UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended OctoberJuly 31, 20192020

OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____ to _____

Commission File No. 001-11507

JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)

New York 13-5593032
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
111 River Street, Hoboken, New Jersey 07030
(Address of principal executive offices) Zip Code

 
(201) 748-6000
 
 Registrant’s telephone number, including area code 

 Not Applicable 
Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol Name of each exchange on which registered
Class A Common Stock, par value $1.00 per share JW.A New York Stock Exchange
Class B Common Stock, par value $1.00 per share JW.B New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
 
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐   No ☒

The number of shares outstanding of each of the Registrant’s classes of common stock as of November 30, 2019August 31, 2020 were:

Class A, par value $1.00 – 47,041,05246,920,390
Class B, par value $1.00 – 9,115,9239,083,163


JOHN WILEY & SONS, INC. AND SUBSIDIARIES
INDEX

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements  
     
  
Condensed Consolidated Statements of Financial Position – Unaudited as of OctoberJuly 31, 20192020 and as of April 30, 20192020
 5
     
  
Condensed Consolidated Statements of Income – Unaudited for the three and sixthree months ended OctoberJuly 31, 20192020 and 20182019
 6
     
  
Condensed Consolidated Statements of Comprehensive Income (Loss) – Unaudited for the three and sixthree months ended OctoberJuly 31, 20192020 and 20182019
 7
     
  
Condensed Consolidated Statements of Cash Flows – Unaudited for the sixthree months ended OctoberJuly 31, 20192020 and 20182019
 8
     
  
Condensed Consolidated Statements of Shareholders' Equity – Unaudited for the three and sixthree months ended OctoberJuly 31, 20192020 and 20182019
 9
     
  Notes to Unaudited Condensed Consolidated Financial Statements  
  
Note 1.    Basis of Presentation
 1110
  
Note 2.    Recent Accounting Standards
 1110
  
Note 3.    Acquisitions
 1312
  
Note 4.    Revenue Recognition, Contracts with Customers
 1514
  
Note 5.    Operating Leases
 1615
  
Note 6.    Stock-Based Compensation
 1817
  
Note 7.    Accumulated Other Comprehensive Loss
 18
  
Note 8.    Reconciliation of Weighted Average Shares Outstanding
 1918
  
Note 9.    Restructuring and Related Charges
 19
  
Note 10.  Segment Information
 2221
  
Note 11.  Inventories
 2322
  
Note 12.  Goodwill and Intangible Assets
 2322
  
Note 13.  Income Taxes
 2423
  
Note 14.  Retirement Plans
 2423
  
Note 15.  Debt and Available Credit Facilities
 24
  
Note 16.  Derivative Instruments and Hedging Activities
 25
  
Note 17.  Capital Stock and Changes in Capital Accounts
 2625
  
Note 18.  Commitments and Contingencies
 2726
     
Item 2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 2827
     
Item 3. 
Quantitative and Qualitative Disclosures About Market Risk
 3935
     
Item 4. 
Controls and Procedures
 4036
     
PART II - OTHER INFORMATION
  
     
Item 1. 
Legal Proceedings
 4137
     
Item 1a. 
Risk Factors
 4137
     
Item 2. 
Unregistered Sales of Equity Securities and Use of Proceeds
 4137
     
Item 6. 
Exhibits
 4138
     
SIGNATURES
 39
2
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 2

Cautionary Notice Regarding Forward-Looking Statements “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:

This report contains certain “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 concerning our business, consolidated financial condition and results of operations. The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “should,” “estimates,” “expects,” “intends,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding our fiscal year 20202021 outlook, the anticipated impact on the ability of our employees, contractors, customers and other business partners to perform our and their respective responsibilities and obligations relative to the conduct of our business in the future due to the current coronavirus (COVID-19) outbreak, anticipated restructuring charges and savings, operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon many assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond our control, and are subject to change based on many important factors. Such factors include, but are not limited to (i) the level of investment in new technologies and products; (ii) subscriber renewal rates for our journals; (iii) the financial stability and liquidity of journal subscription agents; (iv) the consolidation of book wholesalers and retail accounts; (v) the market position and financial stability of key retailers; (vi) the seasonal nature of our educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) our ability to protect our copyrights and other intellectual property worldwide; (ix) our ability to successfully integrate acquired operations and realize expected opportunities; (x) the ability to realize operating savings over time and in fiscal year 20202021 in connection with our multi-year Business Optimization Program; and (xi) other factors detailed from time to time in our filings with the SEC. We undertake no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.

Please refer to Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K and as revised and updated by our Quarterly Reports in Form 10-Q for important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Non-GAAP Financial Measures:

We present financial information that conforms to Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). We also present financial information that does not conform to U.S. GAAP, which we refer to as non-GAAP.

In this report, we may present the following non-GAAP performance measures:

●Adjusted Earnings Per Share (“Adjusted EPS”);
●Free Cash Flow less Product Development Spending;
●Adjusted Revenue;
●Adjusted Operating Income and margin;
●Adjusted Contribution to Profit and margin;
●EBITDA, Adjusted EBITDA and margin;
●Organic revenue; and
●Results on a constant currency basis.

Management uses these non-GAAP performance measures as supplemental indicators of our operating performance and financial position as well for internal reporting and forecasting purposes, when publicly providing itsour outlook, to evaluate our performance and to evaluate and calculate incentive compensation. We present these non-GAAP performance measures in addition to U.S. GAAP financial results because we believe that these non-GAAP performance measures provide useful information to certain investors and financial analysts for operational trends and comparisons over time. The use of these non-GAAP performance measures may also provide a consistent basis to evaluate operating profitability and performance trends by excluding items that we do not consider to be controllable activities for this purpose.

3
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 3
For example:

●Adjusted EPS, Adjusted Revenue, Adjusted Operating Profit,Income, Adjusted Contribution to Profit, Adjusted EBITDA, and organic revenue provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance.
●Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders as it represents cash available to repay debt, pay common stock dividends and fund share repurchases and acquisitions.
●Results on a constant currency basis removes distortion from the effects of foreign currency movements to provide better comparability of our business trends from period to period. We measure our performance before the impact of foreign currency (or at “constant currency”), which means that we apply the same foreign currency exchange rates for the current and equivalent prior period.

In addition, we have historically provided these or similar non-GAAP performance measures and understand that some investors and financial analysts find this information helpful in analyzing our operating margins, and net income and comparing our financial performance to that of our peer companies and competitors. Based on interactions with investors, we also believe that our non-GAAP performance measures are regarded as useful to our investors as supplemental to our U.S. GAAP financial results, and that there is no confusion regarding the adjustments or our operating performance to our investors due to the comprehensive nature of our disclosures. We have not provided our 20202021 outlook for the most directly comparable U.S. GAAP financial measures, as they are not available without unreasonable effort due to the high variability, complexity, and low visibility with respect to certain items, including restructuring charges and credits, gains and losses on foreign currency, and other gains and losses. These items are uncertain, depend on various factors, and could be material to our consolidated results computed in accordance with U.S. GAAP.

Non-GAAP performance measures do not have standardized meanings prescribed by U.S. GAAP and therefore may not be comparable to the calculation of similar measures used by other companies and should not be viewed as alternatives to measures of financial results under U.S. GAAP. The adjusted metrics have limitations as analytical tools and should not be considered in isolation from or as a substitute for U.S. GAAP information. It does not purport to represent any similarly titled U.S. GAAP information and is not an indicator of our performance under U.S. GAAP. Non-U.S. GAAP financial metrics that we present may not be comparable with similarly titled measures used by others. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures.

4
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 4

ITEM 1. FINANCIAL STATEMENTS
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION – UNAUDITED
In thousands

 October 31, 2019  April 30, 2019  July 31, 2020  April 30, 2020 
            
Assets:            
Current Assets            
Cash and cash equivalents $107,744  $92,890  $101,385  $202,464 
Accounts receivable, net  235,466   294,867   282,412   309,384 
Inventories, net  45,032   35,582   45,051   43,614 
Prepaid expenses and other current assets  58,926   67,441   59,155   59,465 
Total Current Assets  447,168   490,780   488,003   614,927 
                
Product Development Assets, net  57,394   62,470   52,088   53,643 
Royalty Advances, net  16,473   36,185   28,682   36,710 
Technology, Property and Equipment, net  294,761   289,021   295,457   298,005 
Intangible Assets, net  880,613   865,572   829,231   807,405 
Goodwill  1,143,197   1,095,666   1,133,610   1,116,790 
Operating Lease Right-of-Use Assets  145,886   —   139,798   142,716 
Other Non-Current Assets  97,279   97,308   102,077   98,598 
Total Assets $3,082,771  $2,937,002  $3,068,946  $3,168,794 
                
Liabilities and Shareholders' Equity:                
Current Liabilities                
Accounts payable $74,425  $90,980  $52,556  $93,691 
Accrued royalties  91,438   78,062   82,691   87,408 
Short-term portion of long-term debt  6,250   —   10,938   9,375 
Contract liabilities  248,653   507,365   408,954   520,214 
Accrued employment costs  74,727   97,230   70,211   108,448 
Accrued income taxes  3,294   21,025   181   13,728 
Short-term portion of operating lease liabilities  18,409   —   20,647   21,810 
Other accrued liabilities  68,446   75,900   69,958   72,595 
Total Current Liabilities  585,642   870,562   716,136   927,269 
                
Long-Term Debt  788,360   478,790   835,763   765,650 
Accrued Pension Liability  152,707   166,331   183,284   187,969 
Deferred Income Tax Liabilities  137,295   143,775   124,184   119,127 
Operating Lease Liabilities  164,622   —   156,644   159,782 
Other Long-Term Liabilities  75,149   96,197   79,190   75,373 
Total Liabilities  1,903,775   1,755,655   2,095,201   2,235,170 
                
Shareholders’ Equity                
Preferred Stock, $1 par value: Authorized – 2 million, Issued 0  —   — 
Class A Common Stock, $1 par value: Authorized - 180 million, Issued 70,149 and 70,127 as of October 31, 2019 and April 30, 2019, respectively  70,149   70,127 
Class B Common Stock, $1 par value: Authorized - 72 million, Issued 13,033 and 13,055 as of October 31, 2019 and April 30, 2019, respectively  13,033   13,055 
Preferred Stock, $1 par value: Authorized – 2 million, Issued - 0  0   0 
Class A Common Stock, $1 par value: Authorized - 180 million, Issued 70,177 and 70,166 as of July 31, 2020 and April 30, 2020, respectively  70,177   70,166 
Class B Common Stock, $1 par value: Authorized - 72 million, Issued 13,005 and 13,016 as of July 31, 2020 and April 30, 2020, respectively  13,005   13,016 
Additional paid-in-capital  429,968   422,305   431,241   431,680 
Retained earnings  1,940,902   1,931,074   1,775,813   1,780,129 
Accumulated other comprehensive loss  (505,026)  (508,738)
Treasury stock (Class A - 23,107 and 22,634 as of October 31, 2019 and April 30, 2019, respectively; Class B - 3,918 and 3,918 as of October 31, 2019 and April 30, 2019, respectively)  (770,030)  (746,476)
Accumulated other comprehensive loss, net of tax  (534,118)  (575,497)
Less Treasury Shares At Cost (Class A - 23,259 and 23,405 as of July 31, 2020 and April 30, 2020, respectively; Class B - 3,920 and 3,920 as of July 31, 2020 and April 30, 2020, respectively)  (782,373)  (785,870)
Total Shareholders’ Equity  1,178,996   1,181,347   973,745   933,624 
Total Liabilities and Shareholders' Equity $3,082,771  $2,937,002  $3,068,946  $3,168,794 

See accompanying notes to the unaudited condensed consolidated financial statements.
5
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 5

JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED
Dollars in thousands except per share information

 
Three Months Ended
October 31,
  
Six Months Ended
October 31,
  
Three Months Ended
July 31,
 
 2019  2018  2019  2018  2020  2019 
Revenue, net $466,205  $448,622  $889,735  $859,523  $431,326  $423,530 
                        
Costs and Expenses                        
Cost of sales  143,413   132,577   286,509   260,315   144,809   143,096 
Operating and administrative expenses  240,380   236,207   490,550   476,633   237,369   250,170 
Restructuring and related charges  4,001   9,996   14,736   3,910   2,218   10,735 
Amortization of intangibles  15,020   12,367   29,990   25,050   16,891   14,970 
Total Costs and Expenses  402,814   391,147   821,785   765,908   401,287   418,971 
                        
Operating Income  63,391   57,475   67,950   93,615   30,039   4,559 
                        
Interest Expense  (6,787)  (3,608)  (12,864)  (6,404)  (4,614)  (6,077)
Foreign Exchange Transaction Losses  (2,668)  (54)  (16)  (1,783)
Foreign Exchange Transaction (Losses) Gains  (82)  2,652 
Interest and Other Income  2,537   2,509   5,370   4,975   4,391   2,833 
                
                        
Income Before Taxes  56,473   56,322   60,440   90,403   29,734   3,967 
Provision for Income Taxes  11,783   12,538   12,126   20,324   13,400   343 
                        
Net Income $44,690  $43,784  $48,314  $70,079  $16,334  $3,624 
                        
Earnings Per Share                        
Basic $0.79  $0.76  $0.86  $1.22  $0.29  $0.06 
Diluted $0.79  $0.76  $0.85  $1.21  $0.29  $0.06 
                        
Weighted Average Number of Common Shares Outstanding                        
Basic  56,326   57,379   56,431   57,392   55,912   56,536 
Diluted  56,664   57,870   56,791   57,955   56,193   56,905 

See accompanying notes to the unaudited condensed consolidated financial statements.

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 6

JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) – UNAUDITED
Dollars in thousands

 
Three Months Ended
October 31,
  
Six Months Ended
October 31,
  
Three Months Ended
July 31,
 
 2019  2018  2019  2018  2020  2019 
Net Income $44,690  $43,784  $48,314  $70,079  $16,334  $3,624 
                        
Other Comprehensive Income (Loss):                        
Foreign currency translation adjustment  38,319   (20,424)  2,780   (60,749)  46,853   (35,539)
Unamortized retirement costs, net of tax benefit (provision) of $1,822, $(1,229), $(358), and $(3,717), respectively  (6,576)  4,387   1,592   13,198 
Unrealized (loss) gain on interest rate swaps, net of tax benefit of $236, $245, $280 and $449, respectively  (745)  (781)  (660)  (1,433)
Unamortized retirement (costs) credits, net of tax benefit (expense) of $1,705 and $(2,180), respectively  (5,665)  8,168 
Unrealized gain on interest rate swaps, net of tax (expense) benefit of $(30) and $44, respectively  191   85 
Total Other Comprehensive Income (Loss)  30,998   (16,818)  3,712   (48,984)  41,379   (27,286)
                        
Comprehensive Income $75,688  $26,966  $52,026  $21,095 
Comprehensive Income (Loss) $57,713  $(23,662)

See accompanying notes to the unaudited condensed consolidated financial statements.

7
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 7

JOHNJOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED
Dollars in thousands

 
Six Months Ended
October 31,
  
Three Months Ended
July 31,
 
 2019  2018  2020  2019 
Operating Activities            
Net income $48,314  $70,079  $16,334  $3,624 
Adjustments to reconcile net income to net cash used in operating activities:                
Amortization of intangibles  29,990   25,050   16,891   14,970 
Amortization of product development assets  17,616   18,928   9,148   8,714 
Depreciation and amortization of technology, property and equipment  37,251   35,845   23,468   18,535 
Restructuring and related charges  14,736   3,910   2,218   10,735 
Stock-based compensation expense  10,289   8,882   4,314   4,604 
Employee retirement plan expense  4,054   3,369   4,033   1,841 
Royalty advances  (48,250)  (50,580)  (28,952)  (25,687)
Earned royalty advances  67,814   71,317   40,125   33,886 
Foreign exchange transaction losses  16   1,783 
Foreign exchange transaction losses (gains)  82   (2,652)
Other non-cash charges  10,643   4,328   15,285   3,750 
Changes in Operating Assets and Liabilities        
Accounts receivable, net  60,836   1,921 
Accounts payable  (17,765)  (13,856)
Contract liabilities  (263,665)  (255,890)
Other accrued liabilities  (34,612)  (54,437)
Other assets and liabilities  (36,788)  12,790 
Net change in operating assets and liabilities  (223,729)  (166,488)
Net Cash Used In Operating Activities  (99,521)  (116,561)  (120,783)  (94,168)
Investing Activities                
Product development spending  (11,686)  (12,351)  (5,325)  (6,211)
Additions to technology, property and equipment  (44,531)  (34,560)  (18,964)  (24,202)
Businesses acquired in purchase transactions, net of cash acquired  (74,169)  —   (136)  (73,209)
Acquisitions of publication rights and other  (4,045)  (2,795)  (3,855)  (2,270)
Net Cash Used in Investing Activities  (134,431)  (49,706)
Net Cash Used In Investing Activities  (28,280)  (105,892)
Financing Activities                
Repayment of long-term debt  (65,680)  (65,800)  (139,331)  (10,400)
Borrowing of long-term debt  383,151   245,075   206,687   264,248 
Payment of debt issuance costs  (4,006)  —   0   (3,957)
Purchase of treasury shares  (25,000)  (24,994)  0   (10,000)
Change in book overdrafts  681   (3,066)  (3,292)  (6,169)
Cash dividends  (38,486)  (38,033)  (19,261)  (19,252)
Net (payments) proceeds from exercise of stock options and other  (1,393)  7,283 
Net Cash Provided by Financing Activities  249,267   120,465 
Net payments from exercise of stock options and other  (1,319)  (1,137)
Net Cash Provided By Financing Activities  43,484   213,333 
Effects of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash  (461)  (8,368)  4,500   (2,138)
Cash Reconciliation:                
Cash and Cash Equivalents  92,890   169,773   202,464   92,890 
Restricted cash included in Prepaid expenses and other current assets  658   484   583   658 
Balance at Beginning of Period  93,548   170,257   203,047   93,548 
Increase/(Decrease) for the Period  14,854   (54,170)
(Decrease)/Increase for the Period  (101,079)  11,135 
Cash and cash equivalents  107,744   115,603   101,385   104,025 
Restricted cash included in Prepaid expenses and other current assets  658   484   583   658 
Balance at End of Period $108,402  $116,087  $101,968  $104,683 
Cash Paid During the Period for:                
Interest $12,125  $5,713  $4,221  $5,410 
Income taxes, net of refunds $30,170  $18,404  $25,704  $11,484 

See the accompanying notes to the unaudited condensed consolidated financial statements.
Index
8

JOHN WILEY & SONS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY – UNAUDITED
Dollars in thousands

 
Common Stock
Class A
  
Common Stock
Class B
  
Additional
Paid-in Capital
  
Retained
Earnings
  
Treasury
Stock
  
Accumulated Other
Comprehensive Loss
  
Total
Shareholder’s Equity
 
Balance at July 31, 2019 $70,139  $13,043  $424,904  $1,915,445  $(755,501) $(536,024) $1,132,006 
                             
Restricted Shares Issued under Stock-based Compensation Plans  —   —   (681)  1   787   —   107 
Net (Payments) Proceeds from Exercise of Stock Options and Other  —   —   60   —   (316)  —   (256)
Stock-based Compensation Expense  —   —   5,685   —   —   —   5,685 
Purchase of Treasury Shares  —   —   —   —   (15,000)  —   (15,000)
Class A Common Stock Dividends ($0.34 per share)  —   —   —   (16,130)  —   —   (16,130)
Class B Common Stock Dividends ($0.34 per share)  —   —   —   (3,104)  —   —   (3,104)
Common Stock Class Conversions  10   (10)  —   —   —   —   — 
Comprehensive Income (Loss), Net of Tax  —   —   —   44,690   —   30,998   75,688 
Balance at October 31, 2019 $70,149  $13,033  $429,968  $1,940,902  $(770,030) $(505,026) $1,178,996 


 
Common Stock
Class A
  
Common Stock
Class B
  
Additional
Paid-in Capital
  
Retained
Earnings
  
Treasury
Stock
  
Accumulated Other
Comprehensive Loss
  
Total
Shareholder’s Equity
 
Balance at July 31, 2018 $70,115  $13,067  $413,488  $1,845,811  $(696,727) $(471,746) $1,174,008 
                             
Restricted Shares Issued under Stock-based Compensation Plans  —   —   (828)  4   877   —   53 
Net (Payments) Proceeds from Exercise of Stock Options and Other  —   —   106   —   (703)  —   (597)
Stock-based Compensation Expense  —   —   4,952   —   —   —   4,952 
Purchase of Treasury Shares  —   —   —   —   (17,000)  —   (17,000)
Class A Common Stock Dividends ($0.33 per share)  —   —   —   (15,974)  —   —   (15,974)
Class B Common Stock Dividends ($0.33 per share)  —   —   —   (3,016)  —   —   (3,016)
Common Stock Class Conversions  10   (10)  —   —   —   —   — 
Adjustment Due to Adoption of New Revenue Standard  —   —   —   —   —   —   — 
Comprehensive Income (Loss), Net of Tax  —   —   —   43,784   —   (16,818)  26,966 
Balance at October 31, 2018 $70,125  $13,057  $417,718  $1,870,609  $(713,553) $(488,564) $1,169,392 

See accompanying notes to the audited consolidated financial statements.
Index
 9

JOHN WILEY & SONS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY – UNAUDITED
Dollars in thousands

 
Common Stock
Class A
  
Common Stock
Class B
  
Additional
Paid-in Capital
  
Retained
Earnings
  
Treasury
Stock
  
Accumulated
Other
Comprehensive
Loss
  
Total
Shareholder’s
Equity
 
Balance at April 30, 2019 $70,127  $13,055  $422,305  $1,931,074  $(746,476) $(508,738) $1,181,347 
                             
Restricted Shares Issued under Stock-based Compensation Plans  —   —   (2,793)  —   3,006   —   213 
Net (Payments) Proceeds from Exercise of Stock Options and Other  —   —   167   —   (1,560)  —   (1,393)
Stock-based Compensation Expense  —   —   10,289   —   —   —   10,289 
Purchase of Treasury Shares  —   —   —   —   (25,000)  —   (25,000)
Class A Common Stock Dividends ($0.34 per share)  —   —   —   (32,278)  —   —   (32,278)
Class B Common Stock Dividends ($0.34 per share)  —   —   —   (6,208)  —   —   (6,208)
Common Stock Class Conversions  22   (22)  —   —   —   —   — 
Comprehensive Income (Loss), Net of Tax  —   —   —   48,314   —   3,712   52,026 
Balance at October 31, 2019 $70,149  $13,033  $429,968  $1,940,902  $(770,030) $(505,026) $1,178,996 
 
Common Stock
Class A
  
Common Stock
Class B
  
Additional
Paid-in Capital
  
Retained
Earnings
  Accumulated Other Comprehensive Loss  Treasury Stock  
Total
Shareholders' Equity
 
Balance at April 30, 2020 $70,166  $13,016  $431,680  $1,780,129  $(575,497) $(785,870) $933,624 
Cumulative Effect of Change in Accounting Principle, Net of Tax  0   0   0   (1,390)  0   0   (1,390)
Restricted Shares Issued under Stock-based Compensation Plans  0   0   (5,121)  1   0   5,184   64 
Net Proceeds (Payments) from Exercise of Stock Options and Other  0   0   368   0   0   (1,687)  (1,319)
Stock-based Compensation Expense  0   0   4,314   0   0   0   4,314 
Class A Common Stock Dividends ($0.3425 per share)  0   —   0   (16,149)  0   0   (16,149)
Class B Common Stock Dividends ($0.3425 per share)  —   0   0   (3,112)  0   0   (3,112)
Common Stock Class Conversions  11   (11)  0   0   0   0   0 
Comprehensive Income, Net of Tax  0   0   0   16,334   41,379   0   57,713 
Balance at July 31, 2020 $70,177  $13,005  $431,241  $1,775,813  $(534,118) $(782,373) $973,745 

 
Common Stock
Class A
  
Common Stock
Class B
  
Additional
Paid-in Capital
  
Retained
Earnings
  
Treasury
Stock
  
Accumulated
Other
Comprehensive
Loss
  
Total
Shareholder’s
Equity
 
Balance at April 30, 2018 $70,111  $13,071  $407,120  $1,834,057  $(694,222) $(439,580) $1,190,557 
                             
Restricted Shares Issued under Stock-based Compensation Plans  —   —   (2,984)  3   3,080   —   99 
Net Proceeds (Payments) from Exercise of Stock Options and Other  —   —   4,700   —   2,583   —   7,283 
Stock-based Compensation Expense  —   —   8,882   —   —   —   8,882 
Purchase of Treasury Shares  —   —   —   —   (24,994)  —   (24,994)
Class A Common Stock Dividends ($0.33 per share)  —   —   —   (31,996)  —   —   (31,996)
Class B Common Stock Dividends ($0.33 per share)  —   —   —   (6,037)  —   —   (6,037)
Common Stock Class Conversions  14   (14)  —   —   —   —   — 
Adjustment Due to Adoption of New Revenue Standard  —   —   —   4,503   —   —   4,503 
Comprehensive Income (Loss), Net of Tax  —   —   —   70,079   —   (48,984)  21,095 
Balance at October 31, 2018 $70,125  $13,057  $417,718  $1,870,609  $(713,553) $(488,564) $1,169,392 

 
Common Stock
Class A
  
Common Stock
Class B
  
Additional
Paid-in Capital
  
Retained
Earnings
  
Accumulated Other
Comprehensive Loss
  Treasury Stock  
Total
Shareholders' Equity
 
Balance at April 30, 2019 $70,127  $13,055  $422,305  $1,931,074  $(508,738) $(746,476) $1,181,347 
Restricted Shares Issued under Stock-based Compensation Plans  0   0   (2,112)  (1)  0   2,219   106 
Net Proceeds (Payments) from Exercise of Stock Options and Other  0   0   107   0   0   (1,244)  (1,137)
Stock-based Compensation Expense  0   0   4,604   0   0   0   4,604 
Purchase of Treasury Shares  0   0   0   0   0   (10,000)  (10,000)
Class A Common Stock Dividends ($0.34 per share)  0   —   0   (16,148)  0   0   (16,148)
Class B Common Stock Dividends ($0.34 per share)  —   0   0   (3,104)  0   0   (3,104)
Common Stock Class Conversions  12   (12)  0   0   0   0   0 
Comprehensive Income (Loss), Net of Tax  0   0   0 �� 3,624   (27,286)  0   (23,662)
Balance at July 31, 2019 $70,139  $13,043  $424,904  $1,915,445  $(536,024) $(755,501) $1,132,006 

See accompanying notes to the auditedunaudited condensed consolidated financial statements.

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 10

JOHN WILEY & SONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of Presentation

Throughout this report, when we refer to “Wiley,” the “Company,” “we,” “our,” or “us,” we are referring to John Wiley & Sons, Inc. and all our subsidiaries, except where the context indicates otherwise.

Our Unaudited Condensed Consolidated Financial Statements include all the accounts of the Company and our subsidiaries. We have eliminated all intercompany transactions and balances in consolidation. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Unaudited Condensed Consolidated Financial Condition, Results of Operations, Comprehensive Income and Cash Flows for the periods presented. Operating results for the interim period are not necessarily indicative of the results expected for the full year. All amounts are in thousands, except per share amounts, and approximate due to rounding. These financial statements should be read in conjunction with the most recent audited consolidated financial statements included in our Form 10-K for the fiscal year ended April 30, 20192020 as filed with the SEC on July 1, 2019June 26, 2020 (“20192020 Form 10-K”).

Our Unaudited Condensed Consolidated Financial Statements were prepared in accordance with the interim reporting requirements of the SEC. As permitted under those rules, annual footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted. The preparation of our Unaudited Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Certain prior year amounts have been reclassified to conform to the current year’s presentation. The Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended October 31, 2018, includes a reclassification of $4.5 million, between Operating Activities within the net change in operating assets and liabilities and Investing Activities related to costs to fulfill a contract and product development spending. In addition, for the six months ended October 31, 2018, amortization expense related to costs to fulfill a contract of $1.2 million was reclassified from amortization of product development spending to other non-cash charges (credits) within Operating Activities.

Note 2 — Recent Accounting Standards

Recently Adopted Accounting Standards

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU 2018-02 “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. We adopted ASU 2018-02 on May 1, 2019. We did not elect to reclassify the income tax effects from comprehensive income to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act. Our policy for releasing the income tax effects from accumulated other comprehensive income is when the corresponding pretax accumulated other comprehensive income items are reclassified to earnings.

Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” to simplify and improve the application and financial reporting of hedge accounting. Subsequently, in November 2018, the FASB issued ASU 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”.  ASU 2017-12 eases the requirements for measuring and reporting hedge ineffectiveness and clarifies that changes in the fair value of hedging instruments for cash flow, net investment, and fair value hedges should be reflected in the same income statement line item as the earnings effect of the hedged item. The guidance also permits entities to designate specific components in cash flow and interest rate hedges as the hedged risk, instead of using total cash flows. ASU 2018-16 allows the use of the OIS rate based on the SOFR as a U.S. benchmark interest rate for hedge accounting purposes. We adopted ASU 2017-12, 2018-06 and 2019-04, for those portions related to ASU 2017-02, on May 1, 2019 and there was no impact to our consolidated financial statements at the date of adoption. The future impact will depend on any future hedging activities we may enter into.

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 11

Leases

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)”. Subsequently, the FASB issued in March 2019, ASU 2019-01, “Leases (Topic 842): Codification Improvements”, in December 2018 ASU 2018-20, “Leases (Topic 842): Narrow Scope Improvements for Lessors”, and in July 2018 the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements” and ASU 2018-10, “Codification Improvements to Topic 842, Leases”.  ASU 2016-02 requires an entity to recognize a right-of-use asset (“ROU”) and lease liability for all leases with terms of more than 12 months and provide enhanced disclosures. Recognition, measurement, and presentation of expenses depends on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance.

The new standard provides a number of optional practical expedients in transition. We elected the practical expedients to forgo a reassessment of (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) initial direct costs.  We did not elect the practical expedient allowing the use-of-hindsight which would have required us to reassess the lease term of our leases based on all facts and circumstances through the effective date.  In addition, we did not elect the practical expedient pertaining to land easements.

In addition, the new standard provides as a practical expedient, certain policy elections for ongoing lease accounting which we elected at the date of adoption and included the following, (i) to not separate nonlease components from the associated lease component if certain conditions are met, and (ii) to not recognize ROU assets and lease liabilities for leases that qualify as short-term.

A modified retrospective transition approach was required, applying the standard to all leases existing at the date of initial application. A company could choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as of its date of initial application. We adopted the new standard on May 1, 2019 and used the effective date as the date of initial application. Accordingly, previously reported financial information was not updated, and the disclosures required under the new standard will not be provided for dates and periods before May 1, 2019. 

At adoption, we recognized operating lease liabilities of $178 million based on the present value of the remaining minimum rental payments for existing operating leases and ROU assets of $142 million on our Unaudited Condensed Consolidated Statement of Financial Position. The difference between the ROU assets and operating lease liabilities represents the existing deferred rent liabilities, prepaid rent balances, and applicable restructuring liabilities, which were reclassified upon adoption to reduce the measurement of the ROU assets. The adoption of the standard did not have an impact on our Unaudited Condensed Consolidated Statement of Shareholders’ Equity, Condensed Consolidated Statement of Income or Condensed Consolidated Statement of Cash Flow. See Note 5, “Operating Leases”, for further details on our operating leases.

Recently Issued Accounting Standards

Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

In August 2018, the FASB issued ASU 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We adopted ASU 2018-15 on May 1, 2020 on a prospective basis. There was no impact to our consolidated financial statements at the date of adoption.

Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 removes, modifies and added disclosures. We adopted ASU 2018-13 on May 1, 2020. There was no impact to our consolidated financial statements at the date of adoption.

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Index

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” Subsequently, in May 2019, the FASB issued ASU 2019-05 - "Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief”, in April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” in November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” in November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” and in February 2020, the FASB issued ASU 2020-02, “Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842)  (SEC Update)”. ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses. ASU 2016-13, ASU 2019-05, ASU 2019-04, ASU 2018-19, ASU 2019-11 and ASU 2020-02 were effective for us on May 1, 2020, including interim periods within those fiscal periods, with early adoption permitted.

We adopted the new standard on May 1, 2020, with a cumulative effect adjustment to retained earnings as of the beginning of the year of adoption. Based on financial instruments currently held by us, the adoption of ASU 2016-13 primarily impacted our trade receivables, specifically our allowance for doubtful accounts. The adoption of the standard did not have an impact on our Unaudited Condensed Consolidated Statements of Income, or our Unaudited Condensed Consolidated Statements of Cash Flows. See the table below for further details on the immaterial impact to our Unaudited Condensed Consolidated Statements of Financial Position and Unaudited Condensed Consolidated Statements of Shareholders’ Equity.

We are exposed to credit losses through our accounts receivable with customers. Accounts Receivable, net is stated at amortized cost net of provision for credit losses. Our methodology to measure the provision for credit losses requires an estimation of loss rates based upon historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivable including the impact of COVID-19, delinquency trends, aging behavior of receivables, credit and liquidity indicators for industry groups, customer classes or individual customers and reasonable and supportable forecasts of the economic conditions that may exist through the contractual life of the asset.  Our provision for credit losses is reviewed and revised periodically.  Our accounts receivable is evaluated on a pool basis that is based on customer groups with similar risk characteristics.  This includes consideration of the following factors to develop these pools; size of the customer, industry, geographical location, historical risk and types of services or products sold.

Our customer’s ability to pay is assessed through our internal credit review processes. Based on the dollar value of credit extended, we assess our customers' credit by reviewing the total expected receivable exposure, expected timing of payments and the customer’s established credit rating. In determining customer creditworthiness, we assess our customers' credit utilizing different resources including external credit validations and/or our own assessment through analysis of the customers' financial statements and review of trade/bank references. We also consider contract terms and conditions, country and political risk, and the customer's mix of products purchased in our evaluation. A credit limit is established for each customer based on the outcome of this review. Credit limits are periodically reviewed for existing customers and whenever an increase in the credit limit is being considered. When necessary, we utilize collection agencies and legal counsel to pursue recovery of defaulted receivables. We write off receivables only when deemed no longer collectible.

The following table presents the change in provision for credit losses, which is presented net in Accounts Receivable on our Unaudited Condensed Consolidated Statements of Financial Position for the period indicated:

 
Provision for
Credit Losses
 
Balance as of April 30, 2020 $18,335 
Adjustment due to adoption of new credit losses standard recorded as an adjustment to retained earnings  1,776 
Current period provision  2,678 
Amounts written off, less recoveries  (1,327)
Foreign exchange translation adjustments and other  (1,398)
Balance as of July 31, 2020 $20,064 

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Index

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock.  As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions.  In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on May 1, 2022, including interim periods within those fiscal years.  Adoption is either a modified retrospective method or a fully retrospective method of transition. We are currently assessing the impact the new guidance will have on our consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional guidance for a limited period of time to ease the burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.  This would apply to companies meeting certain criteria that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.  This standard is effective for us immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We are currently assessing the impact the new guidance will have on our consolidated financial statements.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.”  This ASU is intended to simplify various aspects related to accounting for income taxes, eliminates certain exceptions within Topic 740, “Income Taxes” and clarifies certain aspects of the current guidance to promote consistent application.  The standard is effective for us on May 1, 2020,2021, and interim periods within that fiscal year, with early adoption permitted.is permitted in any interim period for which financial statements have not yet been issued. We are currently assessing the impact the new guidance will have on our consolidated financial statements.

Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued ASU 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and added additional disclosures. The standard is effective for us on May 1, 2021, with early adoption permitted. The amendments in ASU 2018-14 would need to be applied on a retrospective basis.  We are currently assessing the impact the new guidance will have on our disclosures.

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 12

Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 removes, modifies and added disclosures. The standard is effective for us on May 1, 2020, with early adoption permitted. Certain disclosures in ASU 2018-13 would need to be applied on a retrospective basis and others on a prospective basis. We are currently assessing the impact the new guidance will have on our disclosures.

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, “Intangibles–Goodwill and Other (Topic 350): “Simplifying the Test for Goodwill Impairment”, which simplifies the measurement of a potential goodwill impairment charge by eliminating the requirement to calculate an implied fair value of the goodwill based on the fair value of a reporting unit’s other assets and liabilities. The new guidance eliminates the implied fair value method and instead measures a potential impairment charge based on the excess of a reporting unit’s carrying value compared to its fair value. The impairment charge cannot exceed the total amount of goodwill allocated to that reporting unit. The standard is effective for us on May 1, 2020, with early adoption permitted. Based on our most recent annual goodwill impairment test completed in the year ended April 30, 2019, we expect no impact upon adoption.

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” Subsequently, in May 2019, the FASB issued ASU 2019-05 - "Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief”, in April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” in November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” and in November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”.  ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. ASU 2016-13, ASU 2019-05, ASU 2019-04, ASU 2018-19, and ASU 2019-11 are effective for us on May 1, 2020, including interim periods within those fiscal periods, with early adoption permitted. We are currently assessing the impact the new guidance will have on our consolidated financial statements.

Note 3 — Acquisitions

Fiscal Year 2020

Pro forma financial information related to these acquisitions has not been provided as it is not material to our consolidated results of operations.

mthree

On January 1, 2020, we completed the acquisition of 100% of the outstanding stock of mthree. mthree is a rapidly growing education services provider that addresses the IT skills gap by finding, training and placing job-ready technology talent in roles with leading corporations worldwide. Its results of operations are included in our Education Services segment.

The preliminary fair value of the consideration transferred at the acquisition date was $128.6 million (£97.5 million) which included $122.2 million of cash and $6.4 million of additional consideration to be paid after the acquisition date. We financed the payment of the cash consideration primarily through borrowings under our Amended and Restated RCA (as defined below in Note 15, “Debt and Available Credit Facilities”) and using cash on hand. The fair value of the cash consideration transferred including those amounts paid after the acquisition date, net of $2.2 million of cash acquired was approximately $126.4 million.

mthree’s revenue included in our Education Services segment results for the three months ended July 31, 2020 was $12.4 million.
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Index

During the three months ended July 31, 2020, no revisions were made to the allocation of the consideration transferred to the assets acquired and liabilities assumed. We recorded the preliminary fair value of the assets acquired and liabilities assumed on the acquisition date, which included a preliminary allocation of $82.6 million of goodwill allocated to the Education Services segment, and $56.8 million of intangible assets.

The allocation of the total consideration transferred to the assets acquired and the liabilities assumed is preliminary, and could be revised as a result of additional information obtained due to the finalization of the third-party valuation report, leases and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables, but such amounts will be finalized within the measurement period, which will not exceed one year from the acquisition date.

Zyante Inc.

On July 1, 2019, we completed the acquisition of Zyante Inc. (“zyBooks”), a leading provider of computer science and STEM education courseware. The results of operations of zyBooks is included in our Academic & Professional Learning segment results. The preliminary fair value of the consideration transferred at the acquisition date was $57.0$57.1 million which included $55.9 million of cash and $1.1$1.2 million of additional consideration to be paid after the acquisition date.date, inclusive of purchase price adjustments which were finalized in the three months ended January 31, 2020. The fair value of the cash consideration transferred including those amounts paid after the acquisition date, net of $1.8 million of cash acquiredthat was approximately $54.3paid during the three months ended July 31, 2020 was $0.1 million.

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 13
zyBooks incremental revenue included in our Academic & Professional Learning segment results for the three months ended July 31, 2020 was $1.3 million.

The following table summarizesallocation of the preliminary consideration transferred to acquire zyBooksthe assets acquired and the liabilities assumed was final as of April 30, 2020. This included goodwill of $36.9 million allocated to the Academic & Professional Learning segment, and $24.5 million of intangible assets.

Other Acquisitions in Fiscal Year 2020

The preliminary fair value of cash consideration transferred during the year ended April 30, 2020 for all other acquisitions was approximately $48.5 million. These other acquisitions were accounted for using the acquisition method of accounting as of their respective acquisition dates.

During the three months ended July 31, 2020, a revision of $11.7 million from goodwill to intangibles assets was made to the allocation of the purchase price amongconsideration transferred to the assets acquired and liabilities assumed.assumed for the Informatics and Madgex acquisitions, due to additional information obtained related to the third-party valuation. The excess purchase price over identifiable net tangible and intangible assets of $16.6 million has been recorded to Goodwill on our Condensed Consolidated Statements of Financial Position as of July 31, 2020, and $39.4 million of intangible assets subject to amortization have been recorded, including customer relationships, developed technology, content and trademarks that are being amortized over estimated weighted average useful lives of 7, 8, 10, and 10 years, respectively. The fair value assessed for the majority of the tangible assets acquired and liabilities assumed equaled their carrying value. Goodwill represents synergies and economies of scale expected from the combination of services. Goodwill of $8.5 million has been allocated to the Academic & Professional Learning segment, and $8.1 million has been allocated to the Research Publishing & Platforms segment. The incremental revenue for the three months ended July 31, 2020 related to these other acquisitions was approximately $2.3 million.


 
Preliminary
Allocation as of
July 1, 2019
 
Total cash consideration transferred at the acquisition date $55,884 
     
Assets:     
Current Assets   2,280 
Technology, Property and Equipment, net   28 
Intangible Assets, net  24,500 
Goodwill   37,246 
Total Assets  $64,054 
     
Liabilities:     
Current Liabilities   2,581 
Deferred Income Tax Liabilities  5,589 
Total Liabilities $8,170 
On April 1, 2020, we completed the acquisition of Bio-Rad Laboratories Inc.’s Informatics products including the company’s spectroscopy software and spectral databases (“Informatics”). The results of Informatics are included in our Research Publishing & Platforms segment results.

On March 2, 2020, we completed the acquisition of Madgex Holdings Limited (“Madgex”), a market-leading provider of advanced job board software and career center services. The results of Madgex are included in our Research Publishing & Platforms segment results.

The following table summarizesallocation of the identifiable intangibletotal consideration transferred to the assets acquired and their weighted-average useful life at the dateliabilities assumed for Informatics and Madgex is preliminary, and could be revised as a result of acquisition.additional information obtained due to the finalization of the third-party valuation report, leases and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables, but such amounts will be finalized within the measurement period, which will not exceed one year from the acquisition dates.


 
Estimated
Fair Value
  
Weighted-Average
Useful Life (in
Years)
 
Developed Technology $10,400   7 
Customer Relationships  6,800   10 
Content  4,400   10 
Trademarks  2,900   10 
Total $24,500     

Other Acquisitions
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Index

On May 31, 2019, we completed the acquisition of certain assets of Knewton, Inc. (“Knewton”). Knewton is a provider of affordable courseware and adaptive learning technology. The results of Knewton are included in our Academic & Professional Learning segment results. In addition, in the three months ended July 31, 2019 we also completed the acquisition of 2 immaterial businesses, which are included in our Research Publishing & Platforms segment and in the three months ended October 31, 2019 1 immaterial business included in our Academic & Professional Learning segment results.

The preliminary fair value of cash consideration transferred during the six months ended October 31, 2019 was approximately $19.9 million. We recorded the preliminary fair value of the assets acquired and liabilities assumed on the acquisition date, which included a preliminary allocation of $9.4 million of goodwill and $16.2 million of intangible assets.

The allocation of the total consideration transferred to the assets acquired and the liabilities assumed for the acquisitions discussed above is preliminary and could be revised as a result of additional information obtained due to the finalization of the third-party valuation report, tax related matters and contingencies, but such amounts will be finalized within the measurement period, which will not exceed one year from the acquisition dates.

Fiscal Year 2019

The Learning House, Inc.

On November 1, 2018, we completed the acquisition of 100% of the outstanding stock of The Learning House, Inc. (“Learning House”) a diversified education services provider. The results of operations of Learning House are included in our Education Services segment.

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 14

The fair value of the consideration transferred was $201.3 million which included $200.7 million of cash and $0.6 million of warrants, inclusive of purchase price adjustments which were finalized in the fourth quarter of fiscal year 2019. We financed the payment of the cash consideration through borrowings under our RCA (as defined below in Note 15, “Debt and Available Credit Facilities”). The warrants were classified as equity and allow the holder to purchase 400,000 shares of our Class A Common Stock at an exercise price of $90.00, subject to adjustments. The term of the warrants is three years, expiring on November 1, 2021. The fair value of the warrants was determined using the Black-Scholes option pricing model. The final fair value of the cash consideration transferred, net of $10.3 million of cash acquired was $190.4 million.

The allocation of the consideration transferred to the assets acquired and the liabilities assumed is final.for Knewton was final as of April 30, 2020.

We also completed in fiscal year 2020 the acquisition of 2 immaterial businesses, which are included in our Research Publishing & Platforms segment, 1 immaterial business included in our Academic & Professional Learning segment results and 1 immaterial business in our Education Services business.

Note 4 — Revenue Recognition, Contracts with Customers

Disaggregation of Revenue

As previously announced, we changed our segment reporting structure to align with our strategic focus areas. See Note 10, “Segment Information,” for more details. The following table presents our revenue from contracts with customers disaggregated by segment and product type.


 
Three Months Ended
October 31,
  
Six Months Ended
October 31,
  
Three Months Ended
July 31,
 
 2019  2018  2019  2018  2020  2019 
Research Publishing & Platforms:                  
Research Publishing $225,085  $219,710  $445,012  $436,424  $230,464  $219,927 
Research Platforms  9,624   9,365   19,072   17,968   10,346   9,448 
Total Research Publishing & Platforms  234,709   229,075   464,084   454,392   240,810   229,375 
        ��               
Academic & Professional Learning:                        
Education Publishing  101,741   107,474   167,264   181,508   64,084   65,523 
Professional Learning  75,984   82,196   155,319   164,586   62,829   79,335 
Total Academic & Professional Learning  177,725   189,670   322,583   346,094   126,913   144,858 
                        
Education Services:                        
Education Services(1)  53,771   29,877   103,068   59,037   50,262   48,156 
mthree (1)
  13,341   1,141 
Total Education Services  53,771   29,877   103,068   59,037   63,603   49,297 
        
Total Revenue $466,205  $448,622  $889,735  $859,523  $431,326  $423,530 

(1)In May 2020, we moved the IT bootcamp business acquired as part of The Learning House acquisition from Education Services to mthree. As a result, the prior period revenue related to the IT bootcamp business has been included in mthree. There were no changes to our total Education Services or our consolidated financial results.

Accounts Receivable, net and Contract Liability Balances

When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue when, or as, control of the products or services are transferred to the customer and all revenue recognition criteria have been met.

The following table provides information about receivables and contract liabilities from contracts with customers.


 October 31, 2019  April 30, 2019  
Increase/
(Decrease)
  July 31, 2020  April 30, 2020  
Increase/
(Decrease)
 
Balances from contracts with customers:                  
Accounts receivable, net $235,466  $294,867  $(59,401) $282,412  $309,384  $(26,972)
Contract liabilities (1)
  248,653   507,365   (258,712)  408,954   520,214   (111,260)
Contract liabilities (included in Other Long-Term Liabilities) $19,622  $10,722  $8,900  $15,357  $14,949  $408 

(1)The sales return reserve recorded in Contract Liabilities is $37.7$39.4 million and $25.9$32.8 million, as of OctoberJuly 31, 20192020 and April 30, 2019,2020, respectively.
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Index

Revenue recognized forFor the three and six months ended OctoberJuly 31, 2019 relating to2020, we estimate that we recognized revenue of approximately 38% that was included in the current contract liability at April 30, 2019 was $184.6 million and $378.9 million, respectively.

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 15
2020.

The decrease in contract liabilities as of July 31, 2020 was driven by revenue earned primarily on journal subscriptions, open access and comprehensive agreements, and test preparation and certification offerings, partially offset by renewals of journal subscription agreements, and comprehensive agreements, and the impact of foreign exchange.

Remaining Performance Obligations included in Contract Liability

As of OctoberJuly 31, 2019,2020, the aggregate amount of the transaction price allocated to the remaining performance obligations is approximately $268.3$424.3 million, which included the sales return reserve of $37.7$39.4 million. Excluding the sales return reserve, we expect that approximately $211.0$369.5 million will be recognized in the next twelve months with the remaining $19.6$15.4 million to be recognized thereafter.thereafter.

Assets Recognized for the Costs to Fulfill a Contract

Costs to fulfill a contract are directly related to a contract that will be used to satisfy a performance obligation in the future and are expected to be recovered. These costs are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. These types of costs are incurred in the following revenue streams, (1) Research Platforms and (2) Education Services.

Our assets associated with incremental costs to fulfill a contract were $10.3$11.6 million and $11.5 million at OctoberJuly 31, 20192020 and April 30, 2020, respectively, and are included within Other Non-Current Assets on our Unaudited Condensed Consolidated Statements of Financial Position. We recorded amortization expense of $1.1$1.2 million and $2.1$1.0 million during the three and six months ended OctoberJuly 31, 2020 and 2019, respectively, related to these assets within Cost of Sales on the Unaudited Condensed Consolidated Statements of Income. We recorded amortization expense of $0.4 million and $1.2 million during the three and six months ended October 31, 2018, respectively, related to these assets within Cost of Sales on theour Unaudited Condensed Consolidated Statements of Income.

Sales and value-added taxes are excluded from revenues. Shipping and handling costs, which are primarily incurred within the Academic & Professional Learning segment, occur before the transfer of control of the related goods. Therefore, in accordance with the new revenue standard, it is not considered a promised service to the customer and would be considered a cost to fulfill our promise to transfer the goods. Costs incurred for third party shipping and handling are primarily reflected in Operating and Administrative Expenses on theour Unaudited Condensed Consolidated Statements of Income. We incurred $7.6$6.7 million and $15.0$7.4 million in shipping and handling costs in the three and six months ended OctoberJuly 31, 2019, respectively. We incurred $8.6 million2020 and $16.5 million in shipping and handling costs in the three and six months ended October 31, 2018,2019, respectively.

Note 5 — Operating Leases

On May 1, 2019, we adopted a new accounting standard for leases. For further information, see Note 2, “Recent Accounting Standards.”

We have contractual obligations as a lessee with respect to offices, warehouses and distribution centers, automobiles, and office equipment.

We determine if an arrangement is a lease at inception of the contract in accordance with guidance detailed in the newlease standard and we perform the lease classification test as of the lease commencement date. ROURight-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

The present value of the lease payments is calculated using an incremental borrowing rate, which was determined based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use an unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate.

Under the new leasing standard, leases that are more than one year in duration are capitalized and recorded on theour Unaudited Condensed Consolidated Statements of Financial Position. Some of our leases offer an option to extend the term of such leases. We utilize the reasonably certain threshold criteria in determining which options we will exercise. Furthermore, some of our lease payments are based on index rates with minimum annual increases. These represent fixed payments and are captured in the future minimum lease payments calculation.

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Index

For operating leases, the ROU assets and lease liabilities are presented inon our Unaudited Condensed Consolidated Statement of Financial Position as follows:

 October 31, 2019 
Operating Lease Right-of-Use Assets $145,886 
Short-term portion of operating lease liabilities  18,409 
Operating Lease Liabilities, non-current $164,622 

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 16

 July 31, 2020  April 30, 2020 
Operating lease right-of-use assets $139,798  $142,716 
Short-term portion of operating lease liabilities  20,647   21,810 
Operating lease liabilities, non-current $156,644  $159,782 

During the sixthree months ended OctoberJuly 31, 2019,2020, we added $12.1$0.3 million to the ROU assets and $13.7$0.3 million to the operating lease liabilities due to new leases as well as modifications and remeasurements to our existing operating leases.

Our total net lease costs are as follows:

 
Three Months Ended
October 31, 2019
  
Six Months Ended
October 31, 2019
 
Operating lease cost $6,199  $13,060 
Variable lease cost  915   2,118 
Sublease income  184   (339)
Total net lease cost $7,298  $14,839 

  
Three Months Ended
July 31,
 
 2020  2019 
Operating lease cost $6,635  $6,861 
Variable lease cost  521   1,203 
Short-term lease cost  88   0 
Sublease income  (170)  (523)
Total net lease cost (1)
 $7,074  $7,541 

(1)Total net lease cost does not include those costs included in Restructuring and Related Charges on our Unaudited Condensed Consolidated Statements of Income. See Note 9, “Restructuring and Related Charges” for more information on these programs.

Other supplemental information includes the following:following for our operating leases:

 
Weighted-Average
Remaining
Contractual
Lease Term (Years)
  
Six Months Ended
October 31, 2019
 
Operating leases  10    
        
Weighted-average discount rate:       
Operating leases      5.91%
         
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash flows from operating leases     $14,716 

  
Three Months Ended
July 31,
 
 2020  2019 
Weighted-average remaining contractual lease term (years)  10   10 
         
Weighted-average discount rate  5.89%  5.82%
         
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash flows from operating leases $8,974  $7,300 

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Index

The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded in theour Unaudited Condensed Consolidated Statement of Financial Position as of OctoberJuly 31, 2019:2020:

Fiscal Year 
Operating Lease
Liabilities
 
2020 (remaining 6 months) $16,758 
2021  28,073 
2022  25,085 
2023  22,683 
2024  21,791 
Thereafter  134,823 
Total undiscounted lease payments  249,213 
     
Less: Imputed interest  66,182 
     
Present Value of Minimum Lease Payments  183,031 
     
Less: Current portion  18,409 
     
Noncurrent portion $164,622 

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 17
Fiscal Year 
Operating Lease
Liabilities
 
2021 (remaining 9 months) $23,531 
2022  27,903 
2023  25,038 
2024  23,526 
2025  22,233 
Thereafter  114,078 
Total future undiscounted minimum lease payments  236,309 
     
Less: Imputed interest  59,018 
     
Present Value of Minimum Lease Payments  177,291 
     
Less: Current portion  20,647 
     
Noncurrent portion $156,644 

Note 6 — Stock-Based Compensation

We have stock-based compensation plans under which employees may be granted performance-based stock awards and other restricted stock awards.  Prior to fiscal year 2017, we also granted options to purchase shares of our common stock at the fair market value at the time of grant. We recognize the grant date fair value of stock-based compensation in net income on a straight-line basis, net of estimated forfeitures over the requisite service period. The measurement of performance for performance-based stock awards is based on actual financial results for targets established three years in advance. For the three months ended OctoberJuly 31, 20192020 and 2018,2019, we recognized stock-based compensation expense, on a pre-tax basis, of $5.7$4.3 million and $5.0 million, respectively. For the six months ended October 31, 2019 and 2018, we recognized stock-based compensation expense, on a pre-tax basis, of $10.3 million and $8.9$4.6 million, respectively.

The following table summarizes restricted stock awards we granted to employees (shares in thousands):


 
Six Months Ended
October 31,
  
Three Months Ended
July 31,
 
 2019  2018  2020  2019 
Restricted Stock:            
Awards granted  716   397   358   500 
Weighted average fair value of grant $44.75  $63.33  $38.88  $45.31 

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Index

Note 7 — Accumulated Other Comprehensive Loss

Changes in Accumulated Other Comprehensive Loss by component, net of tax, for the three and six months ended OctoberJuly 31, 20192020 and 20182019 were as follows:


 
Foreign
Currency
Translation
  
Unamortized
Retirement
Costs
  
Interest
Rate Swaps
  Total 
             
Balance at July 31, 2019 $(347,646) $(187,889) $(489) $(536,024)
Other comprehensive income (loss) before reclassifications  38,319   (7,960)  (481)  29,878 
Amounts reclassified from accumulated other comprehensive loss  —   1,384   (264)  1,120 
Total other comprehensive income (loss)  38,319   (6,576)  (745)  30,998 
Balance at October 31, 2019 $(309,327) $(194,465) $(1,234) $(505,026)
                 
Balance at April 30, 2019 $(312,107) $(196,057) $(574) $(508,738)
Other comprehensive income (loss) before reclassifications  2,780   (830)  (153)  1,797 
Amounts reclassified from accumulated other comprehensive loss  —   2,422   (507)  1,915 
Total other comprehensive income (loss)  2,780   1,592   (660)  3,712 
Balance at October 31, 2019 $(309,327) $(194,465) $(1,234) $(505,026)
 
Foreign
Currency Translation
  
Unamortized
Retirement Costs
  
Interest
Rate Swaps
  Total 
Balance at April 30, 2020 $(340,703) $(227,920) $(6,874) $(575,497)
Other comprehensive income (loss) before reclassifications  46,853   (7,190)  (669)  38,994 
Amounts reclassified from Accumulated Other Comprehensive Loss  0   1,525   860   2,385 
Total other comprehensive (loss) income  46,853   (5,665)  191   41,379 
Balance at July 31, 2020 $(293,850) $(233,585) $(6,683) $(534,118)
                 
Balance at April 30, 2019 $(312,107) $(196,057) $(574) $(508,738)
Other comprehensive (loss) income before reclassifications  (35,539)  7,130   328   (28,081)
Amounts reclassified from Accumulated Other Comprehensive Loss  0   1,038   (243)  795 
Total other comprehensive (loss) income  (35,539)  8,168   85   (27,286)
Balance at July 31, 2019 $(347,646) $(187,889) $(489) $(536,024)


 
Foreign
Currency
Translation
  
Unamortized
Retirement
Costs
  
Interest
Rate Swaps
  Total 
             
Balance at July 31, 2018 $(291,898) $(182,215) $2,367  $(471,746)
Other comprehensive income (loss) before reclassifications  (20,424)  3,273   543   (16,608)
Amounts reclassified from accumulated other comprehensive loss  —   1,114   (1,324)  (210)
Total other comprehensive income (loss)  (20,424)  4,387   (781)  (16,818)
Balance at October 31, 2018 $(312,322) $(177,828) $1,586  $(488,564)
                 
Balance at April 30, 2018 $(251,573) $(191,026) $3,019  $(439,580)
Other comprehensive income (loss) before reclassifications  (60,749)  10,993   613   (49,143)
Amounts reclassified from accumulated other comprehensive loss  —   2,205   (2,046)  159 
Total other comprehensive income (loss)  (60,749)  13,198   (1,433)  (48,984)
Balance at October 31, 2018 $(312,322) $(177,828) $1,586  $(488,564)

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 18

During the three months ended OctoberJuly 31, 20192020 and 2018,2019, pre-tax actuarial losses included in Unamortized Retirement Costs of approximately $1.7$1.9 million and $1.4$1.3 million, respectively, and in the six months endedOctober 31, 2019 and 2018, approximately $3.0 million and $2.8 million, respectively, were amortized from Accumulated Other Comprehensive Loss and recognized as pension and post-retirement benefit expense primarily in Operating and Administrative Expenses and Interest and Other Income in theon our Unaudited Condensed Consolidated Statements of Income.

Note 8 — Reconciliation of Weighted Average Shares Outstanding

A reconciliation of the shares used in the computation of earnings per share follows:


 
Three Months Ended
October 31,
  
Six Months Ended
October 31,
  
Three Months Ended
July 31,
 
 2019  2018  2019  2018  2020  2019 
Weighted average shares outstanding  56,339   57,426   56,451   57,451   55,916   56,564 
Less: Unvested restricted shares  (13)  (47)  (20)  (59)  (4)  (28)
Shares used for basic earnings per share  56,326   57,379   56,431   57,392   55,912   56,536 
Dilutive effect of stock options and other stock awards  338   491   360   563 
Dilutive effect of unvested restricted stock units and other stock awards  281   369 
Shares used for diluted earnings per share  56,664   57,870   56,791   57,955   56,193   56,905 

Since their inclusion in the calculation of diluted earnings per share would have been anti-dilutive, options to purchase 212,094 shares of Class A Common Stock have been excluded for both the three201,743 and six months ended October 31, 2019, respectively and 157,167252,704 shares of Class A Common Stock have been excluded for the three and six months ended OctoberJuly 31, 2018, respectively.

Warrants to purchase 515,114 shares of Class A Common Stock have not been included for both the three2020 and six months ended October 31, 2019, respectively. There were 0 warrants issued during the three and six months ended October 31, 2018.

There were 0 restricted shares excluded in the calculation of diluted earnings per share for the three and six months ended OctoberJuly 31, 2020 and 2019.

Warrants to purchase 528,452 and 511,094 shares of Class A Common Stock have been excluded in the calculation of diluted earnings per share for the three months ended July 31, 2020 and 2019, and 2018, respectively.respectively as their inclusion would have been anti-dilutive.

18
Index

Note 9 — Restructuring and Related Charges

Business Optimization Program

Beginning in fiscal year 2020, we initiated a multi-year Business Optimization Program (the “Business Optimization Program”) to drive efficiency improvement and operating savings.

The following tables summarize the pre-tax restructuring charges (credits) related to this program:


 
Three Months Ended
October 31,
  
Six Months Ended
October 31,
  
Three Months Ended
July 31,
  Total Charges 
 2019  2019  2020  2019  Incurred to Date 
Charges (Credits) by Segment:               
Research Publishing & Platforms $29  $2,665  $(197) $2,636  $3,349 
Academic & Professional Learning  765   3,542   (227)  2,777   10,248 
Education Services  (475)  1,717   139   2,192   3,913 
Corporate Expenses  2,835   6,100   2,470   3,265   17,488 
Total Restructuring and Related Charges $3,154  $14,024  $2,185  $10,870  $34,998 
                    
Charges by Activity:                    
Severance and termination benefits $578  $11,287  $1,110  $10,709  $27,974 
Operating lease right-of-use asset impairment  —   161   0   161   161 
Facility related charges  1,240   1,240   1,075   0   5,061 
Other Activities  1,336   1,336 
Other activities  0   0   1,802 
Total Restructuring and Related Charges $3,154  $14,024  $2,185  $10,870  $34,998 

Other Activities for the three and six months ended October 31, 2019 relate to reserves associated with the cessation of certain offerings and the impairment of certain software licenses.

Index
 19

The following table summarizes the activity for the Business Optimization Program liability for the sixthree months ended OctoberJuly 31, 2019:2020:

 April 30, 2019  Charges  Payments  
Foreign
Translation
& Other Adjustments
  October 31, 2019 
Severance and termination benefits $—  $11,287  $(2,760) $(168) $8,359 
Other Activities  —   1,336   —   (365)  971 
Total $—  $12,623  $(2,760) $(533) $9,330 

 April 30, 2020  Charges  Payments  
Foreign
Translation
& Other Adjustments
  July 31, 2020 
Severance and termination benefits $17,632  $1,110  $(6,966) $478  $12,254 
Other activities  430   0   (206)  (2)  222 
Total $18,062  $1,110  $(7,172) $476  $12,476 

TheApproximately $12.0 million of the restructuring liability as of October 31, 2019 for accrued severance and termination benefits is reflected in Accrued Employment Costs and approximately $0.3 million is reflected in theOther Long-Term Liabilities on our Unaudited Condensed Consolidated Statement of Financial Position.

The amount included in Other Long-Term Liabilities that relates to severance and termination benefits is expected to be paid in the year ended April 30, 2022.

The restructuring liability as of OctoberJuly 31, 20192020 for other activities is reflected in Other Accrued Liabilities in theon our Unaudited Condensed Consolidated Statement of Financial Position.

Restructuring and Reinvestment Program

Beginning in the year ended April 30, 2013, we initiated a global program (the “Restructuring and Reinvestment Program”) to restructure and realign our cost base with current and anticipated future market conditions. We are targeting a majority of the expected cost savings achieved to improve margins and earnings, while the remainder will be reinvested in high-growth digital business opportunities.

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Index

The following tables summarize the pre-tax restructuring charges (credits) related to this program:


 
Three Months Ended
October 31,
  
Six Months Ended
October 31,
  Total Charges 
  2019  
2018 (1)
  2019  
2018 (1)
  Incurred to Date 
Charges (Credits) by Segment:               
Research Publishing & Platforms $697  $2,282  $681  $1,302  $27,225 
Academic & Professional Learning  35   2,194   63   1,477   42,902 
Education Services  —   310   (103)  102   3,764 
Corporate Expenses  115   5,210   71   1,029   96,449 
Total Restructuring and Related Charges $847  $9,996  $712  $3,910  $170,340 
                     
Charges by Activity:                    
Severance and termination benefits $847  $8,672  $497  $2,894  $116,756 
Consulting and Contract Termination Costs  —   90   —   225   21,155 
Other Activities  —   1,234   215   791   32,429 
Total Restructuring and Related Charges $847  $9,996  $712  $3,910  $170,340 

(1)As previously announced, we have changed our segment reporting structure to align with our strategic focus areas. See Note 10, “Segment Information,” for more details.
 
Three Months Ended
July 31,
  Total Charges 
  2020  2019  Incurred to Date 
Charges (Credits) by Segment:         
Research Publishing & Platforms $0  $(16) $26,884 
Academic & Professional Learning  260   28   43,094 
Education Services  0   (103)  3,764 
Corporate Expenses  (227)  (44)  95,713 
Total Restructuring and Related Charges (Credits) $33  $(135) $169,455 
             
Charges (Credits) by Activity:            
Severance and termination benefits $33  $(350) $116,042 
Consulting and contract termination costs  0   —   20,984 
Other activities  0   215   32,429 
Total Restructuring and Related Charges (Credits) $33  $(135) $169,455 

The credits in severance and termination benefits activities for the three months endedJuly 31, 2019 primarily reflect changes in the number of headcount reductions and estimates for previously accrued benefit costs. Other Activitiesactivities for the three and six months ended OctoberJuly 31, 2019 include facility related costs. Other Activities for the three and six months ended October 31, 2018 include lease impairment related costs.

Index
 20

The following table summarizes the activity for the Restructuring and Reinvestment Program liability for the sixthree months ended OctoberJuly 31, 2019:2020:

 April 30, 2019  Charges  Payments  
Adoption of
New Lease
Standard (1)
  
Foreign
Translation &
Other Adjustments
  October 31, 2019 
Severance and termination benefits $4,887  $497  $(3,125) $—  $203  $2,462 
Consulting and Contract Termination Costs  303   —   —   —   —   303 
Other Activities  2,544   —   —   (2,258)  (34)  252 
Total $7,734  $497  $(3,125) $(2,258) $169  $3,017 

(1)Refer to Note 2, “Recent Accounting Standards,” and Note 5, “Operating Leases” for more information related to the adoption of the new lease standard.
 April 30, 2020  Charges  Payments  
Foreign
Translation &
Other Adjustments
  July 31, 2020 
Severance and termination benefits $1,360  $33  $(888) $62  $567 
Other activities  230   0   0   128   358 
Total $1,590  $33  $(888) $190  $925 

The restructuring liability as of OctoberJuly 31, 20192020 for accrued severance and termination benefits is reflected in Accrued Employment Costs in theon our Unaudited Condensed Consolidated Statement of Financial Position.

The restructuring liability as of OctoberJuly 31, 2019, for Consulting and Contract Termination Costs is reflected in Other Accrued Liabilities.

As2020 of October 31, 2019, $0.3$0.4 million of Other Activitiesother activities are reflected in Other AccruedLong-Term Liabilities on our Unaudited Condensed Consolidated Statement of Financial Position and mainly relate to facility relocation and lease impairment related costs. The amount included in Other Long-Term Liabilities is expected to be paid in the year ended April 30, 2022.

We currently do not anticipate any further material charges related to the Restructuring and Reinvestment Program.

20
Index
 21

Note 10 — Segment Information

As previously announced, we have changed our segment reporting structure to align with our strategic focus areas: (1) Research Publishing & Platforms, which  includes the Research publishing and Atypon businesses, (2) Academic & Professional Learning, which is the former “Publishing” segment combined with our corporate training businesses – previously noted as Professional Assessment and Corporate Learning; and (3) Education Services, which is the online program management business. Prior period segment results have been revised to the new segment presentation. There were no changes to our consolidated financial results.

We report our segment information in accordance with the provisions of FASB ASC Topic 280.280, “Segment Reporting”. These segments reflect the way our chief operating decision maker evaluates our business performance and manages the operations.

Segment information is as follows:


 
Three Months Ended
October 31,
 ��
Six Months Ended
October 31,
  
Three Months Ended
July 31,
 
 2019  2018  2019  2018  2020  2019 
Revenue:
            
Revenue:      
Research Publishing & Platforms $234,709  $229,075  $464,084  $454,392  $240,810  $229,375 
Academic & Professional Learning  177,725   189,670   322,583   346,094   126,913   144,858 
Education Services  53,771   29,877   103,068   59,037   63,603   49,297 
Total Revenue $466,205  $448,622  $889,735  $859,523  $431,326  $423,530 
                        
Contribution to Profit:                        
Research Publishing & Platforms $63,291  $59,210  $118,937  $116,527  $69,818  $55,646 
Academic & Professional Learning  35,050   47,078   39,961   68,845   (380)  4,911 
Education Services  2,583   (867)  (4,616)  (5,886)  558   (7,199)
Total Contribution to Profit (1)
 $100,924  $105,421  $154,282  $179,486   69,996   53,358 
Corporate Expenses  (37,533)  (47,946)  (86,332)  (85,871)  (39,957)  (48,799)
Operating Income (1)
 $63,391  $57,475  $67,950  $93,615  $30,039  $4,559 
                        
Adjusted Contribution to Profit: (1)
                        
Research Publishing & Platforms $64,017  $61,492  $122,283  $117,829  $69,621  $58,266 
Academic & Professional Learning  35,850   49,272   43,566   70,322   (347)  7,716 
Education Services  2,108   (557)  (3,002)  (5,784)  697   (5,110)
Total Adjusted Contribution to Profit $101,975  $110,207  $162,847  $182,367   69,971   60,872 
Adjusted Corporate Expenses  (34,583)  (42,736)  (80,161)  (84,842)  (37,714)  (45,578)
Total Adjusted Operating Income $67,392  $67,471  $82,686  $97,525  $32,257  $15,294 
                        
Depreciation and Amortization:                        
Research Publishing & Platforms $17,037  $15,422  $34,190  $30,787  $19,701  $17,153 
Academic & Professional Learning  17,349   17,473   33,873   35,050   18,804   16,524 
Education Services  5,522   3,045   11,020   6,512   7,279   5,498 
Total Depreciation and Amortization $39,908  $35,940  $79,083  $72,349   45,784   39,175 
Corporate Depreciation and Amortization  2,730   3,712   5,774   7,474   3,723   3,044 
Total Depreciation and Amortization $42,638  $39,652  $84,857  $79,823  $49,507  $42,219 
                        
Adjusted EBITDA: (2)
                        
Research Publishing & Platforms $81,054  $76,914  $156,473  $148,616  $89,322  $75,419 
Academic & Professional Learning  53,199   66,745   77,439   105,372   18,457   24,240 
Education Services  7,630   2,488   8,018   728   7,976   388 
Total Segment Adjusted EBITDA $141,883  $146,147  $241,930  $254,716   115,755   100,047 
Corporate Adjusted EBITDA  (31,853)  (39,024)  (74,387)  (77,368)  (33,991)  (42,534)
Total Adjusted EBITDA $110,030  $107,123  $167,543  $177,348  $81,764  $57,513 

(1)Adjusted Contribution to Profit is Contribution to Profit adjusted for restructuring charges (credits). See Note 9, “Restructuring and Related Charges” for these charges (credits) by segment.
(2)Adjusted EBITDA is Adjusted Contribution to Profit with depreciation and amortization added back.

21
Index
 22


The following table shows a reconciliation of our consolidated U.S. GAAP net income to Non-GAAP EBITDA and Adjusted EBITDA:


 
Three Months Ended
October 31,
  
Six Months Ended
October 31,
  
Three Months Ended
July 31,
 
 2019  2018  2019  2018  2020  2019 
Net Income $44,690  $43,784  $48,314  $70,079  $16,334  $3,624 
Interest expense  6,787   3,608   12,864   6,404   4,614   6,077 
Provision for income taxes  11,783   12,538   12,126   20,324   13,400   343 
Depreciation and amortization  42,638   39,652   84,857   79,823   49,507   42,219 
Non-GAAP EBITDA $105,898  $99,582  $158,161  $176,630  $83,855  $52,263 
Restructuring and related charges  4,001   9,996   14,736   3,910   2,218   10,735 
Foreign exchange transaction losses  2,668   54   16   1,783 
Foreign exchange transaction losses (gains)  82   (2,652)
Interest and other income  (2,537)  (2,509)  (5,370)  (4,975)  (4,391)  (2,833)
Non-GAAP Adjusted EBITDA $110,030  $107,123  $167,543  $177,348  $81,764  $57,513 

Note 11 — Inventories

Inventories, net were as follows:consisted of the following:


 October 31, 2019  April 30, 2019  July 31, 2020  April 30, 2020 
Finished Goods $36,258  $33,736  $34,975  $36,014 
Work-in-Process  2,637   2,094   1,688   1,398 
Paper and Other Materials  344   373   312   331 
 $39,239  $36,203 
Total Inventories Before Estimated Sales Returns and LIFO Reserve $36,975  $37,743 
Inventory Value of Estimated Sales Returns  9,889   3,739   10,967   8,686 
LIFO Reserve  (4,096)  (4,360)  (2,891)  (2,815)
Total Inventories $45,032  $35,582  $45,051  $43,614 

Note 12 — Goodwill and Intangible Assets

Goodwill

The following table summarizes the activity in goodwill by segment as of OctoberJuly 31, 2019:2020:


 April 30, 2019  
Acquisitions (1)
  
Foreign
Translation
Adjustment
  October 31, 2019  April 30, 2020  
Acquisitions (1)
  
Foreign
Translation
Adjustment
  July 31, 2020 
Research Publishing & Platforms $438,511  $844  $640  $439,995  $448,130  $(11,212) $15,490  $452,408 
Academic & Professional Learning  458,145   45,752   134   504,031   501,091   0   8,794   509,885 
Education Services  199,010   161   —   199,171   167,569   0   3,748   171,317 
Total $1,095,666  $46,757  $774  $1,143,197  $1,116,790  $(11,212) $28,032  $1,133,610 

(1)
Refer to Note 3, “Acquisitions,” for more information related to the acquisitions that occurred in fiscal year 2020, and the revisions that were made to the sixallocation of the consideration transferred to the assets acquired and liabilities assumed during the three months ended OctoberJuly 31, 2019.2020.

As previously announced, we have changed our segment reporting structure to align with our strategic focus areas. See Note 10, “Segment Information,” for more details. Due to this reorganization, we have reallocated goodwill to our reporting units using a relative fair value approach. We tested goodwill for impairment immediately before and after the reorganization, and we concluded that the fair values of the reporting units were above their carrying values and, therefore, there was no indication of impairment.

22
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 23

Intangible Assets

Identifiable intangibleIntangible assets, net consisted of the following:were as follows:


 October 31, 2019  April 30, 2019  July 31, 2020  April 30, 2020 
Intangible Assets with Determinable Lives, net:      
Intangible Assets with Definite Lives, net:      
Content and Publishing Rights (1)
 $384,364  $389,172  $366,888  $362,106 
Customer Relationships (1)
  245,822   245,830   284,433   290,418 
Developed Technology (1)
  28,734   13,111 
Brands and Trademarks (1)
  11,753   12,993   20,371   20,188 
Covenants not to Compete  345   445   197   246 
Developed Technology (1)
  17,989   — 
Total  660,273   648,440   700,623   686,069 
Intangible Assets with Indefinite Lives:                
Brands and Trademarks  134,005   130,909   37,000   37,000 
Content and Publishing Rights  86,335   86,223 
Publishing Rights  91,608   84,336 
Total  220,340   217,132   128,608   121,336 
Total Intangible Assets, Net $880,613  $865,572  $829,231  $807,405 

(1)
Refer to Note 3, “Acquisitions,” for more information related to the acquisitions that occurred in fiscal year 2020 and the revisions that were made to the sixallocation of the consideration transferred to the assets acquired and liabilities assumed during the three months ended OctoberJuly 31, 2019.2020.

Note 13 — Income Taxes

The effective tax rate for the three months ended OctoberJuly 31, 20192020 was 20.9%,45.1% compared with 22.3%to 8.6% for the three months ended OctoberJuly 31, 2018. 2019. The effective tax rate for the sixthree months endedOctober July 31, 20192020 was 20.1% compared with 22.5%greater than the rate for the six months ended October 31, 2018. The rates forcorresponding prior period due to an increase in the threeUK statutory rate discussed below and six months ended October 31, 2019 werea $0.5 million discrete item relating to compensation deductions from restricted stock which vested at lower values than the rates forvalues at time of grant.

During the three and six months ended October 31, 2018 primarily duefirst quarter of fiscal 2021, the U.K. officially enacted legislation that increased its statutory rate from 17% to 19%. This resulted in a more favorable earnings mix, as well as certain$6.7 million non-cash deferred tax expense from the re-measurement of our applicable U.K. net discrete items, including a tax-free life insurance recovery.  Excluding the effects of these discrete items, the rates would have been 21.5% and 21.6% for the three and six months ended October 31, 2019, respectively.deferred tax liabilities.

Note 14 — Retirement Plans

The components of net pension expense (income)income for our globalthe defined benefit plans were as follows:


 
Three Months Ended
October 31,
  
Six Months Ended
October 31,
  
Three Months Ended
July 31,
 
 2019  2018  2019  2018  2020  2019 
Service cost $1,093  $229  $1,317  $462  $333  $224 
Interest cost  6,350   6,169   12,184   12,381   4,521   5,834 
Expected return on plan assets  (9,886)  (9,720)  (19,945)  (19,622)  (9,378)  (10,059)
Net amortization of prior service cost  (19)  (24)  (38)  (48)
Unrecognized net actuarial loss  1,581   1,474   3,181   2,908 
Amortization of prior service cost  (25)  (19)
Amortization of net actuarial loss  1,987   1,600 
Net pension income $(881) $(1,872) $(3,301) $(3,919) $(2,562) $(2,420)

The service cost component of net pension income is reflected in Operating and Administrative Expenses on our Unaudited Condensed Consolidated Statements of Income. The other components of net benefit costs are reported separately from the service cost component and below Operating Income. Such amounts are reflected in Interest and Other Income on our Unaudited Condensed Consolidated Statements of Income.

Employer defined benefit pension plan contributions were $3.3$5.1 million and $3.5$4.7 million for the three months ended OctoberJuly 31, 2020 and 2019, and 2018, respectively, and $8.0 million and $7.1 million for the six months endedOctober 31, 2019 and 2018, respectively.

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Index

Defined Contribution Savings Plans

The expense for employer defined contribution savings plans were approximately $3.1was $6.6 million and $2.8$4.3 million for the three months ended OctoberJuly 31, 2020 and 2019, and 2018, respectively, and $7.4 million and $7.3 million for the six months endedOctober 31, 2019 and 2018, respectively.respectively.

Note 15 — Debt and Available Credit Facilities

Our total debt outstanding consisted of the amounts set forth in the following table: 

  July 31, 2020  April 30, 2020 
Short-term portion of long-term debt (1)
 $10,938  $9,375 
         
Term loan A - Amended and Restated RCA (2)
  232,179   235,263 
Revolving credit facility - Amended and Restated RCA  603,584   530,387 
Total long-term debt, less current portion  835,763   765,650 
         
Total Debt $846,701  $775,025 

(1)Relates to our term loan A under the Amended and Restated RCA.
(2)Amounts are shown net of unamortized issuance costs of $0.6 million as of July 31, 2020 and $0.7 million as of April 30, 2020.

Amended and Restated RCA

On May 30, 2019, we entered into a credit agreement that amended and restated our existing revolving credit agreement (“Amended and Restated RCA”). The Amended and Restated RCA provides for senior unsecured credit facilities comprised of a (i) five-year revolving credit facility in an aggregate principal amount up to $1.25 billion, and (ii) a five-year term loan A facility consisting of $250 million.
Index
 24

Under the terms of the Amended and Restated RCA, which can be drawn in multiple currencies, we have 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 our consolidated net leverage ratio, as defined, or (ii) at the lender’s base rate plus an applicable margin ranging from 0zero to 0.50%, depending on our consolidated net 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, we pay a facility fee for the revolving credit facility ranging from 0.15% to 0.25% depending on our consolidated net leverage ratio. We also have the option to request an increase in the revolving credit facility by an amount not to exceed $500 million, in minimum increments of $50 million, subject to the approval of the lenders.

The Amended and Restated RCA contains certain customary affirmative and negative covenants, including a financial covenant in the form of a consolidated net leverage ratio and consolidated interest coverage ratio, which we were in compliance with as of OctoberJuly 31, 2019.2020.

We incurred inIn the three months ended July 31, 2019, we incurred an immaterial loss on the write-off of unamortized deferred costs in connection with the refinancing of our RCA (as defined below)revolving credit agreement at that time which is reflected in Interest and Other Income on theour Unaudited Condensed Consolidated Statements of Income for the sixthree months ended OctoberJuly 31, 2019.

We incurred inIn the three months ended July 31, 2019, we incurred $4.0 million of costs related to the Amended and Restated RCA which resulted in total costs capitalized of $5.2 million. The amount related to the term loan A facility was $0.9 million, consisting of $0.8 million of lender fees and recorded as a reduction to Long-Term Debt and $0.1 million of non-lender fees included in Other Non-Current Assets.Assets on our Unaudited Condensed Consolidated Statement of Financial Position. The amount related to the five-year revolving credit facility was $4.3 million, all of which is included in Other Non-Current Assets.Assets on our Unaudited Condensed Consolidated Statement of Financial Position.

The amortization expense of the lender and non-lender fees is recognized over the five-year term of the Amended and Restated RCA. Total amortization expense in the three and six months ended OctoberJuly 31, 2020 and 2019 was $0.3 million and $0.5$0.2 million respectively, and is included in Interest Expense on our Unaudited Condensed Consolidated Statement of Income.

Our total debt outstanding as of October 31, 2019 was $794.7 million, which included $6.3 million of current portion of long-term debt related to our term loan A under the Amended and Restated RCA and long-term debt of $788.4 million. The long-term debt consisted of $241.4 million related to our term loan A under the Amended and Restated RCA (amount is net of unamortized issuance costs of $0.8 million) and $547.0 million related to the revolving credit facility under the Amended and Restated RCA.

RCA
24

Index
As of April 30, 2019, total debt outstanding was $478.8 million, which consisted of amounts due under our RCA.

We had a revolving credit agreement (“RCA”) with a syndicated bank group led by Bank of America. The RCA consisted of a $1.1 billion five-year senior revolving credit facility payable March 1, 2021. Since there were no principal payments due until the end of the agreement in the year ended April 30, 2021, we had classified our entire debt obligation as long-term as of April 30, 2019.

Note 16 — Derivative Instruments and Hedging Activities

From time-to-time, we enter into forward exchange and interest rate swap contracts as a hedge against foreign currency asset and liability commitments, changes in interest rates and anticipated transaction exposures, including intercompany purchases. All derivatives are recognized as assets or liabilities and measured at fair value on our Unaudited Condensed Consolidated Statements of Financial Position. Derivatives that are not determined to be effective hedges are adjusted to fair value with a corresponding adjustment to earnings. We do not use financial instruments for trading or speculative purposes.

Interest Rate Contracts

As of OctoberJuly 31, 2019,2020, we had total debt outstanding of $794.7$846.7 million, net of unamortized issuance costs of $0.8$0.6 million of which $795.5$847.3 million are variable rate loans outstanding under the Amended and Restated RCA, which approximated fair value.

On August 7, 2019 we entered into a forward startingWe had outstanding interest rate swap agreement,agreements with combined notional amounts of $300.0 million as of July 31, 2020 and April 30, 2020. These agreements were accounted for as cash flow hedges which fixed a portion of the variable interest due on our Amended and Restated RCA. Under the terms of the agreement, we pay a fixed rate of 1.400% and receive a variable rate of interest based on one-month LIBOR from the counterparty which is reset every month for a three-year period ending August 15, 2022. As of October 31, 2019, the notional amount of the interest rate swap was $100.0 million.

Index
 25

On June 24, 2019 we entered into a forward starting interest rate swap agreement, which fixed a portion of the variable interest due on our Amended and Restated RCA. Under the terms of the agreement, we pay a fixed rate of 1.650% and receive a variable rate of interest based on one-month LIBOR from the counterparty which is reset every month for a three-year period ending July 15, 2022. As of October 31, 2019, the notional amount of the interest rate swap was $100.0 million.

It is management’s intention that the notional amount of interest rate swaps be less than the variable rate loans outstanding during the life of the derivatives.

On April 4, 2016, we entered into a forward starting interest rate swap agreement which fixed a portion of the variable interest due on a variable rate debt renewal on May 16, 2016. Under the terms of the agreement, which expired on May 15, 2019, we paid a fixed rate of  0.92% and receive a variable rate of interest based on one-month LIBOR from the counterparty which was reset every month for a three-year period ending May 15, 2019.  Prior to expiration, the notional amount of the interest rate swap was $350.0 million.

As of October 31, 2019 and April 30, 2019, the interest rate swap agreements maintained by us were designated as cash flow hedges as defined under ASC 815 “Derivatives and Hedging.” As a result, there was no impact on our Unaudited Condensed Consolidated Statements of Income for changes in the fair value of the interest rate swaps as they were fully offset by changes in the interest expense on the underlying variable rate debt instruments.RCA.

We record the fair value of our interest rate swaps on a recurring basis using Level 2 inputs of quoted prices for similar assets or liabilities in active markets. The fair value of the interest rate swaps as of OctoberJuly 31, 20192020 and April 30, 20192020 was a deferred loss of $0.7$8.2 million and a deferred gain of $0.5$8.3 million, respectively. Based on the maturity dates of the contracts, the entire deferred loss as of OctoberJuly 31, 20192020 and  April 30, 2020 was recorded within Other Long-Term Liabilities and the entire deferred gain as of April 30, 2019 was recorded within Prepaid Expenses and Other Current Assets.

. The pre-tax (losses) gains that were reclassified from Accumulated Other Comprehensive Loss into Interest Expense for the three months ended OctoberJuly 31, 2020 and 2019 and 2018 were $0.3$(0.9) million and $1.1$0.2 million, respectively.The pre-tax gains that were reclassified from Accumulated Other Compensation Loss into Interest Expense in the Unaudited Condensed Consolidated Statements of Income for the six months ended October 31, 2019 and 2018 were $0.5 million and $2.0 million, respectively.

Foreign Currency Contracts

We may enter into forward exchange contracts to manage our exposure on certain foreign currency denominated assets and liabilities. The forward exchange contracts are marked to market through Foreign Exchange Transaction Losses in the(Losses) Gains on our Unaudited Condensed Consolidated Statements of Income and carried at their fair value in theon our Unaudited Condensed Consolidated Statements of Financial Position. Foreign currency denominated assets and liabilities are remeasured at spot rates in effect on the balance sheet date, with the effects of changes in spot rates reported in Foreign Exchange Transaction Losses in the(Losses) Gains on our Unaudited Condensed Consolidated Statements of Income.

As of OctoberJuly 31, 2019,2020, and April 30, 2019,2020, we did not maintain any open forward exchange contracts. In addition, we did not maintain any open forward contracts during the three and six months ended OctoberJuly 31, 20192020 and 2018.2019.

Note 17 — Capital Stock and Changes in Capital Accounts

Share Repurchases

The following table summarizes the shares repurchased of Class A Common Stock.Stock for the three months ended July 31, 2019. There were 0 share repurchases during the three months ended July 31, 2020.


 
Three Months Ended
October 31,
  
Six Months Ended
October 31,
 
 2019  2018  2019  2018  
Three Months Ended
July 31, 2019
 
Shares Repurchased  334,336   299,188   551,847   425,120   217,511 
Average Price $44.87  $56.82  $45.30  $58.79  $45.97 

Index
 26

Dividends

The following table summarizes the cash dividends paid during the sixthree months ended OctoberJuly 31, 2019:2020:

Date of Declaration by
Board of Directors
 Quarterly Cash Dividend Total Dividend 
Class of Common
Stock
 Dividend Paid Date 
 Shareholders of
Record as of Date
June 27, 201925, 2020 $0.340.3425 per common share $19.2 million 
Class A and
Class B
 July 24, 201922, 2020 July 10, 2019
September 26, 2019$0.34 per common share$19.1 million
Class A and
Class B
October 23, 2019October 8, 20197, 2020

25
Index

Changes in Common Stock

The following is a summary of changes during the sixthree months ended OctoberJuly 31, in shares of our common stock and common stock in treasury (shares in thousands):

Changes in Common Stock A: 2019  2018  2020  2019 
Number of shares, beginning of year  70,127   70,111   70,166   70,127 
Common stock class conversions  22   14   11   12 
Number of shares issued, end of period  70,149   70,125   70,177   70,139 
                
Changes in Common Stock A in treasury:                
Number of shares held, beginning of year  22,634   21,853   23,405   22,634 
Purchase of treasury shares  552   425   0   218 
Restricted shares issued under stock-based compensation plans - non-PSU Awards  (63)  (54)  (94)  (36)
Restricted shares issued under stock-based compensation plans - PSU Awards  (43)  (59)  (86)  (43)
Restricted shares, forfeited  —   —   0   1 
Restricted shares issued from exercise of stock options  (17)  (224)  (33)  (12)
Shares withheld for taxes  44   53   67   33 
Other  —   6 
Number of shares held, end of period  23,107   22,000   23,259   22,795 
Number of Common Stock A outstanding, end of period  47,042   48,125   46,918   47,344 

Changes in Common Stock B: 2019  2018  2020  2019 
Number of shares, beginning of year  13,055   13,071   13,016   13,055 
Common stock class conversions  (22)  (14)  (11)  (12)
Number of shares issued, end of period  13,033   13,057   13,005   13,043 
                
Changes in Common Stock B in treasury:                
Number of shares held, beginning of year  3,918   3,918   3,920   3,918 
Number of shares held, end of period  3,918   3,918   3,920   3,918 
Number of Common Stock B outstanding, end of period  9,115   9,139   9,085   9,125 

Note 18 — Commitments and Contingencies

We are involved in routine litigation in the ordinary course of our business. A provision for litigation is accrued when information available to us indicates that it is probable a liability has been incurred and the amount of loss can be reasonably estimated. Significant judgment may be required to determine both the probability and estimates of loss. When the amount of the loss can only be estimated within a range, the most likely outcome within that range is accrued. If no amount within the range is a better estimate than any other amount, the minimum amount within the range is accrued. When uncertainties exist related to the probable outcome of litigation and/or the amount or range of loss, we do not record a liability, but disclose facts related to the nature of the contingency and possible losses if management considers the information to be material. Reserves for legal defense costs are recognized when incurred. The accruals for loss contingencies and legal costs are reviewed regularly and may be adjusted to reflect updated information on the status of litigation and advice of legal counsel. In the opinion of management, the ultimate resolution of all pending litigation as of OctoberJuly 31, 2019,2020, will not have a material effect upon our Unaudited Condensed Consolidated Statements of Financial Position or Unaudited Condensed Consolidated Statements of Income.
26
Index
 27

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information in our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with our Condensed Consolidated Financial Statements and related notes set forth in Item 1 of Part I of this Quarterly Report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our 20192020 Form 10-K and our Consolidated Financial Statements and related notes set forth in Item 8 of Part II of our 20192020 Form 10-K. See Part II, Item 1A, “Risk Factors,” below and “Cautionary Notice Regarding Forward-Looking Statements “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995,” above, and the information referenced therein, for a description of risks that we face and important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. All amounts and percentages are approximate due to rounding and all dollars are in thousands, except per share amounts or where otherwise noted. When we cross-reference to a “Note,” we are referring to our “Notes to Unaudited Condensed Consolidated Financial Statements,” unless the context indicates otherwise.

RESULTS OF OPERATIONS – THREE MONTHS ENDED OCTOBERJULY 31, 20192020

CONSOLIDATED OPERATING RESULTS

Revenue:

Revenue for the three months ended OctoberJuly 31, 20192020 increased $17.6$7.8 million, or 4%2%, as compared with the prior year. On a constant currency basis, revenue increased 5%2% as compared with the prior year. This increase was mainly driven by the following factors:
●an increase of $24.0$14.5 million in the Education Services, businessprimarily due largely to the contributions from Learning House,mthree, which was acquired in November 2018,January 2020; and
●an increase of $9.2$12.7 million in the Research Publishing & Platforms business.Platforms.

These increases were partially offset by a decline of $9.5$17.1 million in the Academic & Professional Learning business.Learning.

Excluding the inorganic impact of acquisitions, revenuesrevenue on a constant currency basis decreased 1%.

See the “Segment Operating Results” below for additional details on each segment’s revenue and Adjusted EBITDA performance.

Cost of Sales:

Cost of sales for the three months ended OctoberJuly 31, 20192020 increased $10.8$1.7 million, or 8%1%, as compared with the prior year.  On a constant currency basis, cost of sales increased 10%.2% as compared with the prior year. This increase was primarily due to employment related costs associated with acquired businesses,in Education Services, primarily due to the incremental impact from the acquisition of mthree; and to a lesser extent, an increase in marketing and other programroyalty costs, in the Education Services business; partially offset by lower inventory and royalty costs due to efficiency gains.in Academic & Professional Learning.

Operating and Administrative Expenses:

Operating and administrative expenses for the three months ended OctoberJuly 31, 2019 increased $4.22020 decreased $12.8 million, or 2%5%, as compared with the prior year. On a constant currency basis, operating and administrative expenses increased 3%. The increase wasdecreased 4% as compared with the prior year primarily duereflecting lower discretionary spending and employee-related costs and, to investments in growth and optimization initiatives, including additional resources in editorial support, as well as advertising, marketing, sales and technology.a lesser extent, lower professional fees associated with strategic planning. These factors were partially offset by a decreasean increase in employee benefitother administrative related costs, primarily due to timing, lower costs associated with strategic planning, and a life insurance recoverythe incremental impact of $2 million.the acquisition of mthree.

Restructuring and Related Charges:

Business Optimization Program

Beginning in fiscal year 2020, we initiated a multi-year Business Optimization Program to drive efficiency improvement and operating savings with improved workflows and cycle times and enhanced researcher experiences. We anticipate approximately $15 million to $20 million of restructuring charges, of which approximately $10 million to $15 million to be severance-related costs and the remainder to be other related costs. We anticipate gross savings over the three-year period to be approximately $100 million, with most of that amount to be reinvested in the Company to drive and sustain profitable revenue growth.

For the three months ended OctoberJuly 31, 2019,2020, we recorded pre-tax restructuring charges of $3.2$2.2 million related to this program.program compared with the prior year of $10.9 million. These charges are reflected in Restructuring and Related Charges in theour Unaudited Condensed Consolidated Statements of Income. See Note 9, “Restructuring and Related Charges” for more details on these charges.

We anticipate our restructuring actions to generate annual gross savings of $130 million over the three-year period. The majority of the savings will be reinvested in the Company to drive and sustain profitable revenue growth.

27
Index
 28

Restructuring and Reinvestment Program

Beginning in fiscal year 2013, we initiated the Restructuring and Reinvestment Program to restructure and realign our cost base with current and anticipated future market conditions. We are targeting most of the cost savings achieved to improve margins and earnings, with the remainder reinvested in growth opportunities.

For the three months ended OctoberJuly 31, 20192020 we recorded minimal charges and 2018,for the three months ended July 31, 2019, we recorded pre-tax restructuring chargescredits of $0.8$0.1 million, and $10.0 million, respectively, related to this program. These charges and credits are reflected in Restructuring and Related Charges in theour Unaudited Condensed Consolidated Statements of Income. See Note 9, “Restructuring and Related Charges” for more details on these charges.

For the impact of both of our restructuring programs on diluted earnings per share, see the section below, “Diluted Earnings per Share (“EPS”).”

Amortization of Intangibles:

Amortization of intangibles was $15.0$16.9 million for the three months ended OctoberJuly 31, 2019,2020, an increase of $2.7$1.9 million, or 21%13%, as compared with the prior year. Onyear on a reported and on a constant currency basis, amortization of intangibles increased 23% as compared with prior year. basis. The increase in amortization was primarily due to the acquisition of Learning House in fiscal year 2019 and, to a lesser extent, intangibles acquired as part of the acquisitions completed in fiscal year 2020. 2020, partially offset by a decrease due to the completion of amortization of certain acquired intangible assets. See Note 3, “Acquisitions” for more details on these transactions.

Operating Income:

Operating income was $63.4 million for the three months ended OctoberJuly 31, 2019, an increase of $5.92020 was $30.0 million or 10%, as compared with the prior year. year of $4.6 million. On a constant currency basis and excluding restructuring charges, Adjusted EBITDA increased 3%42%. The increase in operating income and Adjusted EBITDA was primarily due to higher revenue discussedand lower operating and administrative expenses as described above.

Interest Expense:

Interest expense for the three months ended OctoberJuly 31, 20192020 was $6.8$4.6 million compared with the prior year of $3.6$6.1 million. This increasedecrease was due to a lower weighted average effective borrowing rate, partially offset by higher average debt balances outstanding, which included borrowings for the funding of acquisitions and a higher weighted average effective borrowing rate.in fiscal year 2020.

Foreign Exchange Transaction Losses:(Losses) Gains:

Foreign exchange transaction losses were $0.1 million for the three months ended July 31, 2020 and were primarily due to losses on our third-party receivable and payable balances, offset by gains on our intercompany accounts receivable and payable balances due to the impact of the change in average foreign exchange rates as compared to the U.S. dollar.

Foreign exchange transaction gains were $2.7 million for the three months ended OctoberJuly 31, 2019 and were primarily due to the net impact of the change in average foreign exchange rates as compared to the U.S. dollar on our third-party accounts receivable and payable balances. For the three months ended October 31, 2018, foreign exchange transaction losses were less than $0.1 million.

Provision for Income Taxes:

The effective tax rate for the three months ended OctoberJuly 31, 20192020 was 20.9%45.1%, compared with 22.3%to 8.6% for the prior year.three months ended July 31, 2019. The rate for the three months ended OctoberJuly 31, 20192020 was lowergreater than the rate for the corresponding prior year primarilyperiod due to an increase in the UK statutory rate discussed below and a more favorable earnings mix, as well as certain net$0.5 million discrete items, including a tax-free life insurance recovery.  item relating to compensation deductions from restricted stock which vested at lower values than the values at time of grant. Excluding the effectstax impact of these discrete items, the adjustments to Non-GAAP Adjusted EPS, discussed below, the effective tax rate was 22.5% for the three months ended OctoberJuly 31, 2019 would have been 21.5%2020 compared to 20.1% for the three months ended July 31, 2019. This increase was due to the discrete item related to the compensation deductions mentioned above.

During the first quarter of fiscal 2021, the U.K. officially enacted legislation that increased its statutory rate from 17% to 19%. This resulted in a $6.7 million non-cash deferred tax expense from the re-measurement of our applicable U.K. net deferred tax liabilities.

Diluted Earnings per Share (“EPS”):

EPS for the three months ended OctoberJuly 31, 20192020 was $0.79$0.29 per share compared with $0.76$0.06 per share for the three months ended OctoberJuly 31, 2018. Excluding the impact2019.

28
Index

Below is a reconciliation of the items included in the table below,our U.S. GAAP EPS to Non-GAAP Adjusted EPS for the three months ended October 31, 2019 decreased 4% to $0.85 per share compared with $0.89 per share for the three months ended October 31, 2018. EPS:

 
Three Months Ended
July 31,
 
  2020  2019 
U.S. GAAP EPS $0.29  $$ $ 0.06 
Adjustments:        
Restructuring and related charges  0.03   0.14 
Foreign exchange (gains) losses on intercompany transactions  (0.02)  0.01 
Impact of increase in U.K. statutory rate on deferred tax balances in fiscal year 2021  0.12   — 
Non-GAAP Adjusted EPS $0.42  $$ $ 0.21 

On a constant currency basis, Adjusted EPS decreased 1% as increased Adjusted EBITDA was more than offset by higher amortization of intangible assets and124% primarily due to an increase in interest expense.

 Three Months Ended October 31, 
  2019  2018 
GAAP EPS $0.79  $0.76 
Adjustments:        
Restructuring and related charges  0.06   0.13 
Non-GAAP Adjusted EPS $0.85  $0.89 
Index
 29
Adjusted EBITDA.

SEGMENT OPERATING RESULTS

 
Three Months Ended
October 31,
     Constant Currency 
RESEARCH PUBLISHING & PLATFORMS: 2019  2018  % Change Favorable (Unfavorable)  % Change Favorable (Unfavorable) 
Revenue:            
Research Publishing $225,085  $219,710   2%  4%
Research Platforms  9,624   9,365   3%  3%
Total Research Publishing & Platforms Revenue  234,709   229,075   2%  4%
                 
Cost of Sales  64,109   63,040   (2)%  (4)%
Operating Expenses  99,542   97,576   (2)%  (4)%
Amortization of Intangibles  7,041   6,967   (1)%  (4)%
Restructuring Charges (see Note 9)  726   2,282   68%  68%
                 
Contribution to Profit  63,291   59,210   7%  7%
Restructuring Charges (see Note 9)  726   2,282         
Adjusted Contribution to Profit  64,017   61,492   4%  4%
Depreciation and amortization  17,037   15,422         
Adjusted EBITDA $81,054  $76,914   5%  6%

Revenue:

Research Publishing & Platforms revenue for the three months ended October 31, 2019 increased 2% to $234.7 million on a reported basis and increased 4% on a constant currency basis as compared with prior year. This increase was primarily due to continued article volume growth in Research Publishing in Open Access.

Adjusted EBITDA:

Adjusted EBITDA increased 5% to $81.1 million for the three months ended October 31, 2019 as compared with the prior year. On a constant currency basis and excluding restructuring charges, Adjusted EBITDA increased 6% compared with prior year. This increase was due to higher revenues and efficiency gains, which were partially offset by an increase in royalty costs, and higher operating costs, reflecting investments in additional resources in editorial to support increased journal publishing.

Society Partnerships:

For the three months ended October 31, 2019:
●2 new society contracts were signed with a combined annual revenue of approximately $0.1 million,
●10 society contracts were renewed with a combined annual revenue of approximately $2.7 million,
●4 society contracts were not renewed with a combined annual revenue of approximately $0.5 million.

Index
 30

 
Three Months Ended
October 31,
     Constant Currency 
ACADEMIC & PROFESSIONAL LEARNING: 2019  2018  % Change Favorable (Unfavorable)  % Change Favorable (Unfavorable) 
Revenue:            
Education Publishing $101,741  $107,474   (5)%  (4)%
Professional Learning  75,984   82,196   (8)%  (6)%
Total Academic & Professional Learning  177,725   189,670   (6)%  (5)%
                 
Cost of Sales  43,860   49,813   12%  11%
Operating Expenses  93,745   86,401   (8)%  (10)%
Amortization of Intangibles  4,270   4,184   (2)%  (3)%
Restructuring Charges (see Note 9)  800   2,194   64%  63%
                 
Contribution to Profit  35,050   47,078   (26)%  (24)%
Restructuring Charges (see Note 9)  800   2,194         
Adjusted Contribution to Profit  35,850   49,272   (27)%  (26)%
Depreciation and amortization  17,349   17,473         
Adjusted EBITDA $53,199  $66,745   (20)%  (19)%

Revenue:

Academic & Professional Learning revenue decreased 6% to $177.7 million on a reported basis and decreased 5% on a constant currency basis as compared with prior year. This decrease was primarily due to declines in book publishing reflecting market conditions. This decline was partially offset by contributions from acquisitions and, to a lesser extent, growth in corporate training and test preparation and certification. Excluding revenue from acquisitions, organic revenue declined 9% on a constant currency basis. On July 1, 2019, we completed the acquisition of zyBooks, a leading provider of computer science and STEM education courseware. We originally expected Academic & Professional Learning revenue to grow slightly this fiscal year, inclusive of revenue from acquisitions. However, given the market-driven declines in book publishing through the second quarter, we now expect this segment’s revenue to decline at a low single-digit rate.

Adjusted EBITDA:

Adjusted EBITDA decreased 20% to $53.2 million for the three months ended October 31, 2019 as compared with the prior year. On a constant currency basis and excluding restructuring charges, Adjusted EBITDA decreased 19% as compared with prior year. This decrease was primarily due to the decline in revenue, and to a lesser extent, higher sales, technology and administrative related costs, including costs associated with the acquisition of zyBooks and Knewton, Inc. (“Knewton”), partially offset by lower cost of sales, primarily due to lower royalty costs.
 
Three Months Ended
October 31,
     Constant Currency 
EDUCATION SERVICES: 2019  2018  % Change Favorable (Unfavorable)  % Change Favorable (Unfavorable) 
Revenue:            
Total Education Services Revenue $53,771  $29,877   80%  80%
                 
Cost of Sales  35,444   19,724   (80)%  (80)%
Operating Expenses  12,511   9,495   (32)%  (32)%
Amortization of Intangibles  3,708   1,215   #   # 
Restructuring (Credits) Charges (see Note 9)  (475)  310   #   # 
                 
Contribution to Profit  2,583   (867)  #   # 
Restructuring (Credits) Charges (see Note 9)  (475)  310         
Adjusted Contribution to Profit  2,108   (557)  #   # 
Depreciation and amortization  5,522   3,045         
Adjusted EBITDA $7,630  $2,488   #   # 

# Not meaningful
Index
 31

Revenue:

Education Services revenue increased 80% to $53.8 million, on a reported and on a constant currency basis as compared with prior year. The increase was mainly driven by the impact of the acquisition of Learning House, and organic growth of 10%.

Adjusted EBITDA:

Adjusted EBITDA was $7.6 million compared to $2.5 million in the prior year. On a constant currency basis, excluding restructuring (credits) charges, Adjusted EBITDA was favorable by $5.2 million as compared with prior year. This was due to higher revenue and favorable timing of expenses, partially offset by higher costs of sales, including higher marketing costs, which was primarily due to the incremental impact of the acquisition of Learning House. Adjusted EBITDA margin was 14.2% as compared with 8.3% in the prior year. For full year 2020, we anticipate Adjusted EBITDA margin to be in the mid- to high single digit range.

Education Services Partners:

As of October 31, 2019, Wiley had 65 university partners under contract. As of October 31, 2018, Wiley had 36 university partners under contract, which excludes the impact of the acquisition of Learning House.

CORPORATE EXPENSES:

Corporate expenses for the three months endedOctober 31, 2019 decreased 22% to $37.5 million as compared with prior year. On a constant currency basis and excluding restructuring charges, these expenses decreased 18%. This decrease was primarily due to cost savings, lower employee benefit costs due to timing and a life insurance recovery of $2 million.

RESULTS OF OPERATIONS – SIX MONTHS ENDED OCTOBER 31, 2019

CONSOLIDATED OPERATING RESULTS

Revenue:

Revenue for the six months ended October 31, 2019 increased $30.2 million, or 4%, as compared with prior year. On a constant currency basis, revenue increased 5% mainly driven by the following factors:
●an increase of $44.2 million in the Education Services business due largely to contributions from Learning House, which was acquired in November 2018, and
●an increase of $17.1 million in the Research Publishing & Platforms business.

These increases were partially offset by a decline of $18.8 million in the Academic & Professional Learning business.

Excluding the impact of acquisitions, revenues on a constant currency basis were flat.

See the “Segment Operating Results” below for additional details on each segment’s revenue and Adjusted EBITDA performance.

Cost of Sales:

Cost of sales for the six months ended October 31, 2019 increased $26.2 million, or 10%, as compared with prior year. On a constant currency basis, cost of sales increased 12%. This increase was primarily due to additional costs associated with the Learning House acquisition, an increase in marketing costs in the Education Services business and, to a lesser extent, higher royalty costs.

Operating and Administrative Expenses:

Operating and administrative expenses for the six months ended October 31, 2019 increased $13.9 million, or 3%, as compared with prior year. On a constant currency basis, operating and administrative expenses increased 4%. The increase was primarily due to investments in additional resources in content and editorial support, as well as advertising, marketing, sales and technology costs.

Index
 32

Restructuring and Related Charges:

Business Optimization Program

For the six months ended October 31, 2019, we recorded pre-tax restructuring charges of $14.0 million, related to this program. These charges are reflected in Restructuring and Related Charges in the Unaudited Condensed Consolidated Statements of Income. See Note 9, “Restructuring and Related Charges” for more details on these charges.

Restructuring and Reinvestment Program

For the six months ended October 31, 2019 and 2018, we recorded pre-tax restructuring charges of $0.7 million and $3.9 million, respectively, related to this program. These charges are reflected in Restructuring and Related Charges in the Unaudited Condensed Consolidated Statements of Income. See Note 9, “Restructuring and Related Charges” for more details on these charges.

For the impact of both of our restructuring programs on diluted earnings per share, see the section below, “Diluted Earnings per Share (“EPS”).”

Amortization of Intangibles:

Amortization of intangibles was $30.0 million for the six months ended October 31, 2019, an increase of $4.9 million, or 20%, as compared with prior year. On a constant currency basis, amortization of intangibles increased 22% as compared with prior year. The increase in amortization was primarily due to the acquisition of Learning House and, to a lesser extent intangibles acquired as part of the acquisitions completed in fiscal year 2020. See Note 3, “Acquisitions” for more details on these transactions.

Operating Income:

Operating income was $68.0 million for the six months ended October 31, 2019, a decrease of $25.7 million, or 27%, as compared with prior year. On a constant currency basis and excluding restructuring charges, Adjusted EBITDA decreased 5% primarily due to higher costs of sales and operating and administrative expenses, offset by higher revenue.

Interest Expense:

Interest expense for the six months ended October 31, 2019 was $12.9 million compared with prior year of $6.4 million. This increase was due to higher average debt balances outstanding, which included borrowings for the funding of acquisitions and a higher weighted average effective borrowing rate.

Foreign Exchange Transaction Losses:

Foreign exchange transaction losses were less than $0.1 million for the six months ended October 31, 2019 and were primarily due to the net impact of the change in average foreign exchange rates as compared to the U.S. dollar on our intercompany and third-party accounts receivable and payable balances. For the six months ended October 31, 2018, foreign exchange transaction losses were $1.8 million primarily due to the net impact of the change in average foreign exchange rates as compared to the U.S. dollar on our intercompany and third-party receivable and payable balances.

Provision for Income Taxes:

The effective tax rate for the six months ended October 31, 2019 was 20.1%, compared with 22.5% for the prior year. The rate for the six months ended October 31, 2019 was lower than the rate for the prior year due to the mix of earnings, as well as certain net discrete items, including a tax-free life insurance recovery. Excluding the effects of these discrete items, the rate for the six months ended October 31, 2019 would have been 21.6%.

Diluted Earnings per Share (“EPS”):

EPS for the six months ended October 31, 2019 was $0.85 per share compared with $1.21 per share for the six months ended October 31, 2018. Excluding the impact of the items included in the table below, Adjusted EPS for the six months ended October 31, 2019 decreased 19% to $1.06 per share compared with $1.31 per share for the six months ended October 31, 2018. On a constant currency basis, Adjusted EPS decreased 18% due to lower Adjusted EBITDA, higher interest expense and amortization of intangibles, partially offset by a lower provision for income taxes.

Index
 33

 Six Months Ended October 31, 
  2019  2018 
GAAP EPS $0.85  $1.21 
Adjustments:        
Restructuring and related charges  0.20   0.05 
Foreign exchange losses on intercompany transactions  0.01   0.05 
Non-GAAP Adjusted EPS $1.06  $1.31 

SEGMENT OPERATING RESULTS

 
Six Months Ended
October 31,
     Constant Currency  
Three Months Ended
July 31,
     Constant Currency 
RESEARCH PUBLISHING & PLATFORMS: 2019  2018  
% Change Favorable
(Unfavorable)
  
% Change Favorable
(Unfavorable)
  2020  2019  
% Change
Favorable
(Unfavorable)
  
% Change
Favorable
(Unfavorable)
 
Revenue:                        
Research Publishing $445,012  $436,424   2%  4% $230,464  $219,927   5%  5%
Research Platforms  19,072   17,968   6%  6%  10,346   9,448   10%  10%
Total Research Publishing & Platforms Revenue  464,084   454,392   2%  4%  240,810   229,375   5%  6%
                                
Cost of Sales  128,206   124,594   (3)%  (6)%  65,701   64,097   (3)%  (3)%
Operating Expenses  199,090   197,906   (1)%  (2)%  97,821   99,548   2%  1%
Amortization of Intangibles  14,505   14,063   (3)%  (6)%  7,667   7,464   (3)%  (4)%
Restructuring Charges (see Note 9)  3,346   1,302   #   # 
Restructuring (Credits) Charges (see Note 9)  (197)  2,620   #   # 
                                
Contribution to Profit  118,937   116,527   2%  2%  69,818   55,646   25%  26%
Restructuring Charges (see Note 9)  3,346   1,302         
Restructuring (Credits) Charges (see Note 9)  (197)  2,620         
Adjusted Contribution to Profit  122,283   117,829   4%  4%  69,621   58,266   19%  20%
Depreciation and amortization  34,190   30,787           19,701   17,153         
Adjusted EBITDA $156,473  $148,616   5%  6% $89,322  $75,419   18%  19%
Adjusted EBITDA Margin  37.1%  32.9%        

# Not meaningful

Revenue:

Research Publishing & Platforms revenue for the sixthree months ended OctoberJuly 31, 20192020 increased 2% to $464.1$11.4 million, or 5% as compared with the prior year on a reported basis and increased 4% onbasis. On a constant currency basis, revenue increased 6% as compared with the prior year. This increase was primarily due to continued growth in Open Access in Research Publishing primarily due to growth in Open Access.comprehensive “read and publish” agreements, and to a lesser extent, due to the contribution from acquisitions. In addition, approximately $4.0 million, or 2% of revenue for the three months ended July 31, 2020 reflected COVID-19 related delays in renewing certain journal subscriptions agreements, which would have typically been completed in the fourth quarter of 2020.

Adjusted EBITDA:

On a constant currency basis, Adjusted EBITDA increased 5% to $156.5 million for the six months ended October 31, 201919% as compared with the prior year. On a constant currency basis and excluding restructuring charges, Adjusted EBITDA increased 6% as compared with prior year. This increase was primarily due to higher revenues, and efficiency gains, partially offset by an increase in royalty costs, and higher operating costs, which reflected investments in additional resources in editorial and content to support increased journal publishing.lower discretionary spending.
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Index

Society Partnerships:

For the sixthree months ended OctoberJuly 31, 2019:2020:
●
9 3 new society contracts were signed with a combined annual revenue of approximately $9.3$13.4 million,
●2624 society contracts were renewed with a combined annual revenue of approximately $16.3$31.3 million,
●
7 3 society contracts were not renewed with a combined annual revenue of approximately $1.4$0.4 million.

Index
 34

 
Six Months Ended
October 31,
     Constant Currency  
Three Months Ended
July 31,
     Constant Currency 
ACADEMIC & PROFESSIONAL LEARNING: 2019  2018  
% Change Favorable
(Unfavorable)
  
% Change Favorable
(Unfavorable)
  2020  2019  
% Change
Favorable
(Unfavorable)
  
% Change
Favorable
(Unfavorable)
 
Revenue:                        
Education Publishing $167,264  $181,508   (8)%  (7)% $64,084  $65,523   (2)%  (2)%
Professional Learning  155,319   164,586   (6)%  (4)%  62,829   79,335   (21)%  (20)%
Total Academic & Professional Learning  322,583   346,094   (7)%  (5)%  126,913   144,858   (12)%  (12)%
                                
Cost of Sales  87,674   94,711   7%  6%  36,788   43,814   16%  16%
Operating Expenses  183,275   172,504   (6)%  (8)%  86,334   89,530   4%  3%
Amortization of Intangibles  8,068   8,557   6%  5%  4,138   3,798   (9)%  (9)%
Restructuring Charges (see Note 9)  3,605   1,477   #   #   33   2,805   99%  99%
                                
Contribution to Profit  39,961   68,845   (42)%  (41)%  (380)  4,911   #   # 
Restructuring Charges (see Note 9)  3,605   1,477           33   2,805         
Adjusted Contribution to Profit  43,566   70,322   (38)%  (37)%  (347)  7,716   #   # 
Depreciation and amortization  33,873   35,050           18,804   16,524         
Adjusted EBITDA $77,439  $105,372   (27)%  (26)% $18,457  $24,240   (24)%  (23)%
Adjusted EBITDA Margin  14.5%  16.7%        

# Not meaningful

Revenue:

Academic & Professional Learning revenue decreased 7% to $322.6$17.9 million, or 12%, as compared with the prior year on a reported basis and decreased 5%constant currency basis.  Excluding revenue from our zyBooks and Knewton acquisitions, organic revenue declined 13% on a constant currency basis as compared with prior year. basis. This decrease was primarily due to declinesthe continued decline in print book publishing reflecting continuing market conditions. ThisAlso contributing to this decrease was the adverse impact of COVID-19 related retail closures, cancelled exams, and the decline was partially offset by contributions from acquisitions,in classroom dependent corporate training due to continued office closures and to a lesser extent,cancellations of in-person engagements. In Education Publishing, growth in professional assessment. Excluding revenue from acquisitions, organic revenue declined 8% on a constant currency basis.digital content and courseware offerings has been accelerated by the impact of COVID-19 and an increase in virtual school sessions.

Adjusted EBITDA:

On a constant currency basis, Adjusted EBITDA decreased 27%23% as compared with the prior year. This decrease reflected revenue performance, partially offset by lower discretionary spending.
30
Index


 
Three Months Ended
July 31,
     Constant Currency 
EDUCATION SERVICES: 2020  2019  
% Change
Favorable
(Unfavorable)
  
% Change
Favorable
(Unfavorable)
 
Revenue:            
Education Services (1)
 $50,262  $48,156   4%  4%
mthree (1)
  13,341   1,141   #   # 
Total Education Services Revenue  63,603   49,297   29%  29%
                 
Cost of Sales  42,318   35,185   (20)%  (21)%
Operating Expenses  15,501   15,514   —   — 
Amortization of Intangibles  5,087   3,708   (37)%  (38)%
Restructuring Charges (see Note 9)  139   2,089   93%  93%
                 
Contribution to Profit  558   (7,199)  #   # 
Restructuring Charges (see Note 9)  139   2,089         
Adjusted Contribution to Profit  697   (5,110)  #   # 
Depreciation and amortization  7,279   5,498         
Adjusted EBITDA $7,976  $388   #   # 
Adjusted EBITDA Margin  12.5%  0.8%        

# Not meaningful

(1)In May 2020, we moved the IT bootcamp business acquired as part of The Learning House acquisition from Education Services to mthree. As a result, the prior period revenue related to the IT bootcamp business has been included in mthree. There were no changes to our total Education Services or our consolidated financial results. The inorganic revenue from mthree in the three months ended July 31, 2020 was $12.4 million.

Revenue:

Education Services revenue increased $14.3 million, or 29% as compared with the prior year on a reported basis. On a constant currency basis, revenue increased 29% as compared with the prior year. Excluding revenue from acquisitions, organic revenue increased 4% on a constant currency basis mainly driven by an increase in online program management services.

Adjusted EBITDA:

On a constant currency basis, Adjusted EBITDA increased $7.6 million as compared with the prior year. This was due to $77.4 millionhigher revenue, and business optimization savings, notably improvements in student acquisition costs.

Education Services Partners:

As of July 31, 2020 and 2019, Wiley had 67 university partners under contract.

CORPORATE EXPENSES:
Corporate expenses for the sixthree months ended OctoberJuly 31, 20192020 decreased 18% to $40.0 million as compared with the prior year. On a constant currency basis and excluding restructuring charges, Adjusted EBITDAthese expenses decreased 26% as compared with prior year.16%. This decrease was primarily due to the declinea decrease in revenue;employee-related costs and, to a lesser extent, increased investment in growth initiatives including costs associated with the acquisition of zyBooks and Knewton.

 
Six Months Ended
October 31,
     Constant Currency 
EDUCATION SERVICES: 2019  2018  
% Change Favorable
(Unfavorable)
  
% Change Favorable
(Unfavorable)
 
Revenue:            
Total Education Services Revenue $103,068  $59,037   75%  75%
                 
Cost of Sales  70,628   41,010   (72)%  (72)%
Operating Expenses  28,025   21,381   (31)%  (31)%
Amortization of Intangibles  7,417   2,430   #   # 
Restructuring Charges (see Note 9)  1,614   102   #   # 
                 
Contribution to Profit  (4,616)  (5,886)  22%  21%
Restructuring Charges (see Note 9)  1,614   102         
Adjusted Contribution to Profit  (3,002)  (5,784)  48%  48%
Depreciation and amortization  11,020   6,512         
Adjusted EBITDA $8,018  $728   #   # 

# Not meaningful

Index
 35

Revenue:

Education Services revenue increased 75%lower professional fees related to $103.1 million, on a reported and on a constant currency basis as compared with prior year. The increase was mainly driven by the impact of the acquisition of Learning House, and organic growth of 10%.

Adjusted EBITDA:

Adjusted EBITDA was $8.0 million compared to $0.7 million in the prior year. On a constant currency basis, excluding restructuring charges, Adjusted EBITDA was favorable by $7.3 million as compared with prior year. This was due to the following:
●higher revenue as described above;
partially offset by:
●
higher costs of sales primarily due to higher marketing and other program costs, which was primarily due to the incremental impact of the acquisition of Learning House, and
●higher operating expenses due to an increase in advertising, marketing and technology costs.

CORPORATE EXPENSES:

Corporate expenses for the six months ended October 31, 2019 increased 1% to $86.3 million as compared with prior year. On a constant currency basis and excluding restructuring charges, these expenses decreased 5%. This was primarily due to a decrease in employment and technology related costs and a life insurance recovery of $2 million.strategic planning. These factors were partially offset by an increase in costs associated with strategic planning and business optimization efforts.legal related costs.

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Index

FISCAL YEAR 20202021 OUTLOOK:

We are reaffirming our financial outlookCOVID-19 continues to disrupt the global economy, and this has impacted Wiley’s more traditional revenue sources, such as physical books, test prep, and in-person training.  At the same time, the pandemic is accelerating opportunities in open research and online education, with updates that reflectstrong underlying momentum in Research article output and content consumption, online enrollment, and digital courseware.  However, given the additioncontinued uncertainty with university budgets and student enrollment, Wiley cannot confidently predict the extent or duration of zyBooks. Note, Knewton was included in the original outlook.

Amounts in millions, except Adjusted EPS
Item 
Original Fiscal Year 2020
Outlook (1)
  zyBooks Impact  
Updated Fiscal Year 2020
Outlook (1)
 
Revenue $1,840-1,870  $15  $1,855-1,885 
Adjusted EBITDA $360-375  $(3) $357-372 
Adjusted EPS $2.45-2.55  $(0.10) $2.35-2.45 
Free Cash Flow $210-230  Insignificant  Unchanged 

(1)2020 Outlook reflects an effective tax rate of approximately 22% andis at constant currency (reflecting Fiscal Year 2019 average foreign exchange rates) and excludes the impact of foreign exchange movementsthe pandemic on its operating results and therefore has not provided a specific fiscal year 2021 outlook.
In Research Publishing & Platforms, the Company anticipates that COVID-related budget constraints at libraries will result in pricing pressure for 2021, but it is too early to quantify.  This pressure is expected to be offset by continued strong growth in open access, research platforms and corporate solutions should offset this pressure.
In Academic & Professional Learning, print book sales will continue to be challenged by COVID lockdowns and enrollment declines, while digital content and courseware will continue to grow strongly.  Recovery in test prep and corporate training will be dependent on the reopening of physical sites.
In Education Services, universities continue to operate in a hybrid or virtual learning environment while dealing with financial shortfalls related to COVID-related enrollment declines. While navigating through this uncertainty, the second quarter. If current foreign currency exchange rates remain consistent throughoutCompany is encouraged by enrollment trends, new partner opportunities, and expansion of existing partners.

The Company is implementing cost reduction and efficiency initiatives to mitigate the remainderadverse impacts of the economic downturn and improve its agility and efficiency.  These programs are company-wide and include optimizing content development workflows, streamlining our customer support operations and achieving benchmark efficiency levels for corporate support functions, such as HR and Finance.
In the fourth quarter of fiscal year 2020, we anticipate that consolidated revenue would be unfavorably impacted by approximatelyWiley recorded a $15 million restructuring charge for actions that will generate annual run rate savings of approximately $30 million.  Additional cost savings actions are anticipated in fiscal year 2021.
The Company announced on June 11, 2020  that the Executive Leadership Team (ELT) and Adjusted EPS wouldthe CEO, along with the Board of Directors, agreed to six-month base pay reductions, ranging from 15% of the base salary of the ELT to 30% of the base salary of the CEO.
Discretionary spending controls have been implemented across the Company.
Wiley is reviewing its real estate portfolio for targeted rationalization, given success to date and working from home and the potential workforce benefits.
Wiley is accelerating its process reengineering and technology in-sourcing initiatives to enable its strategic plans and reduce costs, while planning to further simplify, standardize and automate our workflows for sustainable efficiency gains.
In regard to capital allocation:
Capital expenditures for fiscal 2021 are expected to be immaterially impactedapproximately $100 million with investment focused on the development of tech-enabled services and platforms, as comparedwell as workflow automation and process redesign.
On June 25, 2020, the Company raised its quarterly dividend for the 27th consecutive year to $0.3425 per share on its Class A and Class B common stock.
As previously announced on April 9, 2020, due to the prior year.COVID-19 uncertainty, Wiley has decided to temporarily suspend share repurchases.  The Company expects to resume share repurchases as the economic environment improves.

Adjusted EBITDA:

Below is a reconciliation of our consolidated U.S. GAAP net income to Non-GAAP EBITDA and Adjusted EBITDA:

 
 
Three Months Ended
October 31,
  Six Months Ended October 31, 
  2019  2018  2019  2018 
Net Income $44,690  $43,784  $48,314  $70,079 
Interest expense  6,787   3,608   12,864   6,404 
Provision for income taxes  11,783   12,538   12,126   20,324 
Depreciation and amortization  42,638   39,652   84,857   79,823 
Non-GAAP EBITDA $105,898  $99,582  $158,161  $176,630 
Restructuring and related charges  4,001   9,996   14,736   3,910 
Foreign exchange transaction losses  2,668   54   16   1,783 
Interest and other income  (2,537)  (2,509)  (5,370)  (4,975)
Non-GAAP Adjusted EBITDA $110,030  $107,123  $167,543  $177,348 

 
 
Three Months Ended
July 31,
 
  2020  2019 
Net Income $16,334  $3,624 
Interest expense  4,614   6,077 
Provision for income taxes  13,400   343 
Depreciation and amortization  49,507   42,219 
Non-GAAP EBITDA $83,855  $52,263 
Restructuring and related charges  2,218   10,735 
Foreign exchange transaction losses (gains)  82   (2,652)
Interest and other income  (4,391)  (2,833)
Non-GAAP Adjusted EBITDA $81,764  $57,513 
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 36

LIQUIDITY AND CAPITAL RESOURCES

Principal Sources of Liquidity

We believe that our operating cash flow, together with our revolving credit facilities and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future, although therefuture. There can be no assurance that continued or increased volatility in the global capital and credit markets will not impair our ability to access these markets on terms commercially acceptable.acceptable in the future. In addition, our liquidity could be adversely impacted by COVID-19 due to the continued impact on our customers, including cash collections. We do not have any off-balance-sheet debt. We will continue to pursue attractive opportunities to add scale and provide enhanced tech-enabled services in research and online education.

As of OctoberJuly 31, 2019,2020, we had cash and cash equivalents of $107.7$101.4 million, of which approximately $88.3$95.7 million, or 82%94%, was located outside the U.S. Maintenance of these cash and cash equivalent balances outside the U.S. does not have a material impact on the liquidity or capital resources of our operations. Notwithstanding the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which generally eliminated federal income tax on future cash repatriation to the U.S., cash repatriation may be subject to state and local taxes or withholding or similar taxes. Since April 30, 2018, we no longer intend to permanently reinvest earnings outside the U.S. We have a $2.0 million liability related to the estimated taxes that would be incurred upon repatriating certain non-U.S. earnings.

On May 30, 2019, we entered into a credit agreement that amended and restated our existing revolving credit agreement (“Amended and Restated RCA”). The Amended and Restated RCA provides for senior unsecured credit facilities comprised of a (i) five-year revolving credit facility in an aggregate principal amount up to $1.25 billion, and (ii) a five-year term loan A facility consisting of $250 million. The agreement contains certain customary affirmative and negative covenants, including a financial covenant in the form of a consolidated net leverage ratio and consolidated interest coverage ratio. 

As of OctoberJuly 31, 2019,2020, we had approximately $794.7$846.7 million of debt outstanding, net of unamortized issuance costs of $0.8$0.6 million, and approximately $705.8$648.1 million of unused borrowing capacity under our Amended and Restated RCA and other facilities. Our Amended and Restated RCA contains certain restrictive covenants related to our consolidated leverage ratio and interest coverage ratio, which we were in compliance with as of OctoberJuly 31, 2019.2020.

Analysis of Historical Cash Flow

The following table shows the changes in our Unaudited Condensed Consolidated StatementStatements of Cash Flows for the sixthree months ended OctoberJuly 31, 20192020 and 2018.2019.

 Six Months Ended October 31,  
Three Months Ended
July 31,
 
 2019  2018  2020  2019 
Net Cash Used In Operating Activities $(99,521) $(116,561) $(120,783) $(94,168)
Net Cash Used In Investing Activities  (134,431)  (49,706)  (28,280)  (105,892)
Net Cash Provided by Financing Activities  249,267   120,465 
Net Cash Provided By Financing Activities  43,484   213,333 
Effect of Foreign Currency Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash  (461)  (8,368)  4,500   (2,138)

Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders, as it represents cash available to repay debt, pay common dividends, and fund share repurchases and new acquisitions. Below are the details of Free Cash Flow less Product Development Spending for the sixthree months ended OctoberJuly 31, 20192020 and 2018.2019.

Cash flow from operations is seasonally a use of cash in the first half of Wiley’s fiscal year principally due to the timing of collections for annual journal subscriptions, which occurs in the beginning of the second half of our fiscal year.

Free Cash Flow less Product Development Spending:
 Six Months Ended October 31,  
Three Months Ended
July 31,
 
 2019  2018  2020  2019 
Net Cash Used In Operating Activities $(99,521) $(116,561) $(120,783) $(94,168)
Less: Additions to Technology, Property and Equipment  (44,531)  (34,560)  (18,964)  (24,202)
Less: Product Development Spending  (11,686)  (12,351)  (5,325)  (6,211)
Free Cash Flow less Product Development Spending $(155,738) $(163,472) $(145,072) $(124,581)

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Index
 37

Net Cash Used In Operating Activities

The following is a summary of the $17.1$26.6 million change in Net Cash Used In Operating Activities for the sixthree months ended OctoberJuly 31, 20192020 as compared with the sixthree months ended OctoberJuly 31, 20182019 (amounts in millions).

Net Cash Used In Operating Activities – Six Months Ended October 31, 2018 $(116.6)
Working Capital Changes:    
Accounts receivable, net and contract liabilities - due to the timing of collections, including collections from the delayed calendar year 2019 journal subscription billing into fiscal year 2020  51.1 
Accounts payable and other accrued liabilities - due to the timing of payments and lower incentive payments in the six months ended October 31, 2019  15.9 
Income tax payments primarily due to the timing of certain international tax payments  (19.0)
Other working capital items  (17.4)
Lower net income adjusted for items to reconcile net income to net cash used in operating activities  (13.5)
Net Cash Used In Operating Activities – Six Months Ended October 31, 2019 $(99.5)
Net Cash Used In Operating Activities – Three Months Ended July 31, 2019 $(94.2)
Working Capital Changes:    
Accounts payable and royalties payable - primarily due to the timing of payments  (31.1)
Accrued income taxes - primarily due to the timing of certain international and U.S. tax payments and refunds  (7.1)
Accounts receivable, net and contract liabilities - due to the timing of customer payments, including customers payments that were delayed due to the economic downturn  (6.0)
Other working capital items – primarily due to an increase in restructuring and employee related payments partially offset by lower inventory purchases  (13.1)
Higher net income adjusted for items to reconcile net income to net cash used in operating activities  30.7 
Net Cash Used In Operating Activities – Three Months Ended July 31, 2020 $(120.8)

Our negative working capital was $138.5$228.1 million and $379.8$312.3 million as of OctoberJuly 31, 20192020 and April 30, 2019,2020, respectively, due to the seasonality of our businesses. The primary driver of the negative working capital is unearned contract liabilities related to subscriptions for which cash has been collected in advance. Cash received in advance for subscriptions is used by us for a number of purposes including funding: acquisitions, debt repayments, operations and dividend payments and purchasing treasury shares. Due to the economic downturn, we estimate that approximately $30 million of customer payments were delayed into fiscal year 2021. Our Accounts Receivable collections were in line with our expectations. Although, in certain situations, the timing of collections may be extended, we do not anticipate any material issues with Accounts Receivable collections. Many of our customers have been adversely impacted by COVID-19, and we expect some continued delays in payments due to widespread disruption and pervasive cash conservation behaviors in the face of uncertainty.

The $241.3$84.2 million change in negative working capital was primarily due to the decrease in cash and cash equivalents, and in accounts receivable and contract liabilities primarily representing deferred revenue on calendar year 2019  subscriptions primarily in the six months ended October 31, 2019, anddue to the timing of certain working capital itemscustomer payments, including customer payments that were delayed into fiscal year 2021 and the paymentrecognition of certain payables;revenue, partially offset by an increasea decrease in current liabilities of $18.4 millionaccounts payable due to the recognitiontiming of the short-term portion of operating lease liabilitiespayments, a decrease in accrued employment costs due to payments of annual incentive compensation and a decrease in accrued income taxes, primarily due to international tax payments, partially offset by the adoption of ASU 2016-02, "Leases (Topic 842).”  See Note 2, “Recent Accounting Standards”, for further details.current year provision.

The revenue from contract liabilities will be recognized as income when the products are shipped or made available online to the customers over the term of the subscription. Current liabilities as of OctoberJuly 31, 20192020 and as of April 30, 20192020 includes $248.7$409.0 million and $507.4$520.2 million, respectively, primarily related to deferred subscription revenue for which cash was collected in advance.

Net Cash Used In Investing Activities

Net Cash Used inIn Investing Activities for the sixthree months ended OctoberJuly 31, 20192020 was $134.4$28.3 million compared to $49.7$105.9 million in the prior year. The increasedecrease in cash used in investing activities was due to $74.2a reduction of $73.1 million of netin cash used to acquire zyBooks, Knewton and other acquisitions during the six months ended October 31, 2019,businesses, and to a lesser extent, an increasea decrease of $10.0$5.2 million for additions of technology, property and equipment due to increased investments in products and platforms.the three months ended July 31, 2020.

Net Cash Provided By Financing Activities

Net Cash Provided byBy Financing Activities was $249.3$43.5 million for the sixthree months ended OctoberJuly 31, 20192020 compared to $120.5$213.3 million for the sixthree months ended OctoberJuly 31, 2018.2019. This increasedecrease in cash provided by financing activities was due to an increasea decrease in net borrowings of $138.2$186.5 million, for the six months ended October 31, 2019 compared to the six months ended October 31, 2018 which was primarily due to an increase in repayments for the acquisitions described above. This wasthree months ended July 31, 2020, partially offset by $8.7$10.0 million of lower cash proceeds fromused for repurchases of common stock in the exercise of stock options and other activities.three months ended July 31, 2020.

During the sixthree months ended OctoberJuly 31, 2020, we made no repurchases of shares of common stock. During the three months ended July 31, 2019, we repurchased 551,847217,511 shares of Class A Common stock at an average price of $45.30 compared to 425,120 shares of Class A Common Stock at an average price of $58.79 in the prior year.$45.97.

In the sixthree months ended OctoberJuly 31, 2019,2020, we increased our quarterly dividend to shareholders by 3% to $1.36$1.37 per share annualized versus $1.32$1.36 per share annualized in the prior year.

34
Index
 38


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to market risk primarily related to interest rates, foreign exchange, and credit risk. It is our policy to monitor these exposures and to use derivative financial investments and/or insurance contracts from time to time to reduce fluctuations in earnings and cash flows when it is deemed appropriate to do so. We do not use derivative financial instruments for trading or speculative purposes.

Interest Rates

From time to time, we may use interest rate swaps, collars, or options to manage our exposure to fluctuations in interest rates. It is management’s intention that the notional amount of interest rate swaps be less than the variable rate loans outstanding during the life of the derivatives.

The information set forth in Note 16, "Derivatives Instruments and Hedging Activities," of the Notes to Unaudited Condensed Consolidated Financial Statements under the caption "Interest Rate Contracts," is incorporated herein by reference.

On an annual basis, a hypothetical one percent change in interest rates for the $595.4$547.3 million of unhedged variable rate debt as of OctoberJuly 31, 20192020 would affect net income and cash flow by approximately $4.5$4.3 million.

Foreign Exchange Rates

Fluctuations in the currencies of countries where we operate outside the U.S. may have a significant impact on financial results. We are primarily exposed to movements in British pound sterling, euros, Canadian and Australian dollars, and certain currencies in Asia. The Statements of Financial Position of non-U.S. business units are translated into U.S. dollars using period-end exchange rates for assets and liabilities and the Statements of Income are translated into U.S. dollars using weighted-average exchange rates for revenues and expenses.

Our significant investments in non-U.S. businesses are exposed to foreign currency risk. Adjustments resulting from translating assets and liabilities are reported as a separate component of Accumulated Other Comprehensive Loss within Shareholders’ Equity under the caption Foreign Currency Translation Adjustment. During the three and six months ended OctoberJuly 31, 2019,2020, we recorded foreign currency translation gains in Accumulated Other Comprehensive IncomeLoss of approximately $38.3$46.9 million, and $2.8 million respectively, primarily as a result of the fluctuations of the U.S. dollar relative to the British pound sterling.sterling, and to a lesser extent the euro. During the three and six months ended OctoberJuly 31, 2018,2019, we recorded foreign currency translation losses in Accumulated Other Comprehensive IncomeLoss of approximately $20.4$35.5 million and $60.7 million, respectively, primarily as a result of the fluctuations of the U.S. dollar relative to the British pound sterling and, to a lesser extent, the euro.

Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses in theour Unaudited Condensed Consolidated Statements of Income as incurred. Under certain circumstances, we may enter into derivative financial instruments in the form of foreign currency forward contracts to hedge against specific transactions, including intercompany purchases and loans.

The information set forth in Note 16, "Derivatives Instruments and Hedging Activities," of the Notes to Unaudited Condensed Consolidated Financial Statements under the caption "Foreign Currency Contracts," is incorporated herein by reference.

Sales Return Reserves

The estimated allowance for print book sales returns is based upon historical return patterns, as well as current market trends in the businesses in which we operate.operate, including the impact of COVID-19. In connection with the estimated sales return reserves, we also include a related increase to inventory and a reduction to accrued royalties as a result of the expected returns.

35
Index

The reserves are reflected in the following accounts of theour Unaudited Condensed Consolidated Statements of Financial Position:Position – increase (decrease):

 October 31, 2019  April 30, 2019 
Increase in Inventories, net $9,889  $3,739 
Decrease in Accrued royalties $(5,285) $(3,653)
Increase in Contract liabilities $37,699  $25,934 
Print book sales return reserve net liability balance $(22,525) $(18,542)
Index
 39
 July 31, 2020  April 30, 2020 
Increase in Inventories, net $10,967  $8,686 
Decrease in Accrued royalties $(5,277) $(4,441)
Increase in Contract liabilities $39,384  $32,769 
Print book sales return reserve net liability balance $(23,140) $(19,642)

A one percent change in the estimated sales return rate could affect net income by approximately $0.8$0.3 million. A change in the pattern or trends in returns could affect the estimated allowance.

Customer Credit Risk

In the journal publishing business, subscriptions are primarily sourced through journal subscription agents who, acting as agents for library customers, facilitate ordering by consolidating the subscription orders/billings of each subscriber with various publishers. Cash is generally collected in advance from subscribers by the subscription agents and is principally remitted to us between the months of December and April. Although at October 31, 2019,currently we hadhave minimal credit risk exposure to these agents, future calendar-year subscription receipts from these agents are highly dependent on their financial condition and liquidity. Subscription agents account for approximately 20% of total annual consolidated revenue and one affiliated group of subscription agents accounts for approximately 10% of total annual consolidated revenue.

Our book business is not dependent upon a single customer; however, the industry is concentrated in national, regional, and online bookstore chains. Although no one book customer accounts for more than 8%11% of total annual consolidated revenue and 17%15% of accounts receivable at OctoberJuly 31, 2019,2020, the top 10 book customers account for approximately 14%15% of total annual consolidated revenue and approximately 35%27% of accounts receivable at OctoberJuly 31, 2019.

We maintain approximately $25 million of trade credit insurance, covering balances due from certain named customers, subject to certain limitations and annual renewal.2020.

Disclosure of Certain Activities Relating to Iran

The European Union, Canada and United States have imposed sanctions on business relationships with Iran, including restrictions on financial transactions and prohibitions on direct and indirect trading with listed “designated persons.” In the three and six months ended OctoberJuly 31, 2019,2020, we recorded revenue of $0.2 million and an immaterial amount of revenue and net earnings related to the sale of scientific and medical content to certain publicly funded universities, hospitals and institutions that meet the definition of the “Government of Iran” as defined under section 560.304 of title 31, Code of Federal Regulations. We assessed our business relationship and transactions with Iran and believe we are in compliance with the regulations governing the sanctions. We intend to continue in these or similar sales as long as they continue to be consistent with all applicable sanction-related regulations.

ITEM 4.  CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer, together with the Chief Accounting Officer and other members of the Company's management, have conducted an evaluation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting:During the three months ended JulyJanuary 31, 2019,2020, we closed on the acquisition of Zyante.mthree. We excluded Zyantemthree from the scope of management’s report on internal control over financial reporting for the six months ended October 31, 2019.year-ended April 30, 2020. We are in the process of integrating Zyante tomthree into our overall internal control over financial reporting and will include them in scope for the year ending April 30, 2020.2021. This process may result in additions or changes to our internal control over financial reporting.

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We are in the process of implementing a new global ERP that will enhance our business and financial processes and standardize our information systems. As previously disclosed, we have completed the implementation of record-to-report, purchase-to-pay and several other business processes within all locations through fiscal year 2017. We completed the implementation of order-to-cash for certain businesses in May 2018 and may continue to roll out additional processes and functionality of the ERP in phases in the foreseeable future.

As with any new information system we implement, this application, along with the internal controls over financial reporting included in this process, will require testing for effectiveness. In connection with this ERP implementation, we are updating our internal controls over financial reporting, as necessary, to accommodate modifications to our business processes and accounting procedures. We do not believe that the ERP implementation will have an adverse effect on our internal control over financial reporting.
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Except as described above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the quarter ended OctoberJuly 31, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no significant developments related to legal proceedings during the three months ended OctoberJuly 31, 2019.2020. For information regarding legal proceedings, see our Annual Report on Form 10-K for the fiscal year ended April 30, 20192020 Note 18,16, “Commitment and Contingencies”.

ITEM 1a. RISK FACTORS

See Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended April 30, 2019.2020. Except as required by the federal securities law, we undertake no obligation to update or revise any risk factor, whether as a result of new information, future events or otherwise.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended OctoberJuly 31, 2019, we made the following purchases2020, there were no share repurchases of our Class A and Class B Common Stock under our publicly announced stock repurchase program:programs.
  
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
  
Maximum Dollar Value of Shares
that May be Purchased
Under Additional Plans or Programs
(Dollars in millions)
 
May 2020  —  $—   —   806,758  $200 
June 2020  —   —   —   806,758  $200 
July 2020  —   —   —   806,758  $200 
Total  —  $—   —   806,758  $200 

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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
 
August 2019  —  $—   —   1,671,464 
September 2019  245,315   45.40   245,315   1,426,149 
October 2019  89,021   43.40   89,021   1,337,128 
Total  334,336  $44.87   334,336   1,337,128 

ITEM 6. EXHIBITS

10.1
Form of the Fiscal Year 2021 Qualified Executive Annual Incentive Plan.
10.2
Form of the Fiscal 2021 Restricted Share Unit Grant Agreement under the Executive Long-Term Incentive Plan, under the Business Officer Equity Program, pursuant to the 2014 Key Employee Stock Plan.
10.3
Form of the Fiscal 2021 Restricted Share Unit Grant Agreement with Matthew S. Kissner under the Executive Long-Term Incentive Plan, under the Business Officer Equity Program, pursuant to the 2014 Key Employee Stock Plan.
10.4
Employment Letter dated April 20, 2018 between Aref Matin, Executive Vice President and Chief Technology Officer, and the Company.
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, Certificate byas adopted pursuant to Section 906 of the President and Chief Executive Officer.Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, Certificate byas adopted pursuant to Section 906 of the Chief Financial and Operations Officer.Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  JOHN WILEY & SONS, INC.
  Registrant
   
 By/s/ Brian A. Napack
  Brian A. Napack
  President and Chief Executive Officer
   
 
By/s/ John A. Kritzmacher
  John A. Kritzmacher
  Executive Vice President, Chief Financial Officer, and Executive Vice President, Operations
By/s/ Christopher F. Caridi
Christopher F. Caridi
Senior Vice President, Corporate Controller andInterim Chief Accounting Officer
   
  
Dated: December 5, 2019September 4, 2020


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