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JW-A > SEC Filings for JW-A > Form 10-K on 26-Jun-2013All Recent SEC Filings

Show all filings for WILEY JOHN & SONS, INC.

Form 10-K for WILEY JOHN & SONS, INC.


Annual Report

Item 7. Management's Discussion and Analysis of Business, Financial Condition and Results of Operations

The Company is a global provider of knowledge and knowledge-based services in areas of research, professional development and education. Core businesses produce scientific, technical, medical and scholarly research journals, reference works, books, database services, and advertising; professional books and certification, assessment and training services; and education content and services including online program management for colleges and universities and integrated online teaching and learning resources for instructors and students. The Company takes full advantage of its content from all three core businesses in developing and cross-marketing products to its diverse customer base of researchers, professionals, students, and educators. The use of technology enables the Company to make its content efficiently more accessible to its customers around the world. The Company maintains publishing, marketing, and distribution centers in the United States, Canada, Europe, Asia, and Australia.

Business growth comes from a combination of title, imprint and business acquisitions which complement the Company's existing businesses; the development of new products and services; designing and implementing new methods of delivering products to our customers; and organic growth from existing brands and titles. The Company's revenue grew at a compound annual rate of 1% over the past five years.

Core Businesses


The Company's Research business serves the world's research and scholarly communities and is the largest publisher for professional and scholarly societies. Research's mission is to support researchers, professionals and learners in the discovery and use of research knowledge to achieve results that help shape the future. Research products include scientific, technical, medical and scholarly research journals, books, major reference works, databases, clinical decision support tools and laboratory manuals and workflow tools, in the publishing areas of the physical sciences and engineering, health sciences, social science and humanities and life sciences. Research customers include academic, corporate, government, and public libraries; researchers; scientists; clinicians; engineers and technologists; scholarly and professional societies; and students and professors. The Company's Research products are sold and distributed globally, online and in print through multiple channels, including research libraries and library consortia, independent subscription agents, direct sales to professional society members, bookstores, online booksellers and other customers. Publishing centers include Australia, Germany, India, Singapore, the United Kingdom and the United States. Research accounted for approximately 57% of total Company revenue in fiscal year 2013 and generated revenue growth at a compound annual rate of 1% over the past five years.

Research revenue by product type includes Journal Subscriptions sold online and in print; Print Books and eBooks including major reference works; Publishing Rights which is revenue from the licensing of the right to republish Wiley content either online or in print; Advertising and Other. Other revenue includes journal and article reprints, pay per view journal revenue, the sale of journal backfile collections, journal contributor fees, open access revenue and the sale of databases and protocols. The graph below presents Research revenue by product type for fiscal year 2013:

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Key growth strategies for the Research business include developing new digital products, services and workflow solutions to meet the needs of researchers, authors and societies; continuing the migration and transformation of the book business from print to digital, focusing resources on high-growth and emerging markets; developing new open access revenue streams; and evolving and developing new licensing models for the Company's institutional customers.

Approximately 53% of journal subscription revenue is derived from publishing rights owned by the Company. Publishing alliances also play a major role in Research's success. Approximately 47% of journal subscription revenue is derived from publication rights which are owned by professional societies and published by the Company pursuant to a long-term contract or owned jointly with a professional society. These society alliances bring mutual benefit, with the societies gaining Wiley's publishing, marketing, sales and distribution expertise, while Wiley benefits from being affiliated with prestigious societies and their members. The Company publishes the journals of many prestigious societies, including the American Cancer Society, the American Heart Association, the British Journal of Surgery Society, the Federation of European Biochemical Societies, the European Molecular Biology Organization, the American Anthropological Association, the American Geophysical Union and the German Chemical Society.

The Company's Research business is a provider of content and services in evidence-based medicine (EBM). Through the Company's alliance with The Cochrane Collaboration, the Company publishes The Cochrane Library, a premier source of high-quality independent evidence to inform healthcare decision-making, which provides the foundation for the Company's growing suite of EBM products designed to improve patient healthcare. EBM facilitates the effective management of patients through clinical expertise informed by best practice evidence that is derived from medical literature.

Wiley Online Library, the online publishing platform for the Company's Research business, is one of the world's broadest and deepest multidisciplinary collections of online resources covering life, health and physical sciences, social science and the humanities. Built on the latest technology and designed with extensive input from scholars around the world, Wiley Online Library delivers seamless integrated access to over 4 million articles from 1,500 journals, 13,000 online books, and hundreds of reference works, laboratory protocols and databases. Wiley Online Library provides the user with intuitive navigation, enhanced discoverability, expanded functionality and a range of personalization options. Wiley Online Library also provides the Company with revenue growth opportunities through new applications and business models, online advertising, deeper market penetration and individual sales and pay-per-view options.

Access to Wiley Online Library is sold through licenses with academic and corporate libraries, consortia and other academic, government and corporate customers. The Company offers a range of licensing options including customized suites of journal publications for individual customer needs as well as subscriptions for individual journal and online book publications. Licenses are typically sold in durations of one to three years. Through the Article Select and PayPerView programs, the Company provides fee-based access to non-subscribed journal content, book chapters and major reference work articles.

For calendar year 2013, the Company piloted an alternative journal subscription license model for a group of customers. Previously, those customer licenses were based on a commitment by the Company to provide a discrete number of online journal issues which provided for recognition of revenue by the Company as issues were published. Under this alternative model, the Company provides access to all journal content published in the calendar year and provides for recognition of revenue on a straight-line basis over the calendar year covered by the alternative license model. The new license model improves the value proposition for our established customer base in mature markets and makes licensing the Company's journals a more straightforward process which frees up sales and support resources to focus on growth opportunities in other digital products and services.

Wiley Online Library takes advantage of technology to update content frequently and to add new features and resources on an ongoing basis to increase the productivity of scientists, professionals and students. Two examples are EarlyView, through which customers can access individual articles well in advance of print publication, and MobileEditions, which enables users to view tables of content and abstracts on wireless handheld devices and smartphones.

Wiley Open Access is the Company's publishing program for open-access research articles. Under the Wiley Open Access business model, research articles submitted by authors are published and compiled by subject area into open-access journals. All research articles published in Wiley Open Access journals are freely available to the general public on Wiley Online Library to read, download and share. A publication service fee is charged upon acceptance of a research article by the Company, which may be paid by the individual author. To actively support researchers and members who wish to publish in Wiley Open Access journals, an academic or research institution, society or corporation may fund the fee directly. In return for the service fee, the Company provides its customary publishing, editing, peer review, technology and distribution services. All accepted open-access articles are subject to the same rigorous peer-review process applied to the Company's subscription based journals which are supported by the Company's network of prestigious journals and societies. In addition to Wiley Open Access, the Company provides authors with the opportunity to make their individual research articles that were published within the Company's paid subscription journals freely available to the general public through OnlineOpen.

Professional Development ("PD"):

The Company's Professional Development business acquires, develops and publishes professional books, subscription products, certification and training services and online applications in the areas of business, finance, accounting, workplace learning, management, leadership, technology, behavioral health, engineering/ architecture and education. Professional Development is focused on creating products and services that help customers become more effective in the workplace and achieve career success. Products are developed in print and digitally for worldwide distribution through multiple channels, including major chains and online booksellers, independent bookstores, libraries, colleges and universities, warehouse clubs, corporations, direct to consumer, websites and other online applications. Professional Development's mission is to help professionals worldwide learn, achieve results, develop opportunities and enhance their skills throughout their career. Publishing centers include Australia, Canada, Germany, India, Singapore, the United Kingdom and the United States. Professional Development accounted for approximately 24% of total Company revenue in fiscal year 2013 and declined at a compound annual rate of 2% over the past five years. Excluding the fiscal year 2013 divestment of the Consumer Publishing Programs, the five year compound growth rate was essentially flat.

Professional Development revenue by product type includes eBooks and Print Books; Online Training and Assessment which is revenue from the sale of products and services focusing on workplace effectiveness and career success; Publishing Rights which is revenue from the licensing of the right to republish Wiley content either online or in print; Journal Subscriptions online and in print to professionals; and Other. Other includes advertising revenue, distribution and agency revenue and reprint revenue. The graph below presents PD revenue by product type for fiscal year 2013:

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Key growth strategies for the Professional Development business include developing and acquiring learning applications, online training and assessment, workflow solutions to support professional career development, developing leading brands and franchises, executing strategic acquisitions and partnerships, innovating digital and eBook formats while expanding global discoverability and distribution and creating advertising opportunities on the Company's branded websites and online applications. The Company has recently executed several initiatives focused on achieving these growth strategies which are described in more detail below.

In February 2012, Wiley acquired Inscape Holdings, Inc. ("Inscape"), a leading provider of online training and assessment solutions, for approximately $85 million in cash, net of cash acquired. The acquisition combines Wiley's deep well of valuable content and global reach in leadership and training with Inscape's technology, distribution network, and talent expertise, including the innovative EPIC online assessment-delivery platform and an elite global authorized distributors network of nearly 1,700 independent consultants, trainers, and coaches. Inscape's solution-focused products are used in thousands of organizations, including major government agencies and Fortune 500 companies. Inscape generated revenue of $21.6 million in fiscal year 2013.

Inscape's solutions-focused DiSC® offerings complement the products published under Wiley's Pfeiffer brand, such as Kouzes and Posner's Leadership Practices Inventory®, in the growing workplace learning industry. Through the Pfeiffer brand, Wiley has a 40-year history of serving professional development and resource needs of learning professionals. The combined Inscape and Pfeiffer business increases the Company's presence in the professional development and skill assessment arena. We believe Inscape's competitive strengths will also advance a number of Professional Development's major strategic goals. As a workplace learning business with more than 50% of revenue from a proprietary digital platform, Inscape will enable Wiley to move more rapidly into digital delivery within the growing workplace learning and assessment market and build a significant market position in the category of leadership development. Inscape also enhances Wiley's global presence, serving customers around the world in more than 30 languages each year, with approximately 35% of revenue generated outside the U.S through Inscape's global distributor network.

In November 2012, the Company acquired Efficient Learning Systems, Inc. ("ELS") for approximately $24 million in cash, net of cash acquired. ELS is an e-learning system provider focused in the areas of professional finance and accounting. ELS' flagship product, CPAExcel, is a modular, digital platform comprised of online self-study, videos, mobile apps, and sophisticated planning tools that has helped over 65,000 professionals prepare for the CPA exam since 1998. The acquisition enhances Wiley's position in the growing CPA test preparation market and provides the Company with a scalable platform that can be leveraged globally across other areas of its Professional Development business. ELS was generating annual revenue of approximately $7 million prior to the acquisition and contributed $3.7 million to the Company's fiscal year 2013 revenue since the acquisition date.

In March 2012, the Company announced that it intended to explore opportunities to sell a number of its consumer publishing assets in the Professional Development business as they no longer align with the Company's long-term business strategy. Those assets included travel (including the well-known Frommer's brand), culinary, general interest, nautical, pets, crafts, Webster's New World, and CliffsNotes. During fiscal year 2013, the Company sold substantially all of these publishing assets in a series of individual transactions for approximately $34 million. Fiscal year 2013 and 2012 revenue associated with the operations of the assets sold were $46 million and $73 million, respectively.

Publishing alliances and franchise products are central to the Company's strategy. The ability to bring together Wiley's product development, sales, marketing, distribution and technological capabilities with a partner's content and brand name recognition has been a driving factor in its success. Professional Development alliance partners include Bloomberg Press, the American Institute of Architects, the Leader to Leader Institute, Fisher Investments, the CFA Institute, the BPO Certification Institute, Autodesk and many others.

The Company also promotes an active and growing Professional Development custom publishing program. Custom publications are typically used by organizations for internal promotional or incentive programs. The Company's custom publications include digital and print books written specifically for a customer and customizations of Professional Development's existing publications to include custom cover art, such as imprints, messages and slogans. Of special note are customized For Dummies publications, which leverage the power of this well-known brand to meet the specific information needs of a wide range of organizations around the world.


The Company's Education business produces educational content and services including online program management for colleges and universities and integrated online teaching and learning resources for instructors and students. Education's mission is to help teachers teach and students learn by delivering to students, faculty and institutions throughout the world personalized content, tools and services that demonstrate results. Education offers innovative products and services principally delivered through college bookstores and online distributors, with customers having access to content in multi-media formats, as well as the traditional textbook. Education's cost-effective, flexible solutions are available in each of its publishing disciplines, including the sciences, engineering, computer science, mathematics, business and accounting, statistics, geography, hospitality and the culinary arts, education, psychology and modern languages.

Education accounted for approximately 19% of total Company revenue in fiscal year 2013 and generated revenue growth at a compound annual rate of 7% over the past five years, including the acquisition of, LLC ("Deltak") in fiscal year 2013.

Education revenue by product type includes eBooks and Print Textbooks; Online Program Management; WileyPLUS, the Company's online learning solution; revenue from the licensing of publishing content rights and Other Nontraditional and Digital Products such as custom publishing and other content adaption's. The graph below presents Education revenue by product type for fiscal year 2013:

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The Company is transforming the Education business from a content publisher to an education solution provider. Education's key growth strategies include developing and acquiring digital products and educational services across the educational value chain; continuing the transformation of the business from traditional print products to digital and custom products and services; focusing on institutional relationships and direct-to-student digital products; and developing the Company's online institutional education model acquired with Deltak.

In October 2012, the Company acquired Deltak for approximately $220 million in cash, net of cash acquired. Deltak works in close partnership with leading colleges and universities to develop and support online degree and certificate programs. The acquisition positions the Company as an online education services provider and expands the services and content value chain for how people teach and learn. Through Deltak, Wiley will now provide a complete solution to help traditional colleges and universities transition their programs into valuable online experiences. Deltak offers market research to validate degree or certification program demand, instructional design, marketing, student recruitment and retention services, and access to the Deltak Engage Learning Management System, with the goal of boosting the quality and efficacy of online and hybrid programs. Deltak provides the Company with access to high-growth markets and a variety of capabilities and technologies for its expansion into custom online courses and curriculum development. The acquisition will also enable Wiley's Education business to accelerate its digital learning strategy and diversify its service offerings to include operational and academic solutions for higher education institutions. Wiley offers Deltak a stable base for new program investment, the ability to accelerate growth globally, access to professional consumers and expanded offerings of content and faculty development. Deltak currently supports more than 100 online programs and was generating annual revenue of approximately $54 million prior to the acquisition and contributed $33.7 million to the Company's fiscal year 2013 revenue since the acquisition date.

Strategic partnerships and relationships with companies such as Microsoft®, Blackboard and the Culinary Institute of America are also an important component of Education's growth strategy. The ability to join Wiley's product development, sales, marketing, distribution and technology with a partner's content and/or brand name has contributed to Education's success.

Education offers high-quality online learning solutions including WileyPLUS, it's research-based, online environment for effective course teaching and learning that is integrated with a complete digital textbook. WileyPLUS improves student learning through instant feedback, personalized learning plans, and self-evaluation tools and a full range of course-oriented activities, including online planning, presentations, study, homework and testing.

Education encourages and supports the customization of its content. Wiley Custom Learning Solutions is a full-service custom publishing program that offers an array of tools and services designed to put content creation in instructors' hands. Our suite of custom products empowers users to create high-quality, economical education solutions tailored to meet individual classroom needs. Through Wiley Custom Select, a custom textbook system, instructors can easily build print and digital materials tailored to their specific course needs and add their own content to create a customized solution derived from one or more Wiley resources.

The Company also provides the services of the Wiley Faculty Network, a global community of faculty that offers guidance, training, and resources. Through the Wiley Faculty Network, instructors and administrators can collaborate with each other, attend virtual and live events, and utilize a wealth of resources all designed to help them grow as educators. Colleagues can also benefit from taking part in the Wiley Learning Institute, an online center for professional development offering workshops, applied learning, coaching programs, and a unique community experience.

In a recent decision, the United States Supreme Court held that the "first sale" doctrine of US Copyright Law applied to copies of US copyrighted material printed outside of the United States. This decision allows third parties who purchase works meant for sale only within a particular non-US territory to resell those works in the United States. These works are often available outside the US at prices significantly below those of the US editions to meet local market pricing conditions.

In response to the ruling, the Company has implemented changes with respect to the sale of US originated Global Education print works outside the United States. The Company is using a tiered approach in certain non-US markets. In those countries where the Company has sales representatives, direct knowledge of local consumption and face to face management of intermediaries, local pricing will be maintained. In those countries where the Company has significant business through long standing local partners, Preferred Partner Agreements are being executed to minimize the resale of Wiley products outside of their designated markets. Lastly, in all non-US markets where the Company does not have sales representatives or Preferred Partner Agreements, locally price differentiated product is not being sold or distributed. In these countries, Global Education product is available only at North American market prices. All sales orders are now being actively monitored for compliance with this policy. Full implementation of these measures is scheduled for completion by 30 June 2013. Additionally, all products carry RFiD (Radio Frequency Identification) tags to track the original sale location. The Company continues to utilize global product strategies which materially differentiate key US print titles through content adaptation and versioning.

As a result of these changes, the company expects the net difference in revenue and operating profit to be negligible after a period of market transition. These changes are expected to reduce units sold and revenue in non-US markets while increasing units and revenue in the US. The reduction in units, at a lower price per unit, will occur immediately in non-US markets while the corresponding recovery of sale of units at a higher price point of formerly cannibalized US units will follow. The timing difference is due to product available for resale into the US will need to be exhausted over time and not replenished. A portion of the revenue and operating income recovery will come from the difference in lower net units globally offset by higher average positive price globally.

Content-Enabled Products and Services:

Journal Products:

The Company publishes approximately 1,600 Research and Professional Development journals. Journal subscription revenue and other related publishing income, such as advertising, backfile sales, the licensing of publishing rights, journal reprints and individual article sales accounted for approximately 48% of the Company's consolidated fiscal year 2013 revenue. The journal portfolio includes titles owned by the Company, in which case they may or may not be sponsored by a professional society; titles owned jointly with a professional society; and titles owned by professional societies and published by the Company pursuant to long-term contracts.

Societies that sponsor or own such journals generally receive a royalty and/or other consideration. The Company may procure editorial services from such societies on a pre-negotiated fee basis. The Company also enters into agreements with outside independent editors of journals that state the duties of the editors, and the fees and expenses for their services. Contributors of articles to the Company's journal portfolio transfer publication rights to the Company or a professional society, as applicable. Journal articles may be based on funded research through government or charitable grants. In certain cases the terms of the grant may require the grant holder to make articles (either the published version or an earlier unedited version) available free of charge to the general public, typically after an embargo period. Funded open access under the Company's Wiley Open Access and OnlineOpen business models facilitate the ability of the grant holder to comply.

The Company sells journal subscriptions directly through Company sales representatives; indirectly through independent subscription agents; through promotional campaigns; and through memberships in professional societies for those journals that are sponsored by societies. Journal subscriptions are primarily licensed through contracts for online content delivered through the Company's online platform, Wiley Online Library. Contracts are negotiated by the Company directly with customers or their subscription agents. Licenses range from one to three years in duration and typically cover calendar years.

Print journals are generally mailed to subscribers directly from independent . . .

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