products ($4 million) and lower facility costs ($2 million). Restructuring and impairment charges by shared service function: Distribution ($4 million), Technology Services ($10 million), Finance ($2 million) and Other Administration ($4 million).
Liquidity and Capital Resources – Fiscal year 2013LIQUIDITY AND CAPITAL RESOURCES:
The Company’s cashCash and cash equivalentsCash Equivalents balance was $334.1$363.8 million at the end of fiscal year 2013,2016, compared with $259.8$457.4 million a year earlier. Cash providedProvided by operating activitiesOperating Activities in fiscal year 20132016 decreased $42.6$5.2 million from fiscal year 2015 to $337.0$350.0 million principally due primarily to changes in operating assetsthe timing of vendor and liabilitiesroyalty payments ($3928 million); higher employee retirement plan contributions ($6 million); and lower net income net of non-cash chargeshigher royalty advance payments due to higher royalty rates on society owned journals and new society contracts ($75 million), partially offset by lower royalty advance payments ($3 million).
Changes in operating assets and liabilities were primarily due to a disputed income tax deposit paid to German tax authorities as discussed in Note 13 ($42 million), lower income taxes payable due to timing of payments and a lower provision, and lower Accounts Payable ($10 million) due to cost containment. Partially offsetting these were lowerannual incentive compensation payments ($1715 million),; lower inventoryincome tax payments and deposits ($11 million); lower payments related to the Company’s restructuring programs ($2 million); and timing of journal subscription cash collections. The change in deferred revenue was driven by lower non-cash earnings mainly due to the continued migrationimpact of transitioning to time-based digital products, higher Deferred Revenuejournal subscription agreements; foreign exchange; and lower Accounts Receivable due to improved collections and lower book revenue. The increase in Deferred Revenue mainly reflects business growth.timing of cash collections.
Cash usedUsed for investing activities forInvesting Activities in fiscal year 20132016 was approximately $342.5$151.4 million compared to $212.1 million in fiscal year 2012. The Company invested $263.3 million in acquisitions, net of cash acquired, compared to $92.2 million in the prior year primarily reflecting $220.5 million for the Deltak acquisition and $23.9 million for the ELS acquisition. During fiscal 2013 the Company received proceeds of $29.9 million from selling certain consumer publishing assets comprised primarily of the Travel program for $22 million, and the Culinary, CliffsNotes and Websters New World consumer publishing programs for $11 million, of which $3.3 million and $1.1 million remain in escrow, respectively. Cash used for technology, property and equipment decreased to $58.7 million in fiscal year 2013 compared to $67.4$279.7 million in the prior year.
Cash provided by financing activities was $90.4 Fiscal year 2015 includes the acquisition of CrossKnowledge (Corporate Learning) for approximately $166 million in fiscal year 2013, as compared to a usecash, net of $104.7 million in fiscal year 2012.cash acquired. The Company’s net debt (debt less cash and cash equivalents) increased $123.7 million from the prior fiscal end mainly due to funds borrowed to finance the acquisitions of Deltak and ELS. These acquisitions wereacquisition was funded through the use of the existing credit facilityfacilities and available cash and did not have an impact on the Company’s ability to meet other operating, investing and financing needs. Acquisitions in fiscal year 2016 mainly reflect the acquisition of publication rights for society journals. During fiscal year 2015, the Company received $1.1 million of escrow proceeds from the sale of certain consumer publishing assets in fiscal year 2013 net borrowings were $198.0which represented the final amounts due to the Company from the sale of those assets.
Composition spending was $37.3 million in fiscal year 2016 compared to $20.8$39.4 million in the prior year period. Inyear. Cash used for technology, property and equipment was $93.7 million in fiscal year 2013,2016 compared to $69.1 million in the prior year. The increase mainly reflects incremental investment in the Company’s Enterprise Resource Planning and related systems ($18 million) and other technology infrastructure.
Cash Used for Financing Activities was $285.7 million in fiscal year 2016 compared to $61.0 million in the prior year. During fiscal year 2016, net debt repayments were $145.1 million compared to borrowings of $47.7 million in the prior year. The Company’s net debt (debt less cash and cash equivalents) decreased $51.4 million from the prior year to $241.2 million.
On March 1, 2016, the Company amended and extended its existing revolving credit agreement (“RCA”) with a syndicated bank group led by Bank of America. The previous RCA consisted of a $940 million senior revolving credit facility due on November 2, 2016. The new agreement consists of a $1.1 billion five-year senior revolving credit facility payable March 1, 2021. The proceeds of the amended facility will be used for general corporate purposes including seasonal operating cash requirements investments in technology systems and new businesses, and strategic acquisitions. Under the agreement, which can be drawn in multiple currencies, the Company has the option of borrowing at the following floating interest rates: (i) at a rate based on the London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging from 0.98% to 1.50%, depending on the Company’s consolidated leverage ratio, as defined, or (ii) for U.S. dollar-denominated loans only, at the lender’s base rate plus an applicable margin ranging from zero to 0.45%, depending on the Company’s consolidated leverage ratio. The lender’s base rate is defined as the highest of (i) the U.S. federal funds effective rate plus a 0.50% margin, (ii) the Eurocurrency rate, as defined, plus a 1.00% margin, or (iii) the Bank of America prime lending rate. In addition, the Company pays a facility fee ranging from 0.15% to 0.25% depending on the Company’s consolidated leverage ratio. The Company also has the option to request an additional credit limit increase of up to $350 million in minimum increments of $50 million, subject to the approval of the lenders. The credit agreement contains certain restrictive covenants related to the Company’s consolidated leverage ratio and interest coverage ratio, which the Company was in compliance with as of April 30, 2016. Due to the fact that there are no principal payments due until the end of the agreement in fiscal year 2021, the Company has classified its entire debt obligation related to this facility as long-term which was approximately $605.0 million as of April 30, 2016. As of April 30, 2015, the entire debt obligation related to the previous facility of approximately $750.1 was classified as long-term. As part of the amendment, the Company paid $3.4 million in debt financing costs in fiscal year 2016 which were capitalized and included in the Other Assets line item in the Consolidated Statements of Financial Position. The total notional amount of the fixed interest rate swap agreements associated with the Company’s revolving credit facility was $500.0 million as of April 30, 2016.
On August 6, 2015, the Company amended its December 22, 2014 364-day U.S. dollar revolving credit facility reinstated every 30 days with Santander Bank, N.A. by increasing the facility to $100 million from $50 million. The additional $50 million was drawn during August and used to repay a portion of the senior revolving credit facility. The facility was equally ranked with the Company’s previous agreement with Bank of America - Merrill Lynch and The Royal Bank of Scotland plc, and TD Bank, N.A. The facility was fully paid on April 29, 2016. This facility’s termination date was May 23, 2016 and was not renewed.
During fiscal year 2016, the Company repurchased 1,846,8731,432,284 shares of common stock at an average price of $48.86 compared to 1,082,502 shares at an average price of $39.92 compared to 1,864,700 shares at an average price of $46.69$57.26 in the prior year. TheIn fiscal year 2016, the Company increased its quarterly dividend to shareholders by 20%3% to $0.24$0.30 per share in fiscal year 2013 from $0.20versus $0.29 per share in the prior year. ProceedsLower proceeds from the exercise of stock options mainly reflected lower stock option exercises increased $8.9 million to $24.2 million in fiscal 2013.
The notional amount ofyear 2016 compared to the interest rate swap agreement associated with the Term Loan and Revolving Credit Facility was $250 million as of April 30, 2013. It is management's intention that the notional amount of the interest rate swap be less than the Term Loan and Revolving Credit Facility outstanding during the life of the derivative.prior year.
The Company’s operating cash flow is affected by the seasonality and timing of receipts from its Research journal subscriptions and its Education business. Cash receipts for calendar year Research subscription journals occur primarily from December through March.April. Reference is made to the Customer Credit Risk section, which follows, for a description of the impact on the Company as it relates to independent journal agents’ financial position and liquidity. Sales primarily in the U.S. higher education market tend to be concentrated in June through August, and again in November through January. Due to this seasonality, the Company normally requires increased funds for working capital from May through September.October.
The Company has adequate cash and cash equivalents available, as well as short-term lines of credit to finance its short-term seasonal working capital requirements. The Company does not have any off-balance-sheet debt. Cash and Cash Equivalents held outside the U.S. were approximately $324.6$339 million as of April 30, 2013.2016. The balances in equivalent U.S. dollars were comprised primarily of Pound Sterling, Euros,pound sterling ($222 million), euros ($46 million), Singapore dollars ($19 million), U.S. dollars ($18 million), Australian dollars ($14 million), and Australian dollars.other ($20 million). Maintenance of these non-U.S. dollar cash and cash equivalent balances outside the U.S. does not have a material impact on the liquidity or capital resources of the Company.Company’s global, including U.S., operations. Cash and cash equivalent balances outside the U.S. may be subject to U.S. taxation, if repatriated. The Company intends to reinvest cash outside the U.S. except in instances where repatriating such earnings would result in no additional income tax. Accordingly, the Company has not accrued for U.S. income tax on the repatriation of non-U.S. earnings. It is not practical to determine the U.S. income tax liability that would be payable if such cash and cash equivalents were not indefinitely reinvested.
As described in Note 14, on October 18, 2012 the Company increased its credit limit under the Revolving Credit Facility from $700 million to $825 million which matures on November 2, 2016. As of April 30, 2013,2016, the Company had approximately $673.0$605 million of debt outstanding and approximately $162$602 million of unused borrowing capacity under theits Revolving Credit and other facilities. The Company believes that its operating cash flow, together with theits revolving credit facilities and other available debt financing, will be adequate to meet its operating, investing and financing needs in the foreseeable future, although there can be no assurance that continued or increased volatility in the global capital and credit markets will not impair ourits ability to access these markets on terms that are commercially acceptable. The Company does not have any off-balance-sheet debt.
The Company’s working capital can be negative due to the seasonality of its businesses. The primary driver of the negative working capital is unearned deferred revenue related to subscriptions for which cash has been collected in advance. Cash received in advance for subscriptions is used by the Company for a number of purposes including acquisitions; debt repayments; funding operations; dividendsdividend payments; and purchasing treasury shares. The deferred revenue will be recognized inas income aswhen the products are shipped or made available online to the customers over the term of the subscription. Current liabilities as of April 30, 20132016 include $363.0$426.5 million of such deferred subscription revenue for which cash was collected in advance.
Projected capital spending for Technology, Property and Equipment and Composition for fiscal year 20142017 is forecast to be approximately $70$115 million and $49$50 million, respectively, primarilyrespectively. The increase in fiscal year 2017 Technology, Property and Equipment projected spending is mainly driven by investment in new enterprise resource systems to create newenable future operating efficiency gains and enhance existing digital productsspending to transform the Company’s Hoboken headquarters to enable consolidation and system functionality that will drive future business growth.productivity gains. Projected spending for author advances, which is classified as an operating activity, for fiscal year 20142017 is forecast to be approximately $110 million.
Fiscal Year 2012 Summary ResultsFISCAL YEAR 2015 SUMMARY RESULTS
Throughout this report, references to amounts “excluding foreign exchange”, “currency neutral basis” and “performance basis” exclude both foreign currency translation effects and transactional gains and losses. Foreign currency translation effects are based on the change in average exchange rates for each reporting period multiplied by the current period’s volume of activity in local currency for each non-U.S. location. For fiscal years 2012 and 2011, the average exchange rates to convert British Pounds sterling to U.S. dollars were 1.59 and 1.56, respectively. The average exchange rates to convert Euros into U.S. dollars for the same periods were 1.37 and 1.33, respectively. Unless otherwise noted, all variance explanations below are on a currency neutral basis.
Revenue, Cost of Sales and Gross Profit:Revenue:
Revenue for fiscal year 20122015 increased 2%3% to $1,782.7$1,822.4 million, or 1%4% excluding the favorableunfavorable impact of foreign exchange. On a currency neutral basis,The increase mainly reflects incremental revenue from the recent acquisitions of CrossKnowledge Group, Ltd. (“CrossKnowledge”) ($42 million) and Profiles International (“Profiles”) ($21 million), growth in Research wasEducation custom products and workflow solutions ($12 million), Education Services (Deltak) ($11 million), the sale of an individually large journal backfile license ($10 million), journal subscriptions ($7 million), funded access revenue ($5 million), growth in online test preparation ($3 million) and other ($9 million), mainly the licensing of research publication content, partially offset by declineslower print book revenue in Professional Development (“PD”)all three businesses ($46 million).
Cost of Sales and Education.Gross Profit:
Cost of sales for fiscal year 2012 of $543.42015 decreased 1% to $499.7 million, increased 1%, but was flat excluding the unfavorablefavorable impact of foreign exchange. Cost savings from outsourcing and procurement initiatives ($10 million), lower print volume ($5 million) and lower cost digital products ($5 million) were partially offset by incremental costs from acquisitions ($8 million), higher royalty rates on society owned journals ($5 million), Education Services (Deltak) program growth ($3 million) and higher journal subscription volume ($3 million).
Gross profit margin for fiscal year 20122015 of 69.5%72.6% was 40120 basis points higher than prior year mainly due to increased sales ofcost savings from outsourcing and procurement initiatives and growth in digital products (90 basis points) and incremental revenue from higher margin digital products in PD and Research,acquisitions (60 basis points), partially offset by higher composition costs in Education to support business growth. Approximately 40% of the Company’s revenue for fiscal year 2012 was generated from digital products and services, as compared to 37% in the prior year.royalty rates on society owned journals (30 basis points).
Operating and Administrative Expenses:
Operating and administrative expenses for fiscal year 2012 of $922.22015 increased 4% to $1,005.0 million, were 1% higher than prior year, or flat5% excluding the unfavorablefavorable impact of foreign exchange. LowerThe increase was mainly driven by incremental operating and administrative expenses from acquisitions ($54 million), higher technology costs related to investments in internal systems and digital platforms ($18 million) including continued development costs related to the Company’s new global Enterprise Resource Planning (“ERP”) system ($6 million), Education Services (Deltak) program growth ($16 million), other employment costs, principally merit ($73 million); the expiration of a real estate tax incentive related to the Hoboken headquarters ($3 million) mainly dueand higher editorial costs in Research to accrued incentive compensation; lower distribution costssupport business growth ($42 million), partially offset by restructuring and other cost savings ($39 million) and lower travel and advertising costs due to cost containment initiativesaccrued incentive compensation ($312 million); were offset by higher technology costs ($13 million); and other ($1 million), mainly higher Research editorial costs to support business growth..
On February 16, 2011, Borders Group, Inc. (“Borders”Restructuring Charges:
In fiscal year 2013, the Company initiated a program (the “Restructuring and Reinvestment Program”) filedto restructure and realign its cost base with current and anticipated future market conditions. The Company is targeting a petition for reorganization relief under Chapter 11majority of the U.S. Bankruptcy Code. Accordingly,cost savings achieved to improve margins and earnings, while the remainder will be reinvested in high growth digital business opportunities.
In fiscal year 2011years 2015 and 2014, the Company recorded a pre-tax bad debt provisionrestructuring charges of $9.3$28.8 million or $6.0($0.34 per share) and $42.7 million after tax ($0.100.48 per share), within the PD reporting segmentrespectively, related to Borders.this program. These charges are summarized in the following table (in thousands):
| | | | | Total Charges |
| 2015 | | 2014 | | Incurred to Date |
Charges by Segment: | | | | | |
Research | $4,555 | | $7,774 | | $15,225 |
Professional Development | 4,385 | | 11,860 | | 22,529 |
Education | 1,571 | | 891 | | 3,580 |
Shared Services | 18,293 | | 22,197 | | 54,644 |
Total Restructuring Charges | $28,804 | | $42,722 | | $95,978 |
| | | | | |
| | | | | |
Charges by Activity: | | | | | |
Severance | $17,093 | | $25,962 | | $62,761 |
Process reengineering consulting | 301 | | 8,556 | | 11,475 |
Other activities | 11,410 | | 8,204 | | 21,742 |
Total Restructuring Charges | $28,804 | | $42,722 | | $95,978 |
Other Activities mainly reflect lease and other contract termination costs. The provision representedcumulative charge recorded to-date related to the Restructuring and Reinvestment Program of $96.0 million is expected to be fully recovered by April 30, 2016.
Impairment Charges:
In fiscal year 2014, the Company terminated a multi-year software development program for an internal operations application due to a change in the Company’s outstanding receivable with Borders, netlonger-term enterprise systems plans. As a result, the Company recorded an asset impairment charge for previously capitalized software costs related to the program of existing reserves and recoveries. There were no additional charges or bad debt expense with respect to this customer.$4.8 million ($0.06 per share).
Amortization of Intangibles:
Amortization of intangibles increased $1.5$6.5 million to $36.8$51.2 million or $1.1 million excluding the unfavorable impact of foreign exchange. The increasein fiscal year 2015 and was mainly driven by incremental amortization related to the Inscape acquisition.
Operating Income:
Operating income for fiscal year 2012 increased 13% to $280.4 million, or 6% excluding the unfavorable impact of foreign exchange and the prior year Borders bad debt provision mainly due to the top-line results and higher gross profit margins.Talent Solutions acquisitions in Professional Development.
Interest Expense/Income, Foreign Exchange and Other:
Interest expense for fiscal year 2012 decreased $8.32015 increased $3.2 million to $9.0$17.1 million. LowerThe increase was driven by higher interest rates and lowerhigher average debt contributed approximately $4.2 million and $4.1 million to the decrease, respectively. Losses on foreign currency transactions primarily due to intercompany loansacquisition financing. The Company’s average cost of borrowing in currencies other than U.S. dollars were $2.3 million and $2.2 million for fiscal years 20122015 and 2011,2014 was 1.9% and 1.8%, respectively. Interest income and other forIn fiscal year 2012 increased $0.6 million to $3.02015, the Company recognized foreign exchange transaction gains of $1.7 million mainly duerelated to a favorable copyright infringement settlement received byU.S. dollar intercompany receivables in the Company in fiscal year 2012.U.K. and Germany.
Provision for Income Taxes:
The effective tax rate for fiscal year 20122015 was 21.8%21.6% compared to 25.6%17.9% in the prior year. In the fourth quarter of fiscal year 2015, the Company recognized a non-recurring tax benefit of $3.1 million related to tax deductions claimed on the write up of certain foreign tax assets to fair market value. During fiscal years 2012 and 2011,year 2014, the Company recorded non-cash deferred tax benefits of $8.8$10.6 million ($0.140.18 per share) and $4.2 million ($0.07 per share), respectively, principally associated with new tax legislation enacted in the U.K.United Kingdom (“U.K”) that reduced the U.K. statutory income tax rates by 2% and 1%, respectively.3%. The benefits recognized by the Company reflect the remeasurementmeasurement of all applicable U.K. deferred tax balances to the new income tax rates as of 21% effective April 1, 20122014 and 2011, respectively. In addition, in fiscal year 2012 due to20% effective April 1, 2015. Excluding the expirationimpact of the statute of limitations the Company also released
an income tax reserve of approximately $7.5 million ($0.12 per share) originally recorded in conjunction with the purchase accounting for the Blackwell acquisition. Excluding the tax benefits described above, the Company’s effective tax rate for fiscal year 2012 was 27.8% compareddecreased from 23.3% to 27.4% in the prior year. The increase was mainly22.9% principally due to state net operating losshigher non-U.S. tax benefits of $1.9 million ($0.03 per share) recognized by the Company in the prior year,and lower U.K. income tax rates, partially offset by higherlower net tax benefits on non-U.S. earnings in the current year.reserve releases of $2.0 million.
Earnings Per Share:
Earnings per diluted share for fiscal years 2012 and 2011 were $3.47 and $2.80, respectively.year 2015 increased 10% to $2.97 per share. Excluding the effectsimpact of favorable foreign exchange ($0.08), the prior year Borders bad debt provision ($0.10), the changes in fiscal year 2012 and 2011 deferred tax benefits associated with the U.K. corporate income tax rates2015 ($0.07)0.34 per share) and the fiscal year 20122014 ($0.48 per share) restructuring charges, the prior year asset impairment charges ($0.06 per share), fiscal year 2015 ($0.05 per share) and fiscal year 2014 ($0.18 per share) non-recurring tax reserve releasebenefits and the unfavorable impact of foreign exchange ($0.12)0.11 per share), earnings per diluted share increased 11% or $0.30 per share.7%. The growth was mainly driven by company-wide restructuring and other cost savings, higher margin digital revenue and lower accrued incentive compensation, partially offset by the dilutive impacts of investments in CrossKnowledge and Education Services (Deltak) and costs incurred for the development of internal systems and digital platforms.
Fiscal Year 2012 Segment ResultsFISCAL YEAR 2015 SEGMENT RESULTS:
| Research: | | | | | | | |
| | | | | | | % change | |
| Dollars in thousands | | 2012 | | 2011 | % change | w/o FX | |
| Journal Subscriptions | | $ | 650,938 | | | $ | 621,551 | | | 5% | | | 2% | |
| Books | | | 179,204 | | | | 175,611 | | | 2% | | | 1% | |
| Other Publishing Income | | | 210,585 | | | | 201,740 | | | 4% | | | 3% | |
| TOTAL REVENUE | | $ | 1,040,727 | | | $ | 998,902 | | | 4% | | | 2% | |
| | | | | | | | | | | | | | | |
| Cost of Sales | | | (278,427 | ) | | | (268,971 | ) | | 4% | | | 2% | |
| | | | | | | | | | | | | | | |
| GROSS PROFIT | | | 762,300 | | | | 729,931 | | | 4% | | | 2% | |
| Gross Profit Margin | | | 73.2% | | | | 73.1% | | | | | | | |
| | | | | | | | | | | | | | | |
| Direct Expenses | | | (283,840 | ) | | | (280,028 | ) | | 1% | | | 0% | |
| Amortization of Intangibles | | | (26,186 | ) | | | (25,106 | ) | | 4% | | | 4% | |
| | | | | | | | | | | | | | | |
| DIRECT CONTRIBUTION TO PROFIT | | $ | 452,274 | | | $ | 424,797 | | | 6% | | | 4% | |
| Direct Contribution Margin | | | 43.5% | | | | 42.5% | | | | | | | |
| | | | | | | | | | | | | | | |
| Allocated Shared Services and Administrative Costs: | | | | | | | | | | | | | | |
| Distribution | | | (47,995 | ) | | | (52,101 | ) | | -8% | | | -9% | |
| Technology Services | | | (65,734 | ) | | | (63,820 | ) | | 3% | | | 3% | |
| Occupancy and Other | | | (21,085 | ) | | | (17,820 | ) | | 18% | | | 16% | |
| CONTRIBUTION TO PROFIT | | $ | 317,460 | | | $ | 291,056 | | | 9% | | | 6% | |
| Contribution Margin | | | 30.5% | | | | 29.1% | | | | | | | |
As part of Wiley’s Restructuring and Reinvestment Program, during the first quarter of fiscal year 2015, the Company consolidated certain decentralized business functions (Content Management, Vendor Procurement Services, Marketing Services, etc.) into Shared Service and Administrative functions. These newly centralized service groups are part of the Company’s plan to reduce costs through efficiencies gained from standardized technology and centralized management. The costs of these functions were previously reported as direct operating expenses in each business segment but are now reported within the shared service functions. Prior year amounts have been restated to reflect the same reporting methodology. The Company uses occupied square footage of space; number of employees; units shipped; specific identification/activity-based; gross profit; revenue and number of invoices to allocate shared service costs to each business segment. | | | % change |
RESEARCH: | 2015 | 2014 | % change | w/o FX (a) |
Revenue: | | | | |
Journal Revenue: | | | | |
Journal Subscriptions | $672,218 | $675,266 | 0% | 1% |
Author-Funded Access | 22,388 | 17,673 | 27% | 29% |
Licensing, Reprints, Backfiles, and Other | 188,326 | 177,255 | 6% | 9% |
Total Journal Revenue | 882,932 | 870,194 | 1% | 3% |
| | | | |
Books and References: | | | | |
Print Books | 99,746 | 112,386 | -11% | -10% |
Digital Books | 42,512 | 45,934 | -7% | -5% |
Licensing and Other | 15,605 | 15,835 | -1% | 2% |
Total Books and References Revenue | 157,863 | 174,155 | -9% | -7% |
| | | | |
| | | | |
Total Revenue | $1,040,795 | $1,044,349 | 0% | 2% |
| | | | |
Cost of Sales | (275,487) | (280,794) | -2% | -1% |
| | | | |
Gross Profit | $765,308 | $763,555 | 0% | 2% |
Gross Profit Margin | 73.5% | 73.1% | | |
| | | | |
Direct Expenses | (245,278) | (248,404) | -1% | 1% |
Amortization of Intangibles | (28,190) | (28,188) | 0% | 0% |
Restructuring Charges (see Note 6) | (4,555) | (7,774) | | |
| | | | |
Direct Contribution to Profit | $487,285 | $479,189 | 2% | 3% |
Direct Contribution Margin | 46.8% | 45.9% | | |
| | | | |
Shared Services and Administrative Costs: | | | | |
Distribution and Operation Services | (44,620) | (45,773) | -3% | -1% |
Technology and Content Management | (96,486) | (99,929) | -3% | -3% |
Occupancy and Other | (30,405) | (28,491) | 7% | 9% |
| | | | |
Contribution to Profit | $315,774 | $304,996 | 4% | 5% |
Contribution Margin | 30.3% | 29.2% | | |
(a) Adjusted to exclude the fiscal year 2015 and 2014 Restructuring Charges
Revenue:
Research revenue for fiscal year 20122015 of $1,040.8 million was flat with the prior year, but increased 2% excluding the unfavorable impact of foreign exchange. The increase was driven by Journal Subscriptions; Licensing, Reprints, Backfiles and Other Journal revenue; and Author-Funded Access, partially offset by declines in Print and Digital Books. Journal Subscription revenue growth was driven by new subscriptions ($4 million), new titles ($2 million) and publication timing ($1 million). As of April 30, 2015, calendar year 2015 journal subscription renewals were up approximately 1% over calendar year 2014 on a constant currency basis with approximately 97% of targeted business closed. Growth in Licensing, Reprints, Backfiles, and Other was mainly driven by the sale of an individually large journal backfile license ($10 million) and journal content rights ($6 million).
Author-Funded Access revenue, which represents article publication fees that provide for free access to author articles, grew $4.7 million in fiscal year 2015 due to a higher volume of articles published by the Company. Print Books declined 10% to $99.7 million and Digital Books declined 5% to $42.5 million excluding the unfavorable impact of foreign exchange.
Revenue by Region is as follows:
| | % of | % change |
| 2015 | 2014 | Revenue | w/o FX |
Revenue by Region: | | | | |
Americas | $398,573 | $408,001 | 38% | -2% |
EMEA | 585,693 | 578,099 | 56% | 4% |
Asia-Pacific | 56,529 | 58,249 | 6% | 3% |
Total Revenue | $1,040,795 | $1,044,349 | 100% | 1% |
Cost of Sales:
Cost of Sales for fiscal year 2015 decreased 2% to $275.5 million, or 1% excluding the favorable impact of foreign exchange. The decrease reflects cost savings from outsourcing and procurement initiatives and lower cost digital products ($10 million), partially offset by higher royalty rates on society owned journals ($5 million) and higher journal volume ($3 million).
Gross Profit:
Gross Profit Margin for fiscal year 2015 of 73.5% was 40 basis points higher than prior year mainly due to cost savings from outsourcing and procurement initiatives and growth in digital products (110 basis points), including the sale of an individually large digital journal backfile license, partially offset by higher royalty rates on society owned journals (70 basis points).
Direct Expenses and Amortization:
Direct Expenses for fiscal year 2015 of $245.3 million decreased 1% from the prior year, but increased 1% excluding the favorable impact of foreign exchange. The increase was mainly driven by higher editorial costs to support business growth ($3 million) and higher employment costs ($3 million), partially offset by lower accrued incentive compensation ($3 million). Amortization of Intangibles in fiscal year 2015 of $28.2 million was flat with the prior year.
Contribution to Profit:
Contribution to Profit for fiscal year 2015 increased 4% to $1,040.7$315.8 million, or 5% excluding the current and prior year Restructuring Charges and the unfavorable impact of foreign exchange. Revenue growth and cost savings from outsourcing and procurement initiatives were partially offset by higher royalty rates on society owned journals and higher employment costs. Contribution Margin increased 110 basis points to 30.3% in fiscal year 2015 mainly due to cost savings from outsourcing and procurement initiatives and growth in digital products, partially offset by higher royalty rates on society owned journals.
Society Partnerships
· | 9 new society journals were signed with combined annual revenue of approximately $5 million |
· | 45 renewals/extensions were signed with approximately $30 million in combined annual revenue |
· | 14 journals were not renewed with combined annual revenue of approximately $9 million |
Journal Impact Index
In July 2014, the Company announced a continued increase in the number of its journal titles indexed in the Thomson Reuters® 2013 Journal Citation Reports (JCR). A total of 1,202 Wiley titles were indexed, up from 1,193 in the previous year report. 27 Wiley journals achieved the top category rank, up from 25 in the previous year. The Thomson Reuters index is an important barometer of journal influence and impact.
| | | % change |
PROFFESIONAL DEVELOPMENT (PD): | 2015 | 2014 | % change | w/o FX (a) |
Revenue: | | | | |
Knowledge Services: | | | | |
Print Books | $206,086 | $229,199 | -10% | -9% |
Digital Books | 49,672 | 53,764 | -8% | -7% |
Online Test Preparation and Certification | 22,119 | 17,975 | 23% | 23% |
Other Knowledge Service Revenue | 30,094 | 29,884 | 1% | 1% |
| 307,971 | 330,822 | -7% | -6% |
Talent Solutions: | | | | |
Assessment | $57,035 | $33,047 | 73% | 73% |
Corporate Learning | 42,017 | - | - | |
| 99,052 | 33,047 | 200% | 200% |
| | | | |
Total Revenue | $407,023 | $363,869 | 12% | 13% |
| | | | |
Cost of Sales | (114,014) | (111,911) | 2% | 3% |
| | | | |
Gross Profit | $293,009 | $251,958 | 16% | 17% |
Gross Profit Margin | 72.0% | 69.2% | | |
| | | | |
Direct Expenses | (131,969) | (102,706) | 28% | 29% |
Amortization of Intangibles | (13,498) | (6,965) | 94% | 94% |
Restructuring Charges (see Note 6) | (4,385) | (11,860) | | |
| | | | |
Direct Contribution to Profit | $143,157 | $130,427 | 10% | 8% |
Direct Contribution Margin | 35.2% | 35.8% | | |
| | | | |
Shared Services and Administrative Costs: | | | | |
Distribution and Operation Services | (30,838) | (37,673) | -18% | -17% |
Technology and Content Management | (48,002) | (50,426) | -5% | -5% |
Occupancy and Other | (26,180) | (19,712) | 33% | 33% |
| | | | |
Contribution to Profit | $38,137 | $22,616 | 69% | 47% |
Contribution Margin | 9.4% | 6.2% | | |
(a) Adjusted to exclude the fiscal year 2015 and 2014 Restructuring Charges
PD revenue for fiscal year 2015 increased 12% to $407.0 million, or 13% excluding the unfavorable impact of foreign exchange. Revenue includes incremental revenue from the Talent Solutions acquisitions of CrossKnowledge ($42 million) and Profiles ($21 million). Excluding revenue from both acquisitions, revenue decreased 6% on a currency neutral basis as declines in Book sales, exceeded growth in Online Test Preparation and Certification and other Assessment revenue. The decline in Book revenue was mainly driven by slow demand for backlist titles through retail and wholesale accounts and strategically planned reductions in front list titles. Growth in Online Test Preparation and Certification reflects the addition of new products, mainly test preparation for the CFA and CMA exams, to the ELS Excel platform. Growth in Assessment revenue excluding the acquisitions was approximately $3.0 million and driven by new Inscape assessment products and other growth in Workplace Learning Solutions products. Other Knowledge Services revenue, which includes the sale of licensing rights, subscription revenue and advertising and agency revenue, increased 1% to $30.1 million due to growth in licensing revenue.
Revenue by Region is as follows:
| | % of | % change |
| 2015 | 2014 | Revenue | w/o FX |
Revenue by Region: | | | | |
Americas | $288,882 | $285,376 | 71% | 2% |
EMEA | 95,613 | 54,240 | 23% | 78% |
Asia-Pacific | 22,528 | 24,253 | 6% | -4% |
Total Revenue | $407,023 | $363,869 | 100% | 13% |
Cost of Sales:
Cost of Sales for fiscal year 2015 increased 2% or 3% excluding the favorable impact of foreign exchange to $114.0 million. The increase was mainly driven by costs from new acquisitions ($8 million), partially offset by lower Print Book volume ($5 million).
Gross Profit:
Gross Profit Margin increased from 69.2% to 72.0% in fiscal year 2015. The improvement was mainly driven by higher margin incremental revenue from the CrossKnowledge (150 basis points) and Profiles (140 basis points) acquisitions.
Direct Expenses and Amortization:
Direct Expenses for fiscal year 2015 increased 28% to $132.0 million, or 29% excluding the favorable impact of foreign exchange. The increase was driven by incremental operating expenses from Talent Solutions acquisitions ($40 million) and content development costs for new assessment products ($1 million), partially offset by restructuring and other cost savings ($12 million). Amortization of Intangibles increased $6.5 million in fiscal year 2015 principally due to the Talent Solutions acquisitions of CrossKnowledge and Profiles.
Contribution to Profit increased 69% to $38.1 million in fiscal year 2015, or 47% on a currency neutral basis and excluding the current and prior year Restructuring Charges. The improvement was mainly driven by restructuring and other cost savings, partially offset by lower Book revenue and the dilutive impact of the CrossKnowledge acquisition. Contribution Margin increased from 6.2% to 9.4% in fiscal year 2015, or 120 basis points on a currency neutral basis and excluding the Restructuring Charges. The increase was mainly driven by restructuring and other cost savings, partially offset by the dilutive impact of the CrossKnowledge acquisition.
· | On April 1, 2014, the Company acquired Profiles International (“Profiles”) for approximately $48 million in cash, net of cash acquired. Profiles provides pre-employment assessment and selection tools that enable employers to optimize candidate selections and develop the full potential of their employees. Solutions include pre-hire assessments, including those designed to measure and match personality, knowledge, skills, managerial fit, loyalty, and values; and post-hire assessments, focused on measuring sales and managerial effectiveness, employee performance and career potential. Profiles serves approximately 4,000 corporate clients and millions of end users in over 120 countries, with assessments available in 32 languages. Profiles revenue and operating income for fiscal year 2015 was $23.3 million and $1.0 million, respectively. |
· | On May 1, 2014, the Company acquired CrossKnowledge Group Limited (“CrossKnowledge”) for approximately $166 million in cash, net of cash acquired. CrossKnowledge is a learning solutions provider focused on leadership and managerial skills development that offers subscription-based, digital learning solutions for global corporations, universities, and small and medium-sized enterprises. CrossKnowledge’s solutions include a variety of managerial and leadership skills assessments, courses, certifications, content and executive training programs that are delivered on a cloud-based LMS platform with over 19,000 learning objects in 17 languages. CrossKnowledge serves over seven million end-users in 80 countries. For the fiscal year ended April 30, 2015, CrossKnowledge’s revenue and operating loss included in Wiley’s results was $42.0 million and $5.1 million, respectively, including $4.6 million of acquisition amortization. |
Collaborations and Alliances
· | CrossKnowledge announced an agreement with Gavisus, a Scandinavian-based digital learning and talent development company. CrossKnowledge will provide Gavisus with the technology to plan, design and deliver online leadership training to clients in Norway, Sweden and Denmark. |
· | Wiley announced a strategic collaboration with SilverCloud Health, a global provider of online behavioral and wellness solutions. The partnership, which will provide a comprehensive range of therapeutic programs across behavioral health and long-term chronic disease management, brings together Wiley’s evidence-based psychological and wellness content and SilverCloud Health’s award-winning cloud-based technology platform. The first set of programs, released in 2015, will address Generalized Anxiety Disorder and Diabetes, conditions that affect more than 40 million people in the United States on a daily basis alone. |
· | Wiley has partnered with Chinese Cultural University to distribute the CPAexcel test preparation platform in China. |
· | The Institute of Management Accountants announced a partnership agreement in India with Wiley to offer Wiley’s Certified Management Accountant Exam (CMA) Learning System as part of a full offering that includes live training from Miles Professional Education, a major professional certification course provider in India. |
| | | % change |
EDUCATION: | 2015 | 2014 | % change | w/o FX (a) |
Revenue: | | | | |
Books: | | | | |
Print Textbooks | $144,500 | $163,152 | -11% | -9% |
Digital Books | 34,086 | 30,137 | 13% | 15% |
| 178,586 | 193,289 | -8% | -6% |
| | | | |
Custom Materials | 50,659 | 43,556 | 16% | 16% |
| | | | |
Course Workflow Solutions (WileyPLUS) | 54,200 | 49,459 | 10% | 11% |
| | | | |
Online Program Management (Deltak) | 81,593 | 70,179 | 16% | 16% |
| | | | |
Other Education Revenue | 9,584 | 10,494 | -9% | -9% |
| | | | |
Total Revenue | $374,622 | $366,977 | 2% | 3% |
| | | | |
Cost of Sales | (110,182) | (114,174) | -3% | -2% |
| | | | |
Gross Profit | $264,440 | $252,803 | 5% | 6% |
Gross Profit Margin | 70.6% | 68.9% | | |
| | | | |
Direct Expenses | (125,613) | (118,240) | 6% | 7% |
Amortization of Intangibles | (9,527) | (9,527) | 0% | 0% |
Restructuring Charges (see Note 6) | (1,571) | (891) | | |
| | | | |
Direct Contribution to Profit | $127,729 | $124,145 | 3% | 4% |
Direct Contribution Margin | 34.1% | 33.8% | | |
| | | | |
Shared Services and Administrative Costs: | | | | |
Distribution and Operation Services | (12,863) | (15,685) | -18% | -16% |
Technology and Content Management | (54,272) | (48,097) | 13% | 13% |
Occupancy and Other | (13,950) | (11,769) | 19% | 19% |
| | | | |
Contribution to Profit | $46,644 | $48,594 | -4% | 0% |
Contribution Margin | 12.5% | 13.2% | | |
(a) | Adjusted to exclude the fiscal year 2015 and 2014 Restructuring Charges |
Revenue:
Education revenue for fiscal year 2015 increased 2% to $374.6 million, or 3% excluding the unfavorable impact of foreign exchange. The growth was mainly driven by Online Program Management (Deltak), Custom Materials, Course Workflow Solutions (WileyPLUS) and Digital Books, partially offset by a decline in Print Textbooks. WileyPLUS revenue, which is earned ratably over the school semester, grew 10% in fiscal year 2015. Unearned deferred WileyPLUS revenue as of April 30, 2015 was $3.8 million. The decline in Print Textbooks reflects student’s preference for Digital Books and Custom Products, a decline in for-profit enrollments and impact from rental book programs.
Online Program Management (Deltak) accounted for 22% of total Education revenue in fiscal year 2015 compared to 19% in the prior year. During the fiscal year, Wiley added 27 net programs and signed the University of Birmingham (UK), Manhattan College (US), University College Cork (Ireland), University of Delaware (US), and the largest partnership to-date, a university-wide agreement with one of America’s most prestigious institutions. As of April 30, 2015, Deltak had 38 partners and 200 degree programs under contract.
Revenue by Region is as follows:
| | % of | % change |
| 2015 | 2014 | Revenue | w/o FX |
Revenue by Region: | | | | |
Americas | $300,174 | $288,329 | 80% | 5% |
EMEA | 19,265 | 19,334 | 5% | 0% |
Asia-Pacific | 55,183 | 59,314 | 15% | -2% |
Total Revenue | $374,622 | $366,977 | 100% | 3% |
Cost of Sales
Cost of Sales for fiscal year 2015 decreased 3% to $110.2 million, or 2% excluding the favorable impact of foreign exchange. The growth was driven by journal subscriptions, books and other publishing income.
Journal Subscriptions
Journal subscription revenue for fiscal year 2012 increased 5% to $650.9 million, or 2% excluding the favorable impact of foreign exchange. The growthdecrease was mainly driven by increased subscriptionslower composition costs from lower cost digital products ($73 million), new society businesslower royalty costs due to product mix ($4 million) and the timing of production scheduling ($2 million). As of April 30, 2012, receipts for calendar year 2012 journal subscriptions grew approximately 3% over calendar year 2011 with approximately 95% of expected calendar year 2012 subscription receipts received.
Books
Book revenue for fiscal year 2012 increased 2% to $179.2 million, or 1% excluding the favorable impact of foreign exchange. The growth was driven by higher digital reference and eBook sales ($6 million) and lower returnsinventory obsolescence provisions ($21 million), partially offset by a declinehigher student recruitment costs in print booksOnline Program Management (Deltak) due to growth in new partners and programs ($53 million).
Other Publishing IncomeGross Profit:
Other publishing incomeGross Profit Margin for fiscal year 2012 of $210.6 million increased 4% over prior year, or 3% on a currency neutral basis. The improvement was driven by increased sales of rights ($5 million)2015 improved 170 basis points to 70.6% principally due to lower composition costs from lower cost digital products (70 basis points), journal advertising ($2 million)lower royalty costs due to product mix (60 basis points) and pay-per-view access ($2 million), partially offset by a decline in reprints ($1 million) and backfiles ($1 million)lower inventory obsolescence provisions (40 basis points).
Total Research Revenue by Region (on a currency neutral basis)Direct Expenses and Amortization:
· | Americas grew 3% to $392.1 million
|
· | EMEA grew 1% to $580.9 million
|
· | Asia-Pacific grew 4% to $67.7 million
|
Cost of Sales:
Cost of sales for fiscal year 2012Direct Expenses increased 4%6% to $278.4$125.6 million, or 2%7% excluding the unfavorablefavorable impact of foreign exchange. The increase was mainly driven by higher royalty rates, partially offset by the transition from print to digital products.
Gross Profit:
Gross profit margin for fiscal year 2012 improved 10 basis points to 73.2%. The improvement was mainly driven by increased sales of higher margin digital products (50 basis points)costs associated with growth in Online Program Management (Deltak) partner programs ($12 million), partially offset by higher royalty rates (40 basis points).
Direct Expensesrestructuring and Amortization:
Direct expenses of $283.8 million increased 1% from the prior year, but was flat excluding the unfavorable impact of foreign exchange. Lowerother cost savings ($2 million), lower accrued incentive compensation ($41 million) and lower travel and advertisingeditorial costs due to cost containment initiatives ($2 million) were offset by higher editorial costs ($3 million) and additional headcount ($2 million) to support business growth; and a bad debt provision related to an outstanding receivable with a university in Iranreduced title count ($1 million).
Amortization of intangibles increased $1.1Intangibles was $9.5 million to $26.2 million forin fiscal year 2012 mainly due to the acquisition of publication rights for new society journals.years 2015 and 2014.
The Company’s operating cash flow is affected by the seasonality and timing of receipts from its Research journal subscriptions and its Education business. Cash receipts for calendar year Research subscription journals occur primarily from December through March.April. Reference is made to the Customer Credit Risk section, which follows, for a description of the impact on the Company as it relates to independent journal agents’ financial position and liquidity. Sales primarily in the U.S. higher education market tend to be concentrated in June through August, and again in November through January. Due to this seasonality, the Company normally requires increased funds for working capital from May through September.October.
Cash and Cash Equivalents held outside the U.S. were approximately $253.7$411.6 million as of April 30, 2012.2015. The balances in equivalent U.S. dollars were comprised primarily of Euros, Pound Sterling,pound sterling ($256 million), euros ($73 million), Australian dollars ($45 million), Singapore dollars ($34 million) and Australian dollars.other ($4 million). Maintenance of these non-U.S. dollar cash and cash equivalent balances outside the U.S. does not have a material impact on the liquidity or capital resources of the Company.Company’s global, including U.S., operations. Cash and cash equivalent balances outside the U.S. may be subject to U.S. taxation, if repatriated. The Company intends to reinvest cash outside the U.S. except in instances where repatriating such earnings would result in no additional income tax. Accordingly, the Company has not accrued for U.S. income tax on the repatriation of non-U.S. earnings. It is not practical to determine the U.S. income tax liability that would be payable if such cash and cash equivalents were not indefinitely reinvested.
The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Management continually evaluates the basis for its estimates. Actual results could differ from those estimates, which could affect the reported results. Note 2 of the “Notes to Consolidated Financial Statements” includes a summary of the significant accounting policies and methods used in preparation of our Consolidated Financial Statements. Set forth below is a discussion of the Company’s more critical accounting policies and methods.
When a product is sold with multiple deliverables, the Company accounts for each deliverable within the arrangement as a separate unit of accounting due to the fact that each deliverable is also sold on a stand-alone basis. The total consideration of a multiple-element arrangement is allocated to each unit of accounting based on the price charged by the Company when it is sold separately. The Company’s multiple deliverable arrangements principally include WileyPLUS,, the online teaching and learning environmentcourse management tool for the Company’s Education business which also includes a complete print or digital textbook for the course, as well ascourse; negotiated licenses for bundles of electronicdigital content available on Wiley Online Library,, the online publishing platform for the Company’s Research business.business; and test preparation, assessment, certification and training services sold by the Professional Development business which can include bundles of print and digital content and online workflow solutions.
Assets with finite lives are only evaluated for impairment upon a significant change in the operating or macroeconomic environment. In these circumstances, if an evaluation of the projected undiscounted cash flows indicates impairment, the asset is written down to its estimated fair value based on the discounted future cash flows.
The accounting for benefit plans is highly dependent on assumptions concerning the outcome of future events and circumstances, including compensation increases, long-term return rates on pension plan assets, healthcare cost trends, discount rates and other factors. In determining such assumptions, the Company consults with outside actuaries and other advisors. The discount rates for the U.S., United Kingdom and Canadian pension plans are based on the derivation of a single-equivalent discount rate using a standard spot rate curve and the timing of expected payments as of the balance sheet date. The spot rate curve is based upon a portfolio of Moody’s-rated Aa3 (or higher) corporate bonds. The discount rates for other non-U.S. plans are based on similar published indices with durations comparable to that of each plan’s liabilities. The expected long-term rates of return on pension plan assets are estimated using market benchmarks for equities, real estate and bonds applied to each plan’s target asset allocation and are estimated by asset class including an anticipated inflation rate. The expected long-term rates are then compared to the historic investment performance of the plan assets as well as future expectations and estimated through consultation with investment advisors and actuaries. Salary growth and healthcare cost trend assumptions are based on the Company’s historical experience and future outlook. While the Company believes that the assumptions used in these calculations are reasonable, differences in actual experience or changes in assumptions could materially affect the expense and liabilities related to the defined benefit pension plans of the Company. A hypothetical one percent changeincrease in the discount rate would impact net income and the accrued pension liability by approximately $6.7$1.5 million and $121.7$143.3 million, respectively. A one percent decrease in the discount rate would impact net income and the accrued pension liability by approximately $1.2 million and $178.6 million, respectively. A one percent change in the expected long term rate of return would affect net income by approximately $2.7$3.7 million.
A summary of contractual obligations and commercial commitments, excluding unrecognized tax benefits further described in Note 13,12, as of April 30, 20132016 is as follows (in thousands):