John Wiley & Sons, Inc. and Subsidiaries
The management of John Wiley & Sons, Inc. and subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
Under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the framework in Internal Control – Integrated Framework issued by COSO, our management concluded that our internal control over financial reporting was effective as of April 30, 2022.
There were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during fiscal year 2022.
The effectiveness of our internal control over financial reporting as of April 30, 2022 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.
The Company’s Corporate Governance Principles, Committee Charters, Business Conduct and Ethics Policy and the Code of Ethics for Senior Financial Officers are published on our web site at www.wiley.com under the “About Wiley—Corporate Governance” captions. Copies are also available free of charge to shareholders on request to the Corporate Secretary, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774.
See accompanying Notes to Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
John Wiley & Sons, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 – Description of Business
The Company, founded in 1807, was incorporated in the state of New York on January 15, 1904. 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.
Wiley is a global leader in scientific research and career-connected education, unlocking human potential by enabling discovery, powering education, and shaping workforces. We report financial information in three segments, as well as a Corporate category. Through the Research Publishing & Platforms segment, we provide peer-reviewed scientific, technical, and medical (STM) publishing, content platforms, and related services to academic, corporate, and government customers, academic societies, and individual researchers. The Academic & Professional Learning segment provides Education Publishing and Professional Learning content and courseware, training and learning services, to students, professionals, and corporations. The Education Services segment provides University Services, including online program management (OPM) services for academic institutions, and Talent Development Services, including placement and training, for professionals and businesses. We have operations primarily located in the United States (US), United Kingdom (UK), India, Sri Lanka, and Germany.
Note 2 – Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards
Summary of Significant Accounting Policies
Basis of Presentation:
Our Consolidated Financial Statements include all the accounts of the Company and our subsidiaries. We have eliminated all intercompany transactions and balances in consolidation. All amounts are in thousands, except per share amounts, and approximate due to rounding.
In the fourth quarter of fiscal year 2021, a UK entity acquired in connection with the acquisition of mthree, which was acquired on January 1, 2020 was erroneously dissolved by the Company in accordance with UK Companies Act regulations while still holding assets. This entity, along with its subsidiaries, (the Entity) had various net intercompany receivables owed to them from other Wiley companies of approximately $188.8 million as of April 30, 2021, which upon a dissolution technically would revert to the British Crown (Crown). Wiley petitioned to Companies House to reinstate the Entity without prejudice, which was completed in March 2022.
When these events occurred, the Company evaluated whether it was appropriate to consolidate the assets, liabilities, and operations of the Entity as part of its Consolidated Financial Statements as of April 30, 2021, and for each reporting period from the Entity being dissolved until its reinstatement in March 2022. The Company evaluated whether there was a liability to the Crown and a related loss associated with the dissolution of the Entity under US GAAP in fiscal year 2021 and through to reinstatement in March 2022.
The Company evaluated the criteria in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 810, “Consolidations,” to determine if consolidating the Entity was appropriate under US GAAP. Based on that evaluation and the administrative nature of the process to restore, the Company concluded that although the Entity was dissolved, we maintained control of the assets of the Entity and, therefore, appropriately consolidated the assets, liabilities, and operations of the Entity in our Consolidated Financial Statements as of April 30, 2021 and through to reinstatement in March 2022.
Reclassifications:
Certain prior year amounts have been reclassified to conform to the current year’s presentation.
Use of Estimates:
The preparation of our Consolidated Financial Statements and related disclosures in conformity with US GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and revenue and expenses during the reporting period. These estimates include, among other items, sales return reserves, allocation of acquisition purchase price to assets acquired and liabilities assumed, goodwill and indefinite-lived intangible assets, intangible assets with definite lives and other long-lived assets, and retirement plans. We review these estimates and assumptions periodically using historical experience and other factors and reflect the effects of any revisions on the Consolidated Financial Statements in the period we determine any revisions to be necessary. Actual results could differ from those estimates, which could affect the reported results.
Book Overdrafts:
Under our cash management system, a book overdraft balance exists for our primary disbursement accounts. This overdraft represents uncleared checks in excess of cash balances in individual bank accounts. Our funds are transferred from other existing bank account balances or from lines of credit as needed to fund checks presented for payment. As of April 30, 2022 and 2021, book overdrafts of $19.4 million and $25.8 million, respectively, were included in Accounts payable on the Consolidated Statements of Financial Position.
Revenue Recognition:
Revenue from contracts with customers is recognized using a five-step model consisting of the following: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) we satisfy a performance obligation. Performance obligations are satisfied when we transfer control of a good or service to a customer, which can occur over time or at a point in time. The amount of revenue recognized is based on the consideration to which we expect to be entitled in exchange for those goods or services, including the expected value of variable consideration. The customer’s ability and intent to pay the transaction price is assessed in determining whether a contract exists with the customer. If collectability of substantially all the consideration in a contract is not probable, consideration received is not recognized as revenue unless the consideration is nonrefundable, and we no longer have an obligation to transfer additional goods or services to the customer, or collectability becomes probable.
See Note 3, “Revenue Recognition, Contracts with Customers,” for further details of our revenue recognition policy.
Cash and Cash Equivalents:
Cash and cash equivalents consist of highly liquid investments with an original maturity of three months or less at the time of purchase and are stated at cost, which approximates market value, because of the short-term maturity of the instruments.
Allowance for Credit Losses:
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 such as, 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 and geopolitical 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 customers’ ability to pay is assessed through our internal credit review processes. Based on the value of credit extended, we assess our customers’ credit by reviewing the total expected receivable exposure, expected timing of payments, and the customers’ established credit rating. In determining customer creditworthiness, we assess our customers’ credit utilizing different resources including third-party 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 geopolitical risk, and the customers’ 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 Consolidated Statements of Financial Position for the period indicated:
|
|
Provision for Credit Losses |
|
Balance as of April 30, 2021 |
|
$ |
21,474 |
|
Current period provision |
|
|
4,029 |
|
Amounts written off, less recoveries |
|
|
(3,754 |
) |
Foreign exchange translation adjustments and other |
|
|
(528 |
) |
Balance as of April 30, 2022 |
|
$ |
21,221 |
|
Sales Return Reserves:
The process that we use to determine our sales returns and the related reserve provision charged against revenue, is based on applying an estimated return rate to current year returnable print book sales. This rate is based upon an analysis of actual historical return experience in the various markets and geographic regions in which we do business. We collect, maintain, and analyze significant amounts of sales returns data for large volumes of homogeneous transactions. This allows us to make reasonable estimates of the amount of future returns. All available data is utilized to identify the returns by market and to which fiscal year the sales returns apply. This enables management to track the returns in detail and identify and react to trends occurring in the marketplace, with the objective of being able to make the most informed judgments possible in setting reserve rates. Associated 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. Print book sales return reserves amounted to a net liability balance of $19.4 million and $22.2 million as of April 30, 2022 and 2021, respectively.
The reserves are reflected in the following accounts of the Consolidated Statements of Financial Position as of April 30:
|
|
2022 |
|
|
2021 |
|
Increase in Inventories, net |
|
$ |
7,820 |
|
|
$ |
10,886 |
|
Decrease in Accrued royalties |
|
|
(3,893 |
) |
|
|
(4,949 |
) |
Increase in Contract liabilities |
|
|
31,135 |
|
|
|
38,034 |
|
Print book sales return reserve net liability balance |
|
$ |
(19,422 |
) |
|
$ |
(22,199 |
) |
Inventories:
Inventories are carried at the lower of cost or net realizable value. US book inventories aggregating $20.6 million and $20.4 million at April 30, 2022 and 2021, respectively, are valued using the last-in, first-out (LIFO) method. All other inventories are valued using the first-in, first-out (FIFO) method. Finished goods not recorded at LIFO have been recorded at the lower of cost or net realizable value.
Product Development Assets:
Product development assets consist of book composition costs and other product development costs and were included in Other non-current assets on the Consolidated Statements of Financial Position. Costs associated with developing a book for publication are expensed until the product is determined to be commercially viable. Book composition costs represent the costs incurred to bring an edited commercial manuscript to publication, which include typesetting, proofreading, design, illustration costs, and digital formatting. Book composition costs are capitalized and are generally amortized on a double-declining basis over their estimated useful lives, ranging from 1 to 3 years. Other product development costs represent the costs incurred in developing software, platforms, and digital content to be sold and licensed to third parties. Other product development costs are capitalized and amortized on a straight-line basis over their estimated useful lives. As of April 30, 2022, the weighted average estimated useful life of other product development costs was approximately 6 years.
Royalty Advances:
Royalty advances are capitalized and, upon publication, are expensed as royalties earned based on sales of the published works. Royalty advances are reviewed for recoverability and a reserve for loss is maintained, if appropriate.
Shipping and Handling Costs:
Costs incurred for third party shipping and handling are primarily reflected in Operating and administrative expenses on the Consolidated Statements of Income (Loss). We incurred $29.0 million, $27.8 million, and $28.8 million in shipping and handling costs in the years ended April 30, 2022, 2021, and 2020, respectively.
Advertising and Marketing Costs:
Advertising and marketing costs are expensed as incurred. These costs are reflected in the Consolidated Statements of Income (Loss) as follows:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Advertising and marketing costs |
|
$ |
100.6 |
|
|
$ |
93.6 |
|
|
$ |
103.1 |
|
Cost of sales(1) |
|
|
62.9 |
|
|
|
57.0 |
|
|
|
65.8 |
|
Operating and administrative expenses |
|
|
37.7 |
|
|
|
36.6 |
|
|
|
37.3 |
|
(1) |
This includes certain advertising and marketing costs incurred by our Education Services business to fulfill performance obligations from contracts with educational institutions. |
Technology, Property, and Equipment:
Technology, property, and equipment is recorded at cost, except for property and equipment that have been impaired, for which we reduce the carrying amount to the estimated fair value at the impairment date. Major renewals and improvements are capitalized, while maintenance and repairs are expensed as incurred.
Technology, property, and equipment is depreciated using the straight-line method based upon the following estimated useful lives: Computer Software – 3 to 10 years; Computer Hardware – 3 to 5 years; Buildings and Leasehold Improvements – the lesser of the estimated useful life of the asset up to 40 years or the duration of the lease; Furniture, Fixtures, and Warehouse Equipment – 5 to 10 years.
Costs incurred for computer software internally developed or obtained for internal use are capitalized during the application development stage and expensed as incurred during the preliminary project and postimplementation stages. Costs incurred during the application development stage include costs of materials, services, and payroll and payroll-related costs for employees who are directly associated with the software project. Such costs are amortized over the expected useful life of the related software, which is generally 3 to 5 years. Costs related to the investment in our Enterprise Resource Planning and related systems are amortized over an expected useful life of 10 years. Maintenance, training, and upgrade costs that do not result in additional functionality are expensed as incurred.
Allocation of Acquisition Purchase Price to Assets Acquired and Liabilities Assumed:
In connection with acquisitions, we allocate the cost of the acquisition to the assets acquired and the liabilities assumed based on the estimates of fair value for such items, including intangible assets and technology acquired. The excess of the purchase consideration over the fair value of assets acquired and liabilities assumed is recorded as goodwill. The determination of the acquisition date fair value of the assets acquired and liabilities assumed requires us to make significant estimates and assumptions, such as forecasted revenue growth rates and operating cash flows, royalty rates, customer attrition rates, obsolescence rates of developed technology, and discount rates. We may use a third-party valuation consultant to assist in the determination of such estimates.
Goodwill and Indefinite-lived Intangible Assets:
Goodwill represents the excess of the aggregate of the following: (1) consideration transferred, (2) the fair value of any noncontrolling interest in the acquiree, and (3) if the business combination is achieved in stages, the acquisition-date fair value of our previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
Indefinite-lived intangible assets primarily consist of brands and trademarks, and publishing rights, and are typically characterized by intellectual property with a long and well-established revenue stream resulting from strong and well-established imprint/brand recognition in the market.
We use the acquisition method of accounting for all business combinations and do not amortize goodwill or intangible assets with indefinite useful lives. Goodwill and intangible assets with indefinite useful lives are tested for possible impairment annually during the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
Intangible Assets with Definite Lives and Other Long-Lived Assets:
Definite-lived intangible assets principally consist of content and publishing rights, customer relationships, developed technology, brands and trademarks, and covenants not to compete agreements, and are amortized over their estimated useful lives. The most significant factors in determining the estimated lives of these intangibles are the history and longevity, combined with the strength and pattern of projected cash flows.
Intangible assets with definite lives as of April 30, 2022, are amortized on a straight-line basis over the following weighted average estimated useful lives: content and publishing rights – 26 years, customer relationships – 16 years, developed technology – 7 years, brands and trademarks – 11 years, and covenants not to compete agreements – 5 years.
Assets with definite lives are evaluated for impairment upon a significant change in the operating or macroeconomic environment. In these circumstances, if an evaluation of the projected undiscounted cash flows indicates impairment, the asset is written down to its estimated fair value based on the discounted future cash flows.
Derivative Financial Instruments:
From time to time, we enter into foreign exchange forward 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. 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.
Foreign Currency Gains/Losses:
We maintain operations in many non-US locations. Assets and liabilities are translated into US dollars using end-of-period exchange rates and revenues, and expenses are translated into US dollars using weighted average rates. Our significant investments in non-US businesses are exposed to foreign currency risk. Foreign currency translation adjustments are reported as a separate component of Accumulated Other Comprehensive Loss within Shareholders’ Equity. Foreign currency transaction gains or losses are recognized on the Consolidated Statements of Income (Loss) as incurred.
Stock-Based Compensation:
We recognize stock-based compensation expense based on the fair value of the stock-based awards on the grant date, reduced by an estimate for future forfeited awards. As such, stock-based compensation expense is only recognized for those awards that are expected to ultimately vest. The fair value of stock-based awards is recognized in net income generally on a straight-line basis over the requisite service period. Stock-based compensation expense associated with performance-based stock awards is based on actual financial results for targets established up to three years in advance, or less. The cumulative effect on current and prior periods of a change in the estimated number of performance share awards, or estimated forfeiture rate, is recognized as an adjustment to earnings in the period of the revision. If actual results differ significantly from estimates, our stock-based compensation expense and Consolidated Statements of Income (Loss) could be impacted. The grant date fair value for stock options is estimated using the Black-Scholes option-pricing model. The determination of the assumptions used in the Black-Scholes model include the expected life of an option, the expected volatility of our common stock over the estimated life of the option, a risk-free interest rate, and the expected dividend yield. Judgment was also required in estimating the amount of stock-based awards that may be forfeited.
Recently Adopted Accounting Standards
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.” In January 2021, the FASB clarified the scope of that guidance with the issuance of ASU 2021-01, “Reference Rate Reform: Scope.” These ASUs provide 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 was 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. On December 22, 2021, we amended the Amended and Restated RCA (as defined in Note 14, “Debt and Available Credit Facilities”) to change the rates for Sterling and euro denominated borrowings from LIBOR-based rates to alternative rates. We applied ASU 2020-04 at the time of this modification, and there was no impact on our Consolidated Financial Statements. Refer to Note 14, “Debt and Available Credit Facilities,” for more information. The future impact of this ASU on our Consolidated Financial Statements will be based on any future contract modifications.
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued Accounting Standards Update (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. We adopted ASU 2019-12 on May 1, 2021. The adoption did not have a material impact on our Consolidated Financial Statements at the time of adoption. The impact in the future would depend on any changes in tax laws and the applicable enactment dates. In accordance with ASU 2019-12, the enactment date is when any effects are recognized in the consolidated financial statements.
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,” and issued subsequent amendments to the initial guidance thereafter. 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 required enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses.
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. 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 Consolidated Statements of Income (Loss), or our Consolidated Statements of Cash Flows. See above under the caption “Allowance for Credit Losses” for a discussion of our policy.
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.
Recently Issued Accounting Standards
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires that an acquirer recognize, and measure, contract assets and contract liabilities acquired in a business combination in accordance with ASC 606 “Revenue from Contracts with Customers” (Topic 606) as if it had originated the contracts. Generally, this would result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements if the acquiree prepared financial statements in accordance with US GAAP. This standard is effective for us on May 1, 2023, including interim periods within the fiscal year. Early adoption is permitted. The standard is applied prospectively to business combinations occurring on or after the effective date of the amendments. The impact will be based on future business combinations after we adopt the standard.
Convertible Debt Instruments, Derivatives, and EPS
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. There was no impact to our Consolidated Financial Statements at the date of adoption.
Note 3 — Revenue Recognition, Contracts with Customers
Disaggregation of Revenue
The following tables present our revenue from contracts with customers disaggregated by segment and product type.
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Research Publishing & Platforms: |
|
|
|
|
|
|
|
|
|
Research Publishing |
|
$ |
1,057,022 |
|
|
$ |
972,512 |
|
|
$ |
908,952 |
|
Research Platforms |
|
|
54,321 |
|
|
|
42,837 |
|
|
|
39,887 |
|
Total Research Publishing & Platforms |
|
|
1,111,343 |
|
|
|
1,015,349 |
|
|
|
948,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Academic & Professional Learning: |
|
|
|
|
|
|
|
|
|
|
|
|
Education Publishing(1) |
|
|
349,992 |
|
|
|
361,194 |
|
|
|
351,514 |
|
Professional Learning |
|
|
296,831 |
|
|
|
280,667 |
|
|
|
298,601 |
|
Total Academic & Professional Learning |
|
|
646,823 |
|
|
|
641,861 |
|
|
|
650,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education Services: |
|
|
|
|
|
|
|
|
|
|
|
|
University Services(2) |
|
|
226,131 |
|
|
|
227,700 |
|
|
|
210,882 |
|
Talent Development Services(1)(3) |
|
|
98,631 |
|
|
|
56,591 |
|
|
|
21,647 |
|
Total Education Services |
|
|
324,762 |
|
|
|
284,291 |
|
|
|
232,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
$ |
2,082,928 |
|
|
$ |
1,941,501 |
|
|
$ |
1,831,483 |
|
(1) |
In May 2021, we moved the WileyNXT product offering from Academic & Professional Learning – Education Publishing to Education Services – Talent Development Services. As a result, the prior period results related to the WileyNXT product offering have been included in Education Services – Talent Development Services. The Revenue was $2.7 million and $0.7 million for the years ended April 30, 2021 and April 30, 2020, respectively. There were no changes to our total consolidated financial results. |
(2) |
University Services was previously referred to as Education Services OPM. |
(3) |
Talent Development Services was previously referred to as mthree. |
The following information describes our disaggregation of revenue by segment and product type. Overall, the majority of our revenue is recognized over time.
Research Publishing & Platforms
Research Publishing & Platforms customers include academic, corporate, government, and public libraries, funders of research, researchers, scientists, clinicians, engineers and technologists, scholarly and professional societies, and students and professors. Research Publishing & Platforms products are sold and distributed globally through multiple channels, including research libraries and library consortia, independent subscription agents, direct sales to professional society members, and other customers. Publishing centers include Australia, China, Germany, India, the UK, and the US. The majority of revenue generated from Research Publishing & Platforms products is recognized over time. Total Research Publishing & Platforms revenue was $1,111.3 million in the year ended April 30, 2022.
We disaggregated revenue by Research Publishing and Research Platforms to reflect the different type of products and services provided.
Research Publishing Products
Research Publishing products provide scientific, technical, medical, and scholarly journals, as well as related content and services, to academic, corporate, and government libraries, learned societies, and individual researchers and other professionals. Research Publishing revenue was $1,057.0 million in the year ended April 30, 2022, and the majority is recognized over time.
Research Publishing products generate approximately 79% of its revenue from contracts with its customers from Journal Subscriptions (pay to read), Open Access (pay to publish), and Transformational Agreements (read and publish), and the remainder from Licensing, Reprints, Backfiles, and Other.
Journal Subscriptions, Open Access, and Transformational Models
Journal subscription contracts are negotiated by us directly with customers or their subscription agents. Subscription periods typically cover calendar years. In a typical journal subscription sale, there is a written agreement between us and our customer that covers multiple years. However, we typically account for these agreements as one-year contracts because our enforceable rights under the agreements are subject to an annual confirmation and negotiation process with the customer.
In journal subscriptions, there are generally two performance obligations: a functional intellectual property license with a stand-ready promise to provide access to new content for one year, which includes online hosting of the content, and a functional intellectual property perpetual license for access to historical journal content, which also includes online hosting of the content. The transaction price consists of fixed consideration. Journal subscription revenue is generally collected in advance when the annual license is granted and no significant financing component exists.
The total transaction price is allocated to each performance obligation based on its relative standalone selling price. We allocate revenue to the stand-ready promise to provide access to new content for one year based on its observable standalone selling price which is generally the contractually stated price, and the revenue for new content is recognized over one year as we have a continuous stand-ready obligation to provide the right of access to additional intellectual property. The allocation of revenue to the perpetual licenses for access to historical journal content is done using the expected cost plus a margin approach as permitted by the revenue standard. Revenue is recognized at the point in time when access to historical content is initially granted.
Under the Open Access business model, we have a signed contract with the customer that contains enforceable rights. The Open Access business model in a typical model includes an over-time single performance obligation that combines a promise to host the customer’s content on our open access platform, and a promise to provide an Article Publication Charge (APC) at a discount to eligible users who are defined in the contract, in exchange for an upfront payment. Enforceable right to payment occurs over time as we fulfill our obligation to provide a discount to eligible users, as defined, on future APCs. Therefore, the upfront payment is recorded as a contract liability and revenue is recognized over time.
Transformational agreements (read and publish) are the innovative new model that blends journal subscription and open access offerings. Essentially, for a single fee, a national or regional consortium of libraries pays for and receives full read access to our journal portfolio and the ability to publish under an open access arrangement. Like subscriptions, transformational deals involve recurring revenue under multiyear contracts. Unlike subscriptions, some transformational agreements also allow for further upside depending on how much publishing volume we generate. Transformational models accelerate the transition to open access while maintaining subscription access.
Starting in calendar year 2022, we have signed transformational agreements that generally include three performance obligations: (1) a functional intellectual property license with a stand-ready promise to provide access to new content for one year, which includes online hosting of the content, (2) a functional intellectual property perpetual license for access to historical journal content, which also includes online hosting of the content, and (3) a publishing entitlement that allows for a fixed number of articles to be published in hybrid open access journals each contract year. The transaction price consists of fixed consideration and is allocated to the publishing entitlement performance obligation based on its observable standalone selling price, the residual approach for the license to access new content, and the expected cost plus a margin approach for the perpetual license. The revenue for the publishing entitlement and the license to access new content is generally recognized straight-line over the contract year due to the stand-ready promises. The revenue for the perpetual license is recognized at the point in time when access to historical content is initially granted. Cash is generally collected in advance. In addition, some of these transitional agreements also include another performance obligation that includes the promise to provide an APC at a discount in gold open access journals and is recognized over time.
In January 2019, Wiley announced a contractual arrangement in support of open access, a countrywide partnership agreement with Projekt DEAL, a representative of nearly 700 academic institutions in Germany. This three-year agreement, which was extended for one year, provides all Projekt DEAL institutions with access to read Wiley’s academic journals back to the year 1997, and researchers at Projekt DEAL institutions can publish articles open access in Wiley’s journals. The partnership will better support institutions and researchers in advancing open science, driving discovery, and developing and disseminating knowledge. Projekt DEAL includes multiple performance obligations, which include a stand-ready promise to provide access to new content, perpetual license for access to historical journal content, and accepting articles to be hosted on our open access platform. We are compensated primarily through a fee per article published and a consolidated access fee. The consideration for Projekt DEAL consists of fixed and variable consideration. We allocated the total consideration to the fixed and variable components based on its relative standalone selling prices for each performance obligation.
Licensing, Reprints, Backfiles, and Other
Within licensing, the revenue derived from these contracts is primarily comprised of advance payments, including minimum guarantees and sales- or usage-based royalty agreements. Our intellectual property is considered to be functional intellectual property. Due to the stand-ready promise to provide updates during the subscription period, which is generally an annual period, revenue for the minimum guarantee is recognized on a straight-line basis over the term of the agreement. For our sales-or usage-based royalty agreements, we recognize revenue in the period of usage based on the amounts earned. We record revenue under these arrangements for the amounts due and not yet reported to us based on estimates of the sales or usage of these customers and pursuant to the terms of the contracts. We also have certain licenses whereby we receive a non-refundable minimum guarantee against a volume-based royalty throughout the term of the agreement. We recognize volume-based royalty income only when cumulative consideration exceeds the minimum guarantee.
Reprints contracts generally contain a single performance obligation which is the delivery of printed articles. Revenue is recognized at the time of delivery of the printed articles.
For Backfiles, the performance obligation is the granting of a functional intellectual property license. Revenue is recognized at the time the functional intellectual property license is granted.
Other includes our Article Select offering, whereby we have a single performance obligation to our customers to give access to an article through the purchase of a token. The customer redeems the token for access to the article for a 24-hour period. The customer purchases the tokens with an upfront cash payment. Revenue is recognized when access to the article is provided.
Research Platforms Services
Research Platforms is principally comprised of Atypon, a publishing software and service provider that enables scholarly and professional societies and publishers to deliver, host, enhance, market, and manage their content on the web through the Literatum platform. Research Platforms revenue was $54.3 million in the year ended April 30, 2022 and the majority is recognized over time.
Research Platforms services primarily includes a single performance obligation for the implementation and hosting of subscription services. The transaction price is fixed which may include price escalators that are fixed increases per year, and therefore, revenue is recognized upon the initiation of the subscription period and recognized on a straight-line basis over the time of the contractual period. The duration of these contracts is generally multiyear ranging from 2 to 5 years.
Academic & Professional Learning
Academic & Professional Learning provides Education Publishing and Professional Learning products and services including scientific, professional, and education print and digital books, digital courseware, and test preparation services, to libraries, corporations, students, professionals, and researchers, as well as learning, development, and assessment services for businesses and professionals. Communities served include business, finance, accounting, workplace learning, management, leadership, technology, behavioral health, engineering/ architecture, science and medicine, and education. Products are developed for worldwide distribution through multiple channels, including chain and online booksellers, libraries, colleges and universities, corporations, direct to consumer, web sites, distributor networks, and other online applications. Publishing centers include Australia, Germany, India, the UK, and the US. Total Academic & Professional Learning revenue was $646.8 million in the year ended April 30, 2022.
We disaggregated revenue by type of products provided. Academic & Professional Learning products are Education Publishing and Professional Learning. Academic & Professional Learning revenues are mainly recognized at a point in time.
Education Publishing Products
Education Publishing products revenue was $350.0 million in the year ended April 30, 2022. Education Publishing products generate approximately 63% of its revenue from contracts with its customers from Education (print and digital) Publishing, which is recognized at a point in time, and 23% from Digital Courseware, which is recognized over time. The remainder of its revenues were from Test Preparation and Certification and Licensing and Other, which has a mix of revenue recognized at a point in time and over time.
Education Publishing and Professional Publishing (included within Professional Learning below)
Our performance obligations as they relate to Education and Professional Publishing are primarily book products delivered in both print and digital form which could include single or multiple performance obligations based on the number of print or digital books purchased. Each is represented by an International Standard Book Number (ISBN), with each ISBN representing a performance obligation. Each ISBN has an observable stand-alone selling price as Wiley sells the books separately.
This revenue stream also includes variable consideration as it relates to discounts and returns for both print and digital books. Discounts are identifiable by performance obligation and therefore are applied at the point of sale by performance obligation. The process that we use to determine our sales returns and the related reserve provision charged against revenue, is based on applying an estimated return rate to current year returnable print book sales. This rate is based upon an analysis of actual historical return experience in the various markets and geographic regions in which we do business. We collect, maintain, and analyze significant amounts of sales returns data for large volumes of homogeneous transactions. This allows us to make reasonable estimates of the amount of future returns. All available data is utilized to identify the returns by market and to which fiscal year the sales returns apply. This enables management to track the returns in detail and identify and react to trends occurring in the marketplace, with the objective of being able to make the most informed judgments possible in setting reserve rates. Associated with the estimated sales return reserves, we also include a related increase to inventory and reduction to accrued royalties as a result of the expected returns.
As it relates to print and digital books within Education Publishing and Professional Publishing, revenue is recognized at the point when control of product transfers, which for print is upon shipment or for digital when fulfillment of the products has been rendered.
Digital Courseware Products
Courseware customers purchase access codes to utilize the product. This could include single or multiple performance obligations based on the number of course ISBNs purchased. Revenue is recognized over time in the period from when the access codes are activated over the applicable semester term to which such product relates.
Test Preparation and Certification Products
Test Preparation and Certification contracts are generally three-year agreements. This revenue stream includes multiple performance obligations as it relates to the online and printed course materials, including such items as textbooks, ebooks, video lectures, flashcards, study guides, and test banks. The transaction price is fixed; however, discounts are offered and returns of certain products are allowed. We allocate revenue to each performance obligation based on its relative standalone selling price. This standalone selling price is generally based upon the observable selling prices where the product is sold separately to customers. Depending on the performance obligation, revenue is recognized at the time the product is delivered and control has passed to the customer or over time due to our stand-ready obligation to provide updates to the customer.
Licensing and Other
Revenue derived from our licensing contracts is primarily comprised of advance payments and sales- or usage-based royalties. Revenue for advance payments is recognized at the point in time that the functional intellectual property license is granted. For sales- or usage- based royalties, we record revenue under these arrangements for the amounts due and not yet reported to us based on estimates of the sales or usage of these customers and pursuant to the terms of the contracts.
Professional Learning Products
Professional Learning products revenue was $296.8 million in the year ended April 30, 2022. Professional Learning (print and digital) products generate approximately 61% of revenue from contracts with its customers from Professional Publishing and Licensing and Other, both of which are described above, and both are mainly recognized at a point in time. Approximately 39% of Professional Learning products revenue is from contracts with its customers from Corporate Training and Corporate Learning, which is recognized mainly over time.
Corporate Training
Corporate Training through our authorized distributor network includes multiple performance obligations. This includes a performance obligation that includes an annual membership which includes the right to purchase products and services, access to the platform, support, and training. This performance obligation is recognized over time as we have an obligation to stand-ready for the customer’s use of the services. In addition, there are performance obligations for the assessments and related products or services which are recognized at a point in time when the assessment, product, or service is provided or delivered. The transaction price is allocated to each performance obligation based on its observable standalone selling price which is generally the contractually stated price for the performance obligation related to the annual membership, and for the other performance obligations based on its relative observable selling price when sold separately.
In addition, as it relates to Corporate Training customers’ unexercised rights for situations where we have received a nonrefundable payment for a customer to receive an assessment and the customer is not expected to exercise such right, we will recognize such “breakage” amounts as revenue in proportion to the pattern of rights exercised by the customer, which is generally one year.
Corporate Learning
The transaction price consists of fixed consideration that is determined at the beginning of each year and received at the same time. Within Corporate Learning there are multiple performance obligations, which include the licenses to learning content and the learning application. Revenue is recognized over time as we have a continuous obligation to provide the right of access to the intellectual property which includes the licenses and learning applications.
Education Services
Education Services revenue was $324.8 million in the year ended April 30, 2022, and the majority is recognized over time. We disaggregated revenue by type of services provided, which are University Services (previously referred to as Education Services OPM) and Talent Development Services (previously referred to as mthree).
University Services
University Services revenue was $226.1 million in the year ended April 30, 2022 and is mainly recognized over time. University Services primarily engages in the comprehensive management of online degree programs for universities and has grown to include a broad array of technology enabled service offerings that address our partner specific pain points. Increasingly, this includes delivering career credentialing education that advances specific careers with in-demand skills.
University Services includes market research, marketing, student recruitment, enrollment support, proactive retention support, academic services to design courses, faculty support, and access to the Engage Learning Management System, which facilitates the online education experience. Graduate degree programs include Business Administration, Finance, Accounting, Healthcare, Engineering, Communications, and others. As of April 30, 2022, the University Services business had 68 university partners under contract. We are also extending the core OPM business, as well as delivering a broader array of essential university and career credentialing services that the market is demanding and which leverage our core Wiley skills and assets. This full stack education includes teacher professional development and IT skills training, through which we develop and deliver professional credits and job placement through our corporate partners. In addition, University Services derives revenue from unbundled service offerings. University Services revenue is primarily derived from prenegotiated contracts with institutions that provide for a share of tuition generated from students who enroll in a program. The duration of University Services contracts are generally multiyear agreements ranging from a period of 7 to 10 years, with some having optional renewal periods. These optional renewal periods are not a material right and are not considered a separate performance obligation.
University Services includes a single performance obligation for the services provided because of the integrated technology and services our institutional clients need to attract, enroll, educate, and support students. Consideration is variable since it is based on the number of students enrolled in a program. We begin to recognize revenue at the start of the delivery of the class within a semester overtime, which is also when the variable consideration contingency is resolved.
Talent Development Services
Talent Development Services revenue was $98.6 million in the year ended April 30, 2022 and is recognized at the point in time the services are provided to its customers. Talent Development Services is a talent placement provider that finds, trains, and places job-ready technology talent in roles with leading corporations worldwide.
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 accounts receivable, net and contract liabilities from contracts with customers.
|
|
April 30, 2022 |
|
|
April 30, 2021 |
|
|
Increase/ (Decrease) |
|
Balances from contracts with customers: |
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
$ |
331,960 |
|
|
$ |
311,571 |
|
|
$ |
20,389 |
|
Contract liabilities(1) |
|
|
538,126 |
|
|
|
545,425 |
|
|
|
(7,299 |
) |
Contract liabilities (included in Other long-term liabilities) |
|
$ |
19,072 |
|
|
$ |
19,560 |
|
|
$ |
(488 |
) |
(1) |
The sales return reserve recorded in Contract liabilities is $31.1 million and $38.0 million as of April 30, 2022 and April 30, 2021, respectively. See Note 2, “Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards” for further details of the sales return reserve. |
For the year ended April 30, 2022, we estimate that we recognized as revenue substantially all of the current contract liability balance at April 30, 2021.
The decrease in contract liabilities, excluding the sales return reserve, was primarily driven by revenue earned on journal subscription agreements, transformational agreements, and open access and, to a lesser extent, the impact of foreign exchange. This was partially offset by an increase due to renewals of journal subscription agreements, transformational agreements, and open access.
Remaining Performance Obligations included in Contract Liability
As of April 30, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations is approximately $557.2 million, which includes the sales return reserve of $31.1 million. Excluding the sales return reserve, we expect that approximately $507.0 million will be recognized in the next twelve months with the remaining $19.1 million to be recognized 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 product types: (1) Research Platforms services, which includes customer specific implementation costs per the terms of the contract and (2) University Services, which includes customer specific costs to develop courses per the terms of the contract.
Our assets associated with incremental costs to fulfill a contract were $10.9 million and $12.1 million at April 30, 2022 and 2021, respectively, and are included within Other non-current assets on our Consolidated Statements of Financial Position. We recorded amortization expense of $5.2 million, $5.1 million, and $4.2 million in the years ended April 30, 2022, 2021, and 2020, respectively, related to these assets within Cost of sales on the Consolidated Statements of Income (Loss).
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 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 the Consolidated Statements of Income (Loss). We incurred $29.0 million, $27.8 million, and $28.8 million in shipping and handling costs in the years ended April 30, 2022, 2021, and 2020, respectively.
Note 4 – Acquisitions
Pro forma financial information related to these acquisitions has not been provided as it is not material to our consolidated results of operations.
Fiscal Year 2022
XYZ Media
On December 29, 2021, we completed the acquisition of certain assets of XYZ Media Inc. (XYZ Media). XYZ Media is a company that generates leads for higher education institutions. The results of XYZ Media are included in our Education Services segment results. The fair value of consideration transferred at the date of acquisition was $45.4 million, which included $38.0 million of cash and approximately 129 thousand shares of Wiley Class A common stock, or approximately $7.4 million. We financed the payment of the cash consideration with a combination of cash on hand and borrowings under our Amended and Restated RCA (as defined below in Note 14, “Debt and Available Credit Facilities”).
The XYZ Media acquisition was accounted for using the acquisition method of accounting. The preliminary excess purchase price over identifiable net tangible and intangible assets acquired, and liabilities assumed, has been recorded to Goodwill in our Consolidated Statements of Financial Position. Goodwill represents synergies and economies of scale expected from the combination of services. We recorded the preliminary fair value of the assets acquired and liabilities assumed on the acquisition date. The goodwill will be deductible for tax purposes. The acquisition related costs to acquire XYZ Media were expensed when incurred and were approximately $0.1 million for the year ended April 30, 2022. Such costs were allocated to the Education Services segment and are reflected in Operating and administrative expenses on the Consolidated Statements of Net Income (Loss) for the year ended April 30, 2022.
XYZ Media’s revenue and operating loss included in our Education Services segment results for the year ended April 30, 2022 was $3.6 million and $(1.5) million, respectively.
The following table summarizes the consideration transferred to acquire XYZ Media and the preliminary allocation of the purchase price among the assets acquired and liabilities assumed.
|
|
Preliminary Allocation |
|
Total consideration transferred |
|
$ |
45,363 |
|
|
|
|
|
|
Assets: |
|
|
|
|
Current assets |
|
|
913 |
|
Intangible assets, net |
|
|
22,711 |
|
Goodwill |
|
|
22,226 |
|
Other non-current assets |
|
|
46 |
|
Total assets |
|
$ |
45,896 |
|
|
|
|
|
|
Liabilities: |
|
|
|
|
Current liabilities |
|
|
533 |
|
Total liabilities |
|
$ |
533 |
|
The following table summarizes the identifiable intangible assets acquired and their weighted-average useful life at the date of acquisition.
|
|
Estimated Fair Value |
|
|
Weighted-Average Useful Life (in Years) |
|
Developed technology |
|
$ |
20,930 |
|
|
|
7 |
|
Customer relationships |
|
|
1,340 |
|
|
|
6 |
|
Covenants not to compete |
|
|
323 |
|
|
|
5 |
|
Tradename |
|
|
118 |
|
|
|
1 |
|
Total |
|
$ |
22,711 |
|
|
|
|
|
The allocation of the total consideration transferred to the assets acquired, including intangible assets and goodwill, 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.
Other Acquisitions in Fiscal Year 2022
On November 30, 2021, we acquired the assets of the eJournalPress (EJP) business from Precision Computer Works, Inc. EJP is a technology platform company with an established journal submission and peer review management system. The results of EJP are included in our Research Publishing & Platforms segment results.
On October 1, 2021, we completed the acquisition of certain assets of J&J Editorial Services, LLC. (J&J). J&J is a publishing services company providing expert offerings in editorial operations, production, copyediting, system support, and consulting. The results of J&J are included in our Research Publishing & Platforms segment results.
We also completed in the year ended April 30, 2022 the acquisition of two immaterial businesses included in our Research Publishing & Platforms segment and the acquisition of one immaterial business in our Education Services segment.
The aggregate preliminary fair value of consideration transferred for these other acquisitions was approximately $41.2 million during the year ended April 30, 2022, which included $36.2 million of cash paid at the acquisition dates and $5.0 million of additional cash to be paid after the acquisition dates. The fair value of the cash consideration transferred, net of $1.2 million of cash acquired was approximately $34.9 million. These other acquisitions were accounted for using the acquisition method of accounting as of their respective acquisition dates.
Associated with these other acquisitions, the preliminary aggregate excess purchase price over identifiable net tangible and intangible assets acquired, and liabilities assumed of $24.8 million has been recorded to Goodwill on our Consolidated Statements of Financial Position as of April 30, 2022 and $15.6 million of intangible assets subject to amortization have been recorded, including developed technology, customer relationships, trademarks, covenants not to compete, and content that is being amortized over preliminary estimated weighted-average useful lives of 4, 8, 2, 4, and 4 years, respectively. The fair value assessed for the majority of the tangible assets acquired and liabilities assumed approximated their carrying value. Goodwill represents synergies and economies of scale expected from the combination of services. Goodwill of $24.8 million has been allocated to the Research Publishing & Platforms segment and none has been allocated to the Education Services segment. Approximately $18.7 million of the goodwill will be deductible for tax purposes, and $6.1 million will not be deductible for tax purposes. The incremental revenue for the year ended April 30, 2022 related to these other acquisitions was approximately $8.1 million. The aggregate acquisition related costs to acquire these other acquisitions was expensed when incurred and was approximately $0.5 million for the year ended April 30, 2022.
The allocation of the total consideration transferred to the assets acquired, including intangible assets and goodwill, 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 reports, 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.
Fiscal Year 2021
Hindawi
On December 31, 2020, we completed the acquisition of 100% of the outstanding stock of Hindawi Limited (Hindawi). Hindawi is a scientific research publisher and an innovator in open access publishing. Its results of operations are included in our Research Publishing & Platforms segment.
The fair value of the consideration transferred at the acquisition date was $300.1 million, which included $299.3 million of cash and $0.8 million related to the settlement of a preexisting relationship. We financed the payment of the cash consideration primarily through borrowings under our Amended and Restated RCA (as defined below in Note 14, “Debt and Available Credit Facilities”) and using cash on hand. The fair value of the cash consideration transferred, net of $1.0 million of cash acquired was approximately $298.3 million.
The Hindawi acquisition was accounted for using the acquisition method of accounting. The excess purchase price over identifiable net tangible and intangible assets acquired, and liabilities assumed, has been recorded to Goodwill in our Consolidated Statements of Financial Position. Goodwill represents synergies and economies of scale expected from the combination of services. We recorded the fair value of the assets acquired and liabilities assumed on the acquisition date. None of the goodwill will be deductible for tax purposes. The acquisition related costs to acquire Hindawi were expensed when incurred and were approximately $2.4 million for the year ended April 30, 2021. Such costs were allocated to the Research Publishing & Platforms segment and are reflected in Operating and administrative expenses on the Consolidated Statements of Income (Loss) for the year ended April 30, 2021.
Hindawi’s incremental revenue and operating income included in our Research Publishing & Platforms segment results for the year ended April 30, 2022 was $34.6 million and $8.0 million, respectively. Hindawi’s revenue and operating loss included in our Research Publishing & Platforms segment results for the year ended April 30, 2021 was $12.0 million and $(2.1) million, respectively.
During the year ended April 20, 2022, no revisions were made to the allocation of the consideration transferred to the assets acquired and liabilities assumed. The following table summarizes the consideration transferred to acquire Hindawi and the final allocation of the purchase price among the assets acquired and liabilities assumed.
|
|
Final Allocation |
|
Total consideration transferred |
|
$ |
300,086 |
|
|
|
|
|
|
Assets: |
|
|
|
|
Current assets |
|
|
2,812 |
|
Technology, property and equipment, net |
|
|
844 |
|
Intangible assets, net |
|
|
194,900 |
|
Goodwill |
|
|
147,388 |
|
Operating lease right-of-use assets |
|
|
3,762 |
|
Other non-current assets |
|
|
69 |
|
Total assets |
|
$ |
349,775 |
|
|
|
|
|
|
Liabilities: |
|
|
|
|
Current liabilities |
|
|
3,594 |
|
Deferred income tax liabilities |
|
|
37,031 |
|
Operating lease liabilities |
|
|
3,150 |
|
Other long-term liabilities |
|
|
5,914 |
|
Total liabilities |
|
$ |
49,689 |
|
The following table summarizes the identifiable intangible assets acquired and their weighted-average useful life at the date of acquisition.
|
|
Fair Value |
|
|
Weighted-Average Useful Life (in Years) |
|
Content and publishing rights |
|
$ |
188,500 |
|
|
|
15 |
|
Developed technology |
|
|
5,000 |
|
|
|
6 |
|
Trademarks |
|
|
1,000 |
|
|
|
2 |
|
Customer relationships |
|
|
400 |
|
|
|
10 |
|
Total |
|
$ |
194,900 |
|
|
|
|
|
The allocation of the consideration transferred to the assets acquired and the liabilities assumed was finalized during the three months ended January 31, 2022.
Note 5 – Reconciliation of Weighted Average Shares Outstanding
A reconciliation of the shares used in the computation of earnings (loss) per share follows (shares in thousands):
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Weighted average shares outstanding |
|
|
55,759 |
|
|
|
55,931 |
|
|
|
56,224 |
|
Less: Unvested restricted shares |
|
|
— |
|
|
|
(1 |
) |
|
|
(15 |
) |
Shares used for basic earnings (loss) per share |
|
|
55,759 |
|
|
|
55,930 |
|
|
|
56,209 |
|
Dilutive effect of unvested restricted stock units and other stock awards |
|
|
839 |
|
|
|
531 |
|
|
|
— |
|
Shares used for diluted earnings (loss) per share |
|
|
56,598 |
|
|
|
56,461 |
|
|
|
56,209 |
|
Antidilutive options to purchase Class A common shares, restricted shares, warrants to purchase Class A common shares and contingently issuable restricted stock which are excluded from the table above |
|
|
772 |
|
|
|
982 |
|
|
|
1,677 |
|
In calculating diluted net loss per common share for the year ended April 30, 2020, our diluted weighted average number of common shares outstanding excludes the effect of unvested restricted stock units and other stock awards as the effect was anti-dilutive. This occurs when a US GAAP net loss is reported and the effect of using dilutive shares is antidilutive.
The shares associated with performance-based stock awards are considered contingently issuable shares and will be included in the diluted weighted average number of common shares outstanding when they have met the performance conditions and when their effect is dilutive.
Note 6 – Accumulated Other Comprehensive Loss
Changes in Accumulated other comprehensive loss by component, net of tax, for the years ended April 30, 2022, 2021, and 2020 were as follows:
|
|
Foreign Currency Translation |
|
|
Unamortized Retirement Costs |
|
|
Interest Rate Swaps |
|
|
Total |
|
Balance at April 30, 2019 |
|
$ |
(312,107 |
) |
|
$ |
(196,057 |
) |
|
$ |
(574 |
) |
|
$ |
(508,738 |
) |
Other comprehensive loss before reclassifications |
|
|
(28,596 |
) |
|
|
(36,965 |
) |
|
|
(5,988 |
) |
|
|
(71,549 |
) |
Amounts reclassified from Accumulated other comprehensive loss |
|
|
— |
|
|
|
5,102 |
|
|
|
(312 |
) |
|
|
4,790 |
|
Total other comprehensive loss |
|
|
(28,596 |
) |
|
|
(31,863 |
) |
|
|
(6,300 |
) |
|
|
(66,759 |
) |
Balance at April 30, 2020 |
|
$ |
(340,703 |
) |
|
$ |
(227,920 |
) |
|
$ |
(6,874 |
) |
|
$ |
(575,497 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
82,762 |
|
|
|
(6,273 |
) |
|
|
(639 |
) |
|
|
75,850 |
|
Amounts reclassified from Accumulated other comprehensive loss |
|
|
— |
|
|
|
6,047 |
|
|
|
2,810 |
|
|
|
8,857 |
|
Total other comprehensive income (loss) |
|
|
82,762 |
|
|
|
(226 |
) |
|
|
2,171 |
|
|
|
84,707 |
|
Balance at April 30, 2021 |
|
$ |
(257,941 |
) |
|
$ |
(228,146 |
) |
|
$ |
(4,703 |
) |
|
$ |
(490,790 |
) |
Other comprehensive (loss) income before reclassifications |
|
|
(71,625 |
) |
|
|
40,247 |
|
|
|
5,165 |
|
|
|
(26,213 |
) |
Amounts reclassified from Accumulated other comprehensive loss |
|
|
— |
|
|
|
5,673 |
|
|
|
3,184 |
|
|
|
8,857 |
|
Total other comprehensive (loss) income |
|
|
(71,625 |
) |
|
|
45,920 |
|
|
|
8,349 |
|
|
|
(17,356 |
) |
Balance at April 30, 2022 |
|
$ |
(329,566 |
) |
|
$ |
(182,226 |
) |
|
$ |
3,646 |
|
|
$ |
(508,146 |
) |
For the years ended April 30, 2022, 2021, and 2020, pretax actuarial losses included in Unamortized Retirement Costs of approximately $7.2 million, $7.8 million, and $6.4 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 Other income, net on our Consolidated Statements of Income (Loss).
Our policy for releasing the income tax effects from accumulated other comprehensive (loss) income is to release when the corresponding pretax accumulated other comprehensive (loss) income items are reclassified to earnings.
Note 7 – Restructuring and Related (Credits) Charges
Beginning in fiscal year 2020, we initiated a multiyear Business Optimization Program (the Business Optimization Program) to drive efficiency improvement and operating savings.
The following tables summarize the pretax restructuring (credits) charges related to this program:
|
|
For the Years Ended April 30, |
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Total Charges Incurred to Date |
|
(Credits) Charges by Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
Research Publishing & Platforms |
|
$ |
237 |
|
|
$ |
99 |
|
|
$ |
3,546 |
|
|
$ |
3,882 |
|
Academic & Professional Learning |
|
|
(454 |
) |
|
|
3,229 |
|
|
|
10,475 |
|
|
|
13,250 |
|
Education Services |
|
|
8 |
|
|
|
531 |
|
|
|
3,774 |
|
|
|
4,313 |
|
Corporate Expenses |
|
|
(1,218 |
) |
|
|
29,590 |
|
|
|
15,018 |
|
|
|
43,390 |
|
Total Restructuring and Related (Credits) Charges |
|
$ |
(1,427 |
) |
|
$ |
33,449 |
|
|
$ |
32,813 |
|
|
$ |
64,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Credits) Charges by Activity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and termination benefits |
|
$ |
(3,276 |
) |
|
$ |
11,531 |
|
|
$ |
26,864 |
|
|
$ |
35,119 |
|
Impairment of operating lease ROU assets and property and equipment |
|
|
— |
|
|
|
14,918 |
|
|
|
161 |
|
|
|
15,079 |
|
Acceleration of expense related to operating lease ROU assets and property and equipment |
|
|
— |
|
|
|
3,378 |
|
|
|
— |
|
|
|
3,378 |
|
Facility related charges, net |
|
|
1,849 |
|
|
|
3,684 |
|
|
|
3,986 |
|
|
|
9,519 |
|
Other activities |
|
|
— |
|
|
|
(62 |
) |
|
|
1,802 |
|
|
|
1,740 |
|
Total Restructuring and Related (Credits) Charges |
|
$ |
(1,427 |
) |
|
$ |
33,449 |
|
|
$ |
32,813 |
|
|
$ |
64,835 |
|
The credits in severance and termination benefits activities for the year ended April 30, 2022, primarily reflects changes in the number of headcount reductions and estimates for previously accrued costs.
In November 2020, in response to the COVID-19 pandemic and the Company’s successful transition to a virtual work environment, we increased use of virtual work arrangements for post-pandemic operations. As a result, we expanded the scope of the Business Optimization Program to include the exit of certain leased office space beginning in the three months ended January 31, 2021, and the reduction of our occupancy at other facilities. We are reducing our real estate square footage occupancy by approximately 12%. These actions resulted in a pretax restructuring charge of $18.3 million in the three months ended January 31, 2021. This restructuring charge primarily reflects the following noncash charges:
• |
Impairment charges of $14.9 million recorded in our corporate category, which included the impairment of operating lease ROU assets of $10.6 million related to certain leases that will be subleased, and the related property and equipment of $4.3 million described further below, and |
• |
Acceleration of expense of $3.4 million, which included the acceleration of rent expense associated with operating lease ROU assets of $2.9 million related to certain leases that will be abandoned or terminated and the related depreciation and amortization of property and equipment of $0.5 million. |
Due to the actions taken above, we tested the operating lease ROU assets and the related property and equipment for those being subleased for recoverability by comparing the carrying value of the asset group to an estimate of the future undiscounted cash flows expected to result from the use and eventual disposition of the asset group. Based on the results of the recoverability test, we determined that the undiscounted cash flows of the asset groups were below the carrying values. Therefore, there was an indication of impairment. We then determined the fair value of the asset groups by utilizing the present value of the estimated future cash flows attributable to the assets. The fair value of these operating lease ROU assets and the property and equipment immediately subsequent to the impairment was $7.5 million and was categorized as Level 3 within the FASB ASC Topic 820, “Fair Value Measurements” fair value hierarchy.
In addition, we also incurred ongoing facility-related costs associated with certain properties that resulted in additional restructuring charges of $1.8 million and $3.7 million in the years ended April 30, 2022 and 2021, respectively. Facilities related charges, net include sublease income related to those operating leases we had identified in the year ended April 30, 2021 as part of our Business Optimization Program that would be subleased.
Other activities for the year ended April 30, 2020 primarily relate to reserves and costs associated with the cessation of certain offerings, and, to a lesser extent, a pension settlement and the impairment of certain software licenses.
The following table summarizes the activity for the Business Optimization Program liability for the year ended April 30, 2022:
|
|
April 30, 2021 |
|
|
(Credits) |
|
|
Payments |
|
|
Foreign Translation & Other Adjustments |
|
|
April 30, 2022 |
|
Severance and termination benefits |
|
$ |
11,465 |
|
|
$ |
(3,276 |
) |
|
$ |
(5,831 |
) |
|
$ |
(279 |
) |
|
$ |
2,079 |
|
Total |
|
$ |
11,465 |
|
|
$ |
(3,276 |
) |
|
$ |
(5,831 |
) |
|
$ |
(279 |
) |
|
$ |
2,079 |
|
The restructuring liability for accrued severance and termination benefits is reflected in Accrued employment costs in the Consolidated Statement of Financial Position as of April 30, 2022.
Note 8 – Inventories
Inventories, net consisted of the following at April 30:
|
|
2022 |
|
|
2021 |
|
Finished goods |
|
$ |
31,270 |
|
|
$ |
31,704 |
|
Work-in-process |
|
|
1,729 |
|
|
|
2,060 |
|
Paper and other materials |
|
|
275 |
|
|
|
331 |
|
Total inventories before estimated sales returns and LIFO reserve |
|
|
33,274 |
|
|
|
34,095 |
|
Inventory value of estimated sales returns |
|
|
7,820 |
|
|
|
10,886 |
|
LIFO reserve |
|
|
(4,509 |
) |
|
|
(2,443 |
) |
Inventories, net |
|
$ |
36,585 |
|
|
$ |
42,538 |
|
See Note 2, “Summary of Significant Accounting Policies, Recently Issued and Recently Adopted Accounting Standards,” under the caption “Sales Return Reserves,” for a discussion of the Inventory value of estimated sales returns.
Finished goods not recorded at LIFO have been recorded at the lower of cost or net realizable value, which resulted in a reduction of $11.2 million and $14.0 million as of April 30, 2022 and 2021, respectively.
Note 9 – Product Development Assets
Product development assets, net consisted of the following at April 30:
|
|
2022 |
|
|
2021 |
|
Book composition costs |
|
$ |
20,574 |
|
|
$ |
20,474 |
|
Software costs |
|
|
17,479 |
|
|
|
23,262 |
|
Content development costs |
|
|
3,405 |
|
|
|
5,781 |
|
Product development assets, net |
|
$ |
41,458 |
|
|
$ |
49,517 |
|
Product development assets include $4.4 million and $6.3 million of work-in-process as of April 30, 2022 and 2021, respectively. As of April 30, 2022 this is primarily for book composition costs. As of April 30, 2021, this is primarily for book composition costs and, to a lesser extent, software costs.
Product development assets are net of accumulated amortization of $269.7 million and $269.0 million as of April 30, 2022 and 2021, respectively.
Note 10 – Technology, Property, and Equipment
Technology, property, and equipment, net consisted of the following at April 30:
|
|
2022 |
|
|
2021 |
|
Capitalized software |
|
$ |
605,503 |
|
|
$ |
536,878 |
|
Computer hardware |
|
|
55,386 |
|
|
|
50,714 |
|
Buildings and leasehold improvements |
|
|
94,861 |
|
|
|
99,636 |
|
Furniture, fixtures, and warehouse equipment |
|
|
38,816 |
|
|
|
42,674 |
|
Land and land improvements |
|
|
3,283 |
|
|
|
3,656 |
|
Technology, property, and equipment, gross |
|
|
797,849 |
|
|
|
733,558 |
|
Accumulated depreciation and amortization |
|
|
(526,277 |
) |
|
|
(451,288 |
) |
Technology, property, and equipment, net |
|
$ |
271,572 |
|
|
$ |
282,270 |
|
The following table details our depreciation and amortization expense for technology, property, and equipment, net:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Capitalized software amortization expense |
|
$ |
73,847 |
|
|
$ |
69,184 |
|
|
$ |
55,685 |
|
Depreciation and amortization expense, excluding capitalized software |
|
|
21,325 |
|
|
|
21,955 |
|
|
|
21,031 |
|
Total depreciation and amortization expense for technology, property and equipment |
|
$ |
95,172 |
|
|
$ |
91,139 |
|
|
$ |
76,716 |
|
Technology, property, and equipment includes $7.2 million and $0.6 million of work-in-process as of April 30, 2022 and 2021, respectively, for capitalized software.
The net book value of capitalized software costs was $201.5 million and $202.8 million as of April 30, 2022 and 2021, respectively.
Note 11 – Goodwill and Intangible Assets
Goodwill
The following table summarizes the activity in goodwill by segment as of April 30:
|
|
2021 (1) |
|
|
Acquisitions(2) |
|
|
Foreign Translation Adjustment |
|
|
2022 |
|
Research Publishing & Platforms |
|
$ |
619,203 |
|
|
$ |
24,806 |
|
|
$ |
(33,593 |
) |
|
$ |
610,416 |
|
Academic & Professional Learning |
|
|
512,512 |
|
|
|
— |
|
|
|
(14,376 |
) |
|
|
498,136 |
|
Education Services |
|
|
172,625 |
|
|
|
22,226 |
|
|
|
(1,261 |
) |
|
|
193,590 |
|
Total |
|
$ |
1,304,340 |
|
|
$ |
47,032 |
|
|
$ |
(49,230 |
) |
|
$ |
1,302,142 |
|
(1) |
The Education Services goodwill balance as of April 30, 2021 includes a cumulative pretax noncash goodwill impairment of $110.0 million. |
(2) |
Refer to Note 4, “Acquisitions,” for more information related to the acquisitions that occurred in the year ended April 30, 2022. |
Annual Goodwill Impairment Test as of February 1, 2022 and 2021
As of February 1, 2022 and 2021, we completed step one of our annual goodwill impairment test for our reporting units. We concluded that the fair values of our reporting units were above their carrying values and, therefore, there was no indication of impairment.
We estimated the fair value of these reporting units using a weighting of fair values derived from an income and a market approach. Under the income approach, we determined the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on our best estimates of forecasted economic and market conditions over the period including growth rates, expected changes in operating cash flows, and cash expenditures. The discount rate used is based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the business and the projected cash flows. The market approach estimates fair value based on market multiples of current and forward 12-month revenue or EBITDA, as applicable, derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit.
As noted above, the fair value determined as part of the annual goodwill impairment test completed in the fourth quarter exceeded the carrying value for all of our reporting units. Therefore, there was no impairment of goodwill. However, if the fair value of these reporting units decreases in future periods, we could potentially have an impairment. The future occurrence of a potential indicator of impairment, such as a decrease in expected net earnings, changes in assumptions, adverse equity market conditions, a decline in current market multiples, a decline in our common stock price, a significant adverse change in legal factors or business climates, an adverse action or assessment by a regulator, unanticipated competition, strategic decisions made in response to economic or competitive conditions, or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or disposed of, could require an interim assessment for some or all of the reporting units before the next required annual assessment.
Annual Goodwill Impairment Test as of February 1, 2020
As of February 1, 2020, we completed our annual goodwill impairment test for our reporting units. We concluded that the fair values of our Research Publishing & Platforms and Academic & Professional Learning reporting units were above their carrying values and, therefore, there was no indication of impairment.
During our annual goodwill impairment test initiated on February 1, 2020, we identified indicators that the goodwill of the Education Services business was impaired due to underperformance as compared with our acquisition case projections for revenue growth and operating cash flow. Subsequently, during the fourth quarter of fiscal year 2020, we determined that our updated revenue and operating cash flow projections would be further impacted by anticipated near-term headwinds due to COVID-19, including adverse impacts on new student starts and student reenrollment. Therefore, we updated the impairment test as of March 31, 2020 to reflect this change in circumstances. As a result, we concluded that the carrying value was above the fair value which resulted in a pretax noncash goodwill impairment of $110.0 million. This charge is reflected in Impairment of goodwill and intangible assets in the Consolidated Statements of Income (Loss).
Prior to performing the goodwill impairment test for Education Services, we also evaluated the recoverability of long-lived assets of the reporting unit. The carrying value of the long-lived assets that were tested for impairment was $434.0 million. When indicators of impairment are present, we test definite lived and long-lived assets for recoverability by comparing the carrying value of an asset group to an estimate of the future undiscounted cash flows expected to result from the use and eventual disposition of the asset group. We considered the lower-than-expected revenue and forecasted operating cash flows over a sustained period of time, and downward revisions to our cash flow forecasts for this reporting unit to be indicators of impairment for their long-lived assets. Based on the results of the recoverability test, we determined that the undiscounted cash flows of the asset group of the Education Services reporting unit exceeded the carrying value. Therefore, there was no impairment.
Intangible Assets
Intangible assets, net as of April 30 were as follows:
|
|
2022 |
|
|
2021 |
|
|
|
Cost |
|
|
Accumulated Amortization |
|
|
Net |
|
|
Cost |
|
|
Accumulated Amortization |
|
|
Net |
|
Intangible assets with definite lives, net(1) : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Content and publishing rights |
|
$ |
1,099,778 |
|
|
$ |
(599,841 |
) |
|
$ |
499,937 |
|
|
$ |
1,062,072 |
|
|
$ |
(497,843 |
) |
|
$ |
564,229 |
|
Customer relationships |
|
|
409,097 |
|
|
|
(167,039 |
) |
|
|
242,058 |
|
|
|
384,462 |
|
|
|
(117,985 |
) |
|
|
266,477 |
|
Developed technology(2) |
|
|
72,398 |
|
|
|
(17,677 |
) |
|
|
54,721 |
|
|
|
42,785 |
|
|
|
(7,824 |
) |
|
|
34,961 |
|
Brands and trademarks |
|
|
47,533 |
|
|
|
(31,512 |
) |
|
|
16,021 |
|
|
|
45,630 |
|
|
|
(26,094 |
) |
|
|
19,536 |
|
Covenants not to compete |
|
|
1,655 |
|
|
|
(1,262 |
) |
|
|
393 |
|
|
|
1,250 |
|
|
|
(1,192 |
) |
|
|
58 |
|
Total intangible assets with definite lives, net |
|
|
1,630,461 |
|
|
|
(817,331 |
) |
|
|
813,130 |
|
|
|
1,536,199 |
|
|
|
(650,938 |
) |
|
|
885,261 |
|
Intangible assets with indefinite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brands and trademarks(2) |
|
|
37,000 |
|
|
|
— |
|
|
|
37,000 |
|
|
|
37,000 |
|
|
|
— |
|
|
|
37,000 |
|
Publishing rights |
|
|
81,299 |
|
|
|
— |
|
|
|
81,299 |
|
|
|
93,041 |
|
|
|
— |
|
|
|
93,041 |
|
Total intangible assets with indefinite lives |
|
|
118,299 |
|
|
|
— |
|
|
|
118,299 |
|
|
|
130,041 |
|
|
|
— |
|
|
|
130,041 |
|
Total intangible assets, net |
|
$ |
1,748,760 |
|
|
$ |
(817,331 |
) |
|
$ |
931,429 |
|
|
$ |
1,666,240 |
|
|
$ |
(650,938 |
) |
|
$ |
1,015,302 |
|
(1) |
Refer to Note 4, “Acquisitions,” for more information related to the acquisitions that occurred in years ended April 30, 2022 and 2021. |
(2) |
The developed technology balance as of April 30, 2022 and 2021 is presented net of accumulated impairments and write-offs of $2.8 million. The indefinite-lived brands and trademarks balance as of April 30, 2022 and 2021 is net of accumulated impairments of $93.1 million. |
Based on the current amount of intangible assets subject to amortization and assuming current foreign exchange rates, the estimated amortization expense for the following years are as follows:
Fiscal Year |
|
Amount |
|
2023 |
|
$ |
81,375 |
|
2024 |
|
|
76,193 |
|
2025 |
|
|
69,556 |
|
2026 |
|
|
67,044 |
|
2027 |
|
|
62,422 |
|
Thereafter |
|
|
456,540 |
|
Total |
|
$ |
813,130 |
|
Annual Indefinite-lived Intangible Impairment Test as of February 1, 2022 and 2021
We also review our indefinite-lived intangible assets for impairment annually, which consists of brands and trademarks and certain acquired publishing rights. As of February 1, 2022 and 2021, we completed our annual impairment test related to the indefinite-lived intangible assets. We concluded that the fair values of these indefinite-lived intangible assets were above their carrying values and, therefore, there was no indication of impairment.
Fiscal Year 2020 Impairment
Annual Indefinite-Lived Intangibles Impairment Test as of February 1, 2020
During the fourth quarter of 2020, we completed our annual impairment test related to the indefinite-lived intangible assets. We concluded that the fair values of these indefinite-lived intangible assets were above their carrying values and, therefore, there was no indication of impairment, except for the Blackwell indefinite-lived trademark.
For the year ended April 30, 2020, we recorded a pretax noncash impairment charge of $89.5 million for our Blackwell trademark, which was acquired in 2007 and carried as an indefinite-lived intangible asset primarily related to our Research Publishing & Platforms segment. The impairment reflected our decision to simplify Wiley’s brand portfolio and unify our research journal content under one Wiley brand, which sharply limited the use of the Blackwell trade name. This impairment resulted in writing off substantially all of the carrying value of the intangible trademark asset. This charge is reflected in Impairment of goodwill and intangible assets in the Consolidated Statements of Income (Loss). The resulting noncash impairment charge was entirely unrelated to COVID-19 or the expected future financial performance of the Research Publishing & Platforms segment.
Intangible Assets with Definite Lives
As a result of our decision to discontinue the use of certain technology offerings within the Research Publishing & Platforms segment, we recorded a pretax noncash impairment charge of $2.8 million related to a certain developed technology intangible. This charge was included in Impairment of goodwill and intangible assets on the Consolidated Statements of Income (Loss).
Note 12 — Operating Leases
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 lease standard and we perform the lease classification test as of the lease commencement date. 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 leasing standard, leases that are more than one year in duration are capitalized and recorded on our 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.
For operating leases, the ROU assets and liabilities as of April 30 are presented in our Consolidated Statements of Financial Position as follows:
|
|
2022 |
|
|
2021 |
|
Operating lease ROU assets |
|
$ |
111,719 |
|
|
$ |
121,430 |
|
Short-term portion of operating lease liabilities |
|
|
20,576 |
|
|
|
22,440 |
|
Operating lease liabilities, non-current |
|
$ |
132,541 |
|
|
$ |
145,832 |
|
During the year ended April 30, 2022, we added $10.4 million to the ROU assets and $10.3 million to the operating lease liabilities due to new leases, including due to acquisitions, as well as modifications and remeasurements to our existing operating leases.
As a result of expanding the scope of the Business Optimization Program to include the exit of certain leased office space beginning in the third quarter of fiscal 2021, we incurred a pretax restructuring charge of $18.3 million in the three months ended January 31, 2021. This charge included impairment charges and acceleration of expense associated with certain operating lease ROU assets. See Note 7, “Restructuring and Related (Credits) Charges” for more information on this program and the charges incurred.
Our total net lease costs were as follows:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Operating lease cost |
|
$ |
24,180 |
|
|
$ |
24,862 |
|
|
$ |
26,027 |
|
Variable lease cost |
|
|
1,496 |
|
|
|
2,135 |
|
|
|
3,856 |
|
Short-term lease cost |
|
|
187 |
|
|
|
248 |
|
|
|
86 |
|
Sublease income |
|
|
(945 |
) |
|
|
(722 |
) |
|
|
(691 |
) |
Total net lease cost(1) |
|
$ |
24,918 |
|
|
$ |
26,523 |
|
|
$ |
29,278 |
|
(1) |
Total net lease cost does not include those costs and sublease income included in Restructuring and related charges on our Consolidated Statements of Income (Loss). This includes those operating leases we had identified in the year ended April 30, 2021 as part of our Business Optimization Program that would be subleased. See Note 7, “Restructuring and Related (Credits) Charges” for more information on this program. |
Other supplemental information includes the following:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Weighted-average remaining contractual lease term (years) |
|
|
9 |
|
|
|
9 |
|
|
|
10 |
|
Weighted-average discount rate |
|
|
5.84 |
% |
|
|
5.89 |
% |
|
|
5.89 |
% |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
|
$ |
29,737 |
|
|
$ |
32,344 |
|
|
$ |
28,243 |
|
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 the Consolidated Statement of Financial Position as of April 30, 2022:
Fiscal Year |
|
Operating Lease Liabilities |
|
2023 |
|
$ |
28,128 |
|
2024 |
|
|
26,183 |
|
2025 |
|
|
24,783 |
|
2026 |
|
|
22,443 |
|
2027 |
|
|
17,972 |
|
Thereafter |
|
|
77,521 |
|
Total future undiscounted minimum lease payments |
|
|
197,030 |
|
|
|
|
|
|
Less: Imputed interest |
|
|
43,913 |
|
|
|
|
|
|
Present value of minimum lease payments |
|
|
153,117 |
|
|
|
|
|
|
Less: Current portion |
|
|
20,576 |
|
|
|
|
|
|
Noncurrent portion |
|
$ |
132,541 |
|
Note 13 –Income Taxes
The provisions for income taxes were as follows:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Current Provision |
|
|
|
|
|
|
|
|
|
US – Federal |
|
$ |
(324 |
) |
|
$ |
(6,631 |
) |
|
$ |
1,145 |
|
International |
|
|
57,905 |
|
|
|
43,269 |
|
|
|
37,494 |
|
State and local |
|
|
221 |
|
|
|
1,359 |
|
|
|
172 |
|
Total current provision |
|
$ |
57,802 |
|
|
$ |
37,997 |
|
|
$ |
38,811 |
|
Deferred provision (benefit) |
|
|
|
|
|
|
|
|
|
|
|
|
US – Federal |
|
$ |
(9,793 |
) |
|
$ |
(11,996 |
) |
|
$ |
(8,476 |
) |
International |
|
|
15,882 |
|
|
|
1,175 |
|
|
|
(15,022 |
) |
State and local |
|
|
(2,539 |
) |
|
|
480 |
|
|
|
(4,118 |
) |
Total deferred provision (benefit) |
|
$ |
3,550 |
|
|
$ |
(10,341 |
) |
|
$ |
(27,616 |
) |
Total provision |
|
$ |
61,352 |
|
|
$ |
27,656 |
|
|
$ |
11,195 |
|
International and United States pretax income (loss) were as follows:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
International |
|
$ |
256,456 |
|
|
$ |
202,490 |
|
|
$ |
104,185 |
|
United States |
|
|
(46,795 |
) |
|
|
(26,578 |
) |
|
|
(167,277 |
) |
Total |
|
$ |
209,661 |
|
|
$ |
175,912 |
|
|
$ |
(63,092 |
) |
Our effective income tax rate as a percentage of pretax income differed from the US federal statutory rate as shown below:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
US federal statutory rate |
|
|
21.0 |
% |
|
|
21.0 |
% |
|
|
21.0 |
% |
Cost of higher taxes on non-US income |
|
|
9.7 |
% |
|
|
1.1 |
% |
|
|
4.8 |
% |
Foreign tax credits related to CARES Act carryback and audit |
|
|
(11.9 |
)% |
|
|
12.3 |
% |
|
|
— |
|
Change in valuation allowance |
|
|
11.9 |
% |
|
|
(12.3 |
)% |
|
|
— |
|
State income taxes, net of US federal tax benefit |
|
|
(1.0 |
)% |
|
|
0.8 |
% |
|
|
3.3 |
% |
US NOL carryback under CARES Act |
|
|
— |
|
|
|
(8.0 |
)% |
|
|
— |
|
Tax credits and related net benefits |
|
|
(0.5 |
)% |
|
|
(0.5 |
)% |
|
|
(1.1 |
)% |
Impairment of goodwill and intangibles |
|
|
— |
|
|
|
— |
|
|
|
(42.3 |
)% |
Other |
|
|
0.1 |
% |
|
|
1.3 |
% |
|
|
(3.4 |
)% |
Effective income tax rate (benefit) |
|
|
29.3 |
% |
|
|
15.7 |
% |
|
|
(17.7 |
)% |
The effective tax rate was 29.3% for the year ended April 30, 2022, compared to 15.7% for the year ended April 30, 2021. Our rate for the year ended April 30, 2022 was higher primarily due to an increase in the UK statutory rate from 19% to 25% enacted during our three months ended July 31, 2021, which resulted in a $21.4 million noncash deferred tax expense from the re-measurement of our applicable UK net deferred tax liabilities. In addition, our rate for the year ended April 30, 2021 benefitted by $14 million from the Coronavirus Aid Relief and Economic Security Act (the CARES Act) and certain regulations issued in late July 2020, which enabled us to carryback certain net operating losses (NOLs) to a year with a higher statutory tax rate.
Accounting for Uncertainty in Income Taxes:
As of April 30, 2022 and April 30, 2021, the total amount of unrecognized tax benefits were $8.6 million and $9.1 million, respectively, of which $0.6 million and $0.7 million represented accruals for interest and penalties recorded as additional tax expense in accordance with our accounting policy. We recorded net interest expense on reserves for unrecognized and recognized tax benefits of $0.2 million in each of the years ended April 30, 2022 and 2021. As of April 30, 2022 and April 30, 2021, the total amounts of unrecognized tax benefits that would reduce our income tax provision, if recognized, were approximately $6.9 million and $7.4 million, respectively. We do not expect any significant changes to the unrecognized tax benefits within the next twelve months.
A reconciliation of the unrecognized tax benefits included within the Other long-term liabilities line item on the Consolidated Statements of Financial Position is as follows:
|
|
2022 |
|
|
2021 |
|
Balance at May 1 |
|
$ |
9,144 |
|
|
$ |
6,194 |
|
Additions for current year tax positions |
|
|
947 |
|
|
|
3,626 |
|
Additions for prior year tax positions |
|
|
16 |
|
|
|
511 |
|
Reductions for prior year tax positions |
|
|
— |
|
|
|
(163 |
) |
Foreign translation adjustment |
|
|
(55 |
) |
|
|
57 |
|
Payments and settlements |
|
|
— |
|
|
|
(215 |
) |
Reductions for lapse of statute of limitations |
|
|
(1,460 |
) |
|
|
(866 |
) |
Balance at April 30 |
|
$ |
8,592 |
|
|
$ |
9,144 |
|
Tax Audits:
We file income tax returns in the US and various states and non-US tax jurisdictions. Our major taxing jurisdictions are the United States, United Kingdom, and Germany. Except for one immaterial item, we are no longer subject to income tax examinations for years prior to fiscal year 2014 in the major jurisdictions in which we are subject to tax.
Deferred Taxes:
Deferred taxes result from temporary differences in the recognition of revenue and expense for tax and financial reporting purposes.
We believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets. The significant components of deferred tax assets and liabilities at April 30 were as follows:
|
|
2022 |
|
|
2021 |
|
Net operating losses |
|
$ |
20,847 |
|
|
$ |
19,433 |
|
Reserve for sales returns and doubtful accounts |
|
|
3,771 |
|
|
|
3,838 |
|
Accrued employee compensation |
|
|
26,722 |
|
|
|
32,835 |
|
Foreign and federal credits |
|
|
34,537 |
|
|
|
5,129 |
|
Other accrued expenses |
|
|
11,636 |
|
|
|
16,092 |
|
Retirement and post-employment benefits |
|
|
15,769 |
|
|
|
30,039 |
|
Total gross deferred tax assets |
|
$ |
113,282 |
|
|
$ |
107,366 |
|
Less valuation allowance |
|
|
(30,000 |
) |
|
|
(4,855 |
) |
Total deferred tax assets |
|
$ |
83,282 |
|
|
$ |
102,511 |
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
$ |
(2,684 |
) |
|
$ |
(459 |
) |
Unremitted foreign earnings |
|
|
(2,685 |
) |
|
|
(2,485 |
) |
Intangible and fixed assets |
|
|
(249,215 |
) |
|
|
(260,559 |
) |
Total deferred tax liabilities |
|
$ |
(254,584 |
) |
|
$ |
(263,503 |
) |
Net deferred tax liabilities |
|
$ |
(171,302 |
) |
|
$ |
(160,992 |
) |
|
|
|
|
|
|
|
|
|
Reported As |
|
|
|
|
|
|
|
|
Deferred tax assets |
|
$ |
8,763 |
|
|
$ |
11,911 |
|
Deferred tax liabilities |
|
|
(180,065 |
) |
|
|
(172,903 |
) |
Net Deferred Tax Liabilities |
|
$ |
(171,302 |
) |
|
$ |
(160,992 |
) |
The increase in net deferred tax liabilities was due to the decrease in net deferred tax assets, which was primarily attributable to a decrease in our retirement and post-employment benefits, partially offset by an increase in our Net operating losses and foreign and federal credits net of applicable valuation allowances. The increase in our deferred tax liabilities from the revaluation of our deferred tax liabilities related to the UK rate change from 19% to 25% was largely offset by a decrease in our deferred tax liabilities for intangibles and fixed assets. We have concluded that after valuation allowances, it is more likely than not that we will realize substantially all of the net deferred tax assets at April 30, 2022. In assessing the need for a valuation allowance, we take into account related deferred tax liabilities and estimated future reversals of existing temporary differences, future taxable earnings and tax planning strategies to determine which deferred tax assets are more likely than not to be realized in the future. Changes to tax laws, statutory tax rates and future taxable earnings can have an impact on our valuation allowances.
We have provided a $30.0 million valuation allowance based primarily on the uncertainty of utilizing the tax benefits related to our deferred tax assets for foreign tax credits. As of April 30, 2022, we have apportioned state net operating loss carryforwards totaling approximately $129 million, with a tax effected value of $7.1 million net of federal benefits. Our state and federal NOLs and credits, to the extent they expire, expire in various amounts over 2 to 20 years.
Since April 30, 2018, we no longer intend to permanently reinvest earnings outside the US. We have recorded a $2.7 million liability related to the estimated taxes that would be incurred upon repatriating certain non-US earnings.
Note 14 – Debt and Available Credit Facilities
Our total debt outstanding as of April 30 consisted of the amounts set forth in the following table:
|
|
2022 |
|
|
2021 |
|
Short-term portion of long-term debt(1) |
|
$ |
18,750 |
|
|
$ |
12,500 |
|
|
|
|
|
|
|
|
|
|
Term loan A - Amended and Restated RCA(2) |
|
|
204,343 |
|
|
|
222,928 |
|
Revolving credit facility - Amended and Restated RCA |
|
|
563,934 |
|
|
|
586,160 |
|
Total long-term debt, less current portion |
|
|
768,277 |
|
|
|
809,088 |
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
787,027 |
|
|
$ |
821,588 |
|
(1) |
Relates to our term loan A under the Amended and Restated RCA. |
(2) |
Amounts are shown net of unamortized issuance costs of $0.3 million as of April 30, 2022 and $0.5 million as of April 30, 2021. |
The following table summarizes the scheduled annual maturities for the next three years of our long-term debt, including the short-term portion of long-term debt. This schedule represents the principal portion amount of debt outstanding and therefore excludes unamortized issuance costs.
Fiscal Year |
|
Amount |
|
2023 |
|
$ |
18,750 |
|
2024 |
|
|
204,688 |
|
2025 |
|
|
563,934 |
|
Total |
|
$ |
787,372 |
|
Amended and Restated RCA
On May 30, 2019, we entered into a credit agreement that amended and restated our existing revolving credit agreement, which was then amended on December 22, 2021 as described below (collectively, the Amended and Restated RCA). The Amended and Restated RCA provides for senior unsecured credit facilities comprised of (i) a 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.
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 zero to 0.50%, depending on our consolidated net leverage ratio. The lender’s base rate is defined as the highest of (i) the US 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.
On December 22, 2021, we entered into the first amendment (the “First Amendment”) to the Amended and Restated RCA. The First Amendment, among other things, (i) changes the rate under the Amended and Restated RCA for borrowings denominated in Sterling from a LIBOR-based rate to a daily simple Sterling Overnight Index Average (SONIA) subject to certain adjustments specified in the Amended and Restated RCA, (ii) changes the rate under the Amended and Restated RCA for borrowings denominated in euro from a LIBOR-based rate to a EURIBOR-based rate or a Euro Short Term Rate subject to certain adjustments specified in the Amended and Restated RCA, and (iii) updates certain other provisions regarding successor interest rates to LIBOR.
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 April 30, 2022.
In 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 revolving credit agreement at that time, which is reflected in Other income, net on the Consolidated Statements of Income (Loss) for the year ended April 30, 2020.
In 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 on the Consolidated Statements of Financial Position. The amount related to the five-year revolving credit facility was $4.3 million, all of which was included in Other non-current assets on the Consolidated Statements of Financial Position.
The amortization expense of the costs incurred related to the Amended and Restated RCA related to the lender and non-lender fees is recognized over the five-year term of the Amended and Restated RCA. Total amortization expense for the years ended April 30, 2022, 2021 and 2020 was $1.1 million, $1.1 million and $1.0 million, respectively, and is included in Interest expense on our Consolidated Statements of Income (Loss).
Lines of Credit
We have other lines of credit aggregating $1.0 million at various interest rates. There were no outstanding borrowings under these credit lines at April 30, 2022, and 2021.
Our total available lines of credit as of April 30, 2022 were approximately $1.5 billion, of which approximately $0.7 billion was unused. The weighted average interest rates on total debt outstanding during the years ended April 30, 2022 and 2021 were 2.02% and 2.03%, respectively. As of April 30, 2022 and 2021, the weighted average interest rates for total debt were 2.55% and 1.98%, respectively.
Based on estimates of interest rates currently available to us for loans with similar terms and maturities, the fair value of our debt approximates its carrying value.
Note 15 – Derivative Instruments and 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 sales and purchases. All derivatives are recognized as assets or liabilities and measured at fair value. 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 April 30, 2022, we had total debt outstanding of $787.0 million, net of unamortized issuance costs of $0.3 million, of which $787.3 million are variable rate loans outstanding under the Amended and Restated RCA, which approximated fair value.
As of April 30, 2022 and 2021, the interest rate swap agreements we maintained were designated as fully effective cash flow hedges as defined under FASB ASC Topic 815, “Derivatives and Hedging” (ASC Topic 815). As a result, there was no impact on our Consolidated Statements of Income (Loss) from 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. Under ASC Topic 815, derivative instruments that are designated as cash flow hedges have changes in their fair value recorded initially within Accumulated other comprehensive loss on the Consolidated Statements of Financial Position. As interest expense is recognized based on the variable rate loan agreements, the corresponding deferred gain or loss on the interest rate swaps is reclassified from Accumulated other comprehensive loss to Interest Expense on the Consolidated Statements of Income (Loss). 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 following table summarizes our interest rate swaps designated as cash flow hedges:
|
|
|
|
Notional Amount |
|
|
|
|
|
|
|
|
|
As of April 30, |
|
|
|
|
|
Hedged Item |
Date entered into |
Nature of Swap |
|
2022 |
|
|
2021 |
|
|
Fixed Interest Rate |
|
Variable Interest Rate |
Amended and Restated RCA |
April 7, 2022 |
Pay fixed/receive variable |
|
$ |
100 |
|
|
$ |
— |
|
|
|
2.646 |
% |
1-month LIBOR reset every month for a 2-year period ending April 15, 2024 |
Amended and Restated RCA |
April 12, 2021 |
Pay fixed/receive variable |
|
|
100 |
|
|
|
100 |
|
|
|
0.500 |
% |
1-month LIBOR reset every month for a 3-year period ending April 15, 2024 |
Amended and Restated RCA |
February 26, 2020 |
Pay fixed/receive variable |
|
|
100 |
|
|
|
100 |
|
|
|
1.150 |
% |
1-month LIBOR reset every month for a 3-year period ending March 15, 2023 |
Amended and Restated RCA |
August 7, 2019 |
Pay fixed/receive variable |
|
|
100 |
|
|
|
100 |
|
|
|
1.400 |
% |
1-month LIBOR reset every month for a 3-year period ending August 15, 2022 |
Amended and Restated RCA |
June 24, 2019 |
Pay fixed/receive variable |
|
|
100 |
|
|
|
100 |
|
|
|
1.650 |
% |
1-month LIBOR reset every month for a 3-year period ending July 15, 2022 |
|
|
|
|
$ |
500 |
|
|
$ |
400 |
|
|
|
|
|
|
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 0.920% and received 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.
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 April 30, 2022 was a deferred loss of $0.2 million and a deferred gain of $5.8 million. Based on the maturity dates of the contracts, the entire deferred loss as of April 30, 2022 was recorded within Other accrued liabilities, $0.9 million of the deferred gain was recorded within Prepaid expenses and other current assets, and $4.9 million was recorded within Other non-current assets.
The fair value of the interest rate swaps as of April 30, 2021 was a deferred loss of $5.6 million. Based on the maturity dates of the contracts, the entire deferred loss as of April 30, 2021 was recorded within Other long-term liabilities.
The pretax (losses) gains that were reclassified from Accumulated other comprehensive loss into Interest expense for the years ended April 30, 2022, 2021, and 2020 were $(4.2) million, $(3.7) million, and $0.4 million, respectively. Based on the amount in Accumulated other comprehensive loss at April 30, 2022, approximately $1.6 million, net of tax, would be reclassified into Net income in the next twelve months.
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) gains on our Consolidated Statements of Income (Loss) and carried at fair value on our 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 affects of changes in spot rates reported in Foreign exchange transaction (losses) gains on our Consolidated Statements of Income (Loss).
As of April 30, 2022 and 2021, we did not maintain any open forward exchange contracts. In addition, we did not maintain any open forward contracts during the years ended April 30, 2022 and 2020.
During the year ended April 30, 2021, to manage foreign currency exposures on an intercompany loan, we entered into one forward exchange contract to sell €32 million and buy $38.8 million. This forward contract expired on April 15, 2021. We did not designate this forward exchange contract as a hedge under the applicable sections of ASC Topic 815 as the benefits of doing so were not material due to the short-term nature of the contract. The fair value changes in the forward exchange contract substantially mitigated the changes in the value of the applicable foreign currency denominated liability. The fair value of the open forward exchange contract was measured on a recurring basis using Level 2 inputs of quoted prices for similar assets or liabilities in active markets. For the year ended April 30, 2021, the loss recognized on this forward contract was $0.8 million and included in Foreign exchange transaction (losses) gains on our Consolidated Statement of Income (Loss).
Note 16 – Commitment 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 April 30, 2022, will not have a material effect upon our consolidated financial condition or results of operations.
Note 17 – Retirement Plans
We have retirement plans that cover substantially all employees. The plans generally provide for employee retirement between the ages 60 and 65, and benefits based on length of service and compensation, as defined.
Our Board of Directors approved plan amendments that froze the following retirement plans:
• |
Retirement Plan for the Employees of John Wiley & Sons, Canada was frozen effective December 31, 2015; |
• |
Retirement Plan for the Employees of John Wiley & Sons, Ltd., a UK plan was frozen effective April 30, 2015 and; |
• |
U.S. Employees’ Retirement Plan, Supplemental Benefit Plan, and Supplemental Executive Retirement Plan, were frozen effective June 30, 2013. |
We maintain the Supplemental Executive Retirement Plan for certain officers and senior management which provides for the payment of supplemental retirement benefits after the termination of employment for 10 years, or in a lifetime annuity. Under certain circumstances, including a change of control as defined, the payment of such amounts could be accelerated on a present value basis. Future accrued benefits to this plan have been discontinued as noted above.
The components of net pension expense (income) for the defined benefit plans and the weighted average assumptions were as follows:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
|
US |
|
|
Non-US |
|
|
US |
|
|
Non-US |
|
|
US |
|
|
Non-US |
|
Service cost |
|
$ |
— |
|
|
$ |
1,196 |
|
|
$ |
— |
|
|
$ |
1,396 |
|
|
$ |
— |
|
|
$ |
1,851 |
|
Interest cost |
|
|
9,451 |
|
|
|
11,148 |
|
|
|
9,504 |
|
|
|
8,901 |
|
|
|
11,247 |
|
|
|
12,652 |
|
Expected return on plan assets |
|
|
(12,144 |
) |
|
|
(28,118 |
) |
|
|
(11,969 |
) |
|
|
(26,971 |
) |
|
|
(14,038 |
) |
|
|
(26,116 |
) |
Amortization of prior service cost |
|
|
(154 |
) |
|
|
67 |
|
|
|
(154 |
) |
|
|
58 |
|
|
|
(154 |
) |
|
|
73 |
|
Amortization of net actuarial loss |
|
|
2,617 |
|
|
|
4,846 |
|
|
|
3,501 |
|
|
|
4,516 |
|
|
|
2,403 |
|
|
|
3,993 |
|
Curtailment (credit)/settlement loss |
|
|
— |
|
|
|
(39 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
291 |
|
Net pension (income) expense |
|
$ |
(230 |
) |
|
$ |
(10,900 |
) |
|
$ |
882 |
|
|
$ |
(12,100 |
) |
|
$ |
(542 |
) |
|
$ |
(7,256 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
3.2 |
% |
|
|
1.9 |
% |
|
|
3.1 |
% |
|
|
1.6 |
% |
|
|
4.1 |
% |
|
|
2.4 |
% |
Rate of compensation increase |
|
|
N/A |
|
|
|
3.0 |
% |
|
|
N/A |
|
|
|
3.0 |
% |
|
|
N/A |
|
|
|
3.0 |
% |
Expected return on plan assets |
|
|
5.3 |
% |
|
|
5.5 |
% |
|
|
5.8 |
% |
|
|
5.7 |
% |
|
|
6.8 |
% |
|
|
6.5 |
% |
In the year ended April 30, 2022, because of a reduction in force, there was a curtailment credit of less than $0.1 million related to the Retirement Indemnity Plan for the Employees of Cross Knowledge which is reflected in Restructuring and related (credits) charges in the Consolidated Statements of Income (Loss).
In the year ended April 30, 2020, there was a settlement charge of $0.3 million related to the Retirement Plan for the Employees of John Wiley & Sons, Canada which is reflected in Restructuring and related (credits) charges in the Consolidated Statements of Income (Loss).
The service cost component of net pension expense (income) is reflected in Operating and administrative expenses on our Consolidated Statements of Income (Loss). The other components of net pension expense (income) are reported separately from the service cost component and below Operating income (loss). Such amounts are reflected in Other income, net on our Consolidated Statements of Income (Loss).
The Recognized Net Actuarial Loss for each fiscal year is calculated using the “corridor method,” which reflects the amortization of the net loss at the beginning of the fiscal year in excess of 10% of the greater of the market value of plan assets or the projected benefit obligation. The amortization period is based on the average expected life of plan participants for plans with all or almost all inactive participants and frozen plans, and on the average remaining working lifetime of active plan participants for all other plans.
We recognize the overfunded or underfunded status of defined benefit postretirement plans, measured as the difference between the fair value of plan assets and the projected benefit obligation, on the Consolidated Statements of Financial Position. The change in the funded status of the plan is recognized in Accumulated other comprehensive loss on the Consolidated Statements of Financial Position. Plan assets and obligations are measured at fair value as of our Consolidated Statements of Financial Position date.
The following table sets forth the changes in and the status of, our defined benefit plans’ assets and benefit obligations:
|
|
2022 |
|
|
2021 |
|
|
|
US |
|
|
Non-US |
|
|
US |
|
|
Non-US |
|
CHANGE IN PLAN ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year |
|
$ |
237,129 |
|
|
$ |
523,886 |
|
|
$ |
213,946 |
|
|
$ |
445,480 |
|
Actual return on plan assets |
|
|
(21,257 |
) |
|
|
(37,543 |
) |
|
|
34,560 |
|
|
|
27,971 |
|
Employer contributions |
|
|
3,812 |
|
|
|
12,595 |
|
|
|
5,599 |
|
|
|
12,203 |
|
Employee contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Settlements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Benefits paid |
|
|
(15,229 |
) |
|
|
(10,703 |
) |
|
|
(16,976 |
) |
|
|
(11,921 |
) |
Foreign currency rate changes |
|
|
— |
|
|
|
(45,976 |
) |
|
|
— |
|
|
|
50,153 |
|
Fair value, end of year |
|
$ |
204,455 |
|
|
$ |
442,259 |
|
|
$ |
237,129 |
|
|
$ |
523,886 |
|
CHANGE IN PROJECTED BENEFIT OBLIGATION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year |
|
$ |
(302,632 |
) |
|
$ |
(609,614 |
) |
|
$ |
(318,967 |
) |
|
$ |
(534,303 |
) |
Service cost |
|
|
— |
|
|
|
(1,196 |
) |
|
|
— |
|
|
|
(1,396 |
) |
Interest cost |
|
|
(9,451 |
) |
|
|
(11,148 |
) |
|
|
(9,504 |
) |
|
|
(8,901 |
) |
Actuarial gains (losses) |
|
|
47,284 |
|
|
|
84,746 |
|
|
|
8,863 |
|
|
|
(17,739 |
) |
Benefits paid |
|
|
15,229 |
|
|
|
10,703 |
|
|
|
16,976 |
|
|
|
11,921 |
|
Foreign currency rate changes |
|
|
— |
|
|
|
51,660 |
|
|
|
— |
|
|
|
(59,046 |
) |
Settlements and other |
|
|
— |
|
|
|
47 |
|
|
|
— |
|
|
|
(150 |
) |
Benefit obligation, end of year |
|
$ |
(249,570 |
) |
|
$ |
(474,802 |
) |
|
$ |
(302,632 |
) |
|
$ |
(609,614 |
) |
Underfunded status, end of year |
|
$ |
(45,115 |
) |
|
$ |
(32,543 |
) |
|
$ |
(65,503 |
) |
|
$ |
(85,728 |
) |
AMOUNTS RECOGNIZED ON THE STATEMENT OF FINANCIAL POSITION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets |
|
|
— |
|
|
|
5,855 |
|
|
|
— |
|
|
|
6 |
|
Current pension liability |
|
|
(3,545 |
) |
|
|
(1,346 |
) |
|
|
(3,576 |
) |
|
|
(1,414 |
) |
Noncurrent pension liability |
|
|
(41,570 |
) |
|
|
(37,052 |
) |
|
|
(61,927 |
) |
|
|
(84,320 |
) |
Net amount recognized in statement of financial position |
|
$ |
(45,115 |
) |
|
$ |
(32,543 |
) |
|
$ |
(65,503 |
) |
|
$ |
(85,728 |
) |
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE LOSS (BEFORE TAX) CONSIST OF |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial (losses) gains |
|
$ |
(80,114 |
) |
|
$ |
(171,274 |
) |
|
$ |
(96,613 |
) |
|
$ |
(213,958 |
) |
Prior service cost gains (losses) |
|
|
1,946 |
|
|
|
(1,165 |
) |
|
|
2,100 |
|
|
|
(1,299 |
) |
Total accumulated other comprehensive loss |
|
$ |
(78,168 |
) |
|
$ |
(172,439 |
) |
|
$ |
(94,513 |
) |
|
$ |
(215,257 |
) |
Change in accumulated other comprehensive loss |
|
$ |
16,345 |
|
|
$ |
42,818 |
|
|
$ |
34,802 |
|
|
$ |
(32,803 |
) |
INFORMATION FOR PENSION PLANS WITH AN ACCUMULATED BENEFIT OBLIGATION IN EXCESS OF PLAN ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation |
|
$ |
249,570 |
|
|
$ |
37,801 |
|
|
$ |
302,632 |
|
|
$ |
566,998 |
|
Fair value of plan assets |
|
$ |
204,455 |
|
|
$ |
475 |
|
|
$ |
237,129 |
|
|
$ |
513,279 |
|
INFORMATION FOR PENSION PLANS WITH A PROJECTED BENEFIT OBLIGATION IN EXCESS OF PLAN ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation |
|
$ |
249,570 |
|
|
$ |
38,871 |
|
|
$ |
302,632 |
|
|
$ |
599,011 |
|
Fair value of plan assets |
|
$ |
204,455 |
|
|
$ |
475 |
|
|
$ |
237,129 |
|
|
$ |
513,279 |
|
WEIGHTED AVERAGE ASSUMPTIONS USED IN DETERMINING ASSETS AND LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
4.6 |
% |
|
|
3.0 |
% |
|
|
3.2 |
% |
|
|
1.9 |
% |
Rate of compensation increase |
|
|
N/A |
|
|
|
3.1 |
% |
|
|
N/A |
|
|
|
3.0 |
% |
Accumulated benefit obligations |
|
$ |
(249,570 |
) |
|
$ |
(450,037 |
) |
|
$ |
(302,632 |
) |
|
$ |
(577,600 |
) |
Actuarial gains in the US resulting in a decrease to our projected benefit obligation for the year ended April 30, 2022 were primarily due to an increase in the discount rate. Actuarial gains in non-US countries resulting in a decrease to our projected benefit obligation for the year ended April 30, 2022 were primarily due to an increase in the discount rate partially offset by an increase in the UK inflation rate.
Actuarial gains in the US resulting in a decrease to our projected benefit obligation for the year ended April 30, 2021 were primarily due to an increase in the discount rate and updated census data. Actuarial losses in non-US countries resulting in an increase to our projected benefit obligation for the year ended April 30, 2021 were primarily due to an increase in the UK inflation rate, offset by an increase in the discount rate.
Actuarial losses in the US and non-US countries resulting in an increase in our projected benefit obligation for the year ended April 30, 2020 were primarily due to a reduction in discount rates and changes to other assumptions.
Pension plan assets/investments:
The investment guidelines for the defined benefit pension plans are established based upon an evaluation of market conditions, plan liabilities, cash requirements for benefit payments, and tolerance for risk. Investment guidelines include the use of actively and passively managed securities. The investment objective is to ensure that funds are available to meet the plans benefit obligations when they are due. The investment strategy is to invest in high quality and diversified equity and debt securities to achieve our long-term expectation. The plans’ risk management practices provide guidance to the investment managers, including guidelines for asset concentration, credit rating, and liquidity. For those plan assets measured at NAV as defined below, a redemption request can be executed within a 7-day notice. Asset allocation favors a balanced portfolio, with a global aggregated target allocation of approximately 48% equity securities and 52% fixed income securities and cash. Due to volatility in the market, the target allocation is not always desirable and asset allocations will fluctuate between acceptable ranges of plus or minus 5%. We regularly review the investment allocations and periodically rebalance investments to the target allocations. We categorize our pension assets into three levels based upon the assumptions (inputs) used to price the assets. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:
|
● |
Level 1: Unadjusted quoted prices in active markets for identical assets. |
|
● |
Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets in active markets or quoted prices for identical assets in inactive markets. |
|
● |
Level 3: Unobservable inputs reflecting assumptions about the inputs used in pricing the asset. |
We did not maintain any level 3 assets during the years ended April 30, 2022 and 2021. In accordance with ASU 2015-07, “Fair Value Measurement (Topic 820), Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent),” certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient do not have to be classified in the fair value hierarchy. The fair value amounts presented in the following tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefit plan assets.
The following tables set forth, by level within the fair value hierarchy, pension plan assets at their fair value as of April 30:
|
|
2022 |
|
|
2021 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
NAV |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
NAV |
|
|
Total |
|
US Plan Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Equity Securities: Limited Partnership |
|
$ |
7,477 |
|
|
|
|
|
$ |
77,849 |
|
|
$ |
85,326 |
|
|
|
|
|
|
|
|
$ |
121,569 |
|
|
$ |
121,569 |
|
Fixed Income Securities: Commingled Trust Funds |
|
|
|
|
|
|
|
|
|
119,129 |
|
|
|
119,129 |
|
|
|
|
|
|
|
|
|
115,560 |
|
|
|
115,560 |
|
Total Assets |
|
$ |
7,477 |
|
|
|
|
|
$ |
196,978 |
|
|
|
204,455 |
|
|
|
|
|
|
|
|
$ |
237,129 |
|
|
$ |
237,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-US Plan Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US equities |
|
$ |
— |
|
|
$ |
48,443 |
|
|
|
|
|
|
$ |
48,443 |
|
|
$ |
— |
|
|
$ |
51,882 |
|
|
$ |
|
|
|
$ |
51,882 |
|
Non-US equities |
|
|
— |
|
|
|
112,162 |
|
|
|
|
|
|
|
112,162 |
|
|
|
— |
|
|
|
124,496 |
|
|
|
|
|
|
|
124,496 |
|
Balanced managed funds |
|
|
— |
|
|
|
94,623 |
|
|
|
|
|
|
|
94,623 |
|
|
|
— |
|
|
|
103,717 |
|
|
|
|
|
|
|
103,717 |
|
Fixed income securities: Commingled funds |
|
|
— |
|
|
|
185,192 |
|
|
|
|
|
|
|
185,192 |
|
|
|
1,444 |
|
|
|
236,583 |
|
|
|
|
|
|
|
238,027 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate/other |
|
|
— |
|
|
|
475 |
|
|
|
|
|
|
|
475 |
|
|
|
— |
|
|
|
543 |
|
|
|
|
|
|
|
543 |
|
Cash and cash equivalents |
|
|
1,338 |
|
|
|
26 |
|
|
|
|
|
|
|
1,364 |
|
|
|
5,221 |
|
|
|
— |
|
|
|
|
|
|
|
5,221 |
|
Total Non-US plan assets |
|
$ |
1,338 |
|
|
$ |
440,921 |
|
|
$ |
— |
|
|
$ |
442,259 |
|
|
$ |
6,665 |
|
|
$ |
517,221 |
|
|
$ |
— |
|
|
$ |
523,886 |
|
Total plan assets |
|
$ |
8,815 |
|
|
$ |
440,921 |
|
|
$ |
196,978 |
|
|
$ |
646,714 |
|
|
$ |
6,665 |
|
|
$ |
517,221 |
|
|
$ |
237,129 |
|
|
$ |
761,015 |
|
Expected employer contributions to the defined benefit pension plans in the year ended April 30, 2023 will be approximately $15.6 million, including $12.0 million of minimum amounts required for our non-US plans. From time to time, we may elect to make voluntary contributions to our defined benefit plans to improve their funded status.
Benefit payments to retirees from all defined benefit plans are expected to be the following in the fiscal year indicated:
Fiscal Year |
|
US |
|
Non-US |
|
Total |
2023 |
|
$ |
15,533 |
|
$ |
11,864 |
|
$ |
27,397 |
2024 |
|
|
15,666 |
|
|
12,307 |
|
|
27,973 |
2025 |
|
|
15,315 |
|
|
14,845 |
|
|
30,160 |
2026 |
|
|
15,125 |
|
|
13,419 |
|
|
28,544 |
2027 |
|
|
15,200 |
|
|
14,292 |
|
|
29,492 |
2028–2032 |
|
|
76,222 |
|
|
86,389 |
|
|
162,611 |
Total |
|
$ |
153,061 |
|
$ |
153,116 |
|
$ |
306,177 |
Retiree Health Benefits
We provide contributory life insurance and health care benefits, subject to certain dollar limitations, for substantially all of our eligible retired US employees. The retiree health benefit is no longer available for any employee who retires after December 31, 2017. The cost of such benefits is expensed over the years the employee renders service and is not funded in advance. The accumulated post-retirement benefit obligation recognized on the Consolidated Statements of Financial Position as of April 30, 2022 and 2021, was $1.3 and $1.5 million, respectively. Annual credits for these plans were $(0.1) million for each of the years ended April 30, 2022, 2021, and 2020.
Defined Contribution Savings Plans
We have defined contribution savings plans. Our contribution is based on employee contributions and the level of our match. We may make discretionary contributions to all employees as a group. The expense recorded for these plans was approximately $30.3 million, $24.3 million, and $19.0 million in the years ended April 30, 2022, 2021, and 2020, respectively.
Note 18 – Stock-Based Compensation
All equity compensation plans have been approved by shareholders. Under the 2014 Key Employee Stock Plan, (the Plan), qualified employees are eligible to receive awards that may include stock options, performance-based stock awards, and other restricted stock awards. Under the Plan, a maximum number of 6.5 million shares of our Class A stock may be issued. As of April 30, 2022, there were approximately 1,390,492 securities remaining available for future issuance under the Plan. We issue treasury shares to fund awards issued under the Plan.
Stock Option Activity
Under the terms of our stock option plan, the exercise price of stock options granted may not be less than 100% of the fair market value of the stock at the date of grant. Options are exercisable over a maximum period of ten years from the date of grant.
Options Granted in Fiscal Year 2022
During the year ended April 30, 2022, we granted 300,000 stock option awards. This included 260,000 stock options to our executive leadership team, at a grant price of $63.07, which was generally 10% above the fair market value at the time of grant, and 40,000 stock options granted to other leaders at fair market value on date of grant. For the options granted in the year ended April 30, 2022, such options generally vest 10%, 20%, 30%, and 40% on April 30, or on each anniversary date after the award is granted.
The following table provides the estimated weighted average fair value for options granted during the year ended April 30, 2022 using the Black-Scholes option-pricing model, and the significant weighted average assumptions used in their determination.
Weighted average fair value of options on grant date |
|
$ |
11.75 |
|
|
|
|
|
|
Weighted average assumptions: |
|
|
|
|
Expected life of options (years) |
|
|
6.3 |
|
Risk-free interest rate |
|
|
1.2 |
% |
Expected volatility |
|
|
30.7 |
% |
Expected dividend yield |
|
|
2.4 |
% |
Fair value of common stock on grant date |
|
$ |
56.51 |
|
Exercise price of stock option grant |
|
$ |
61.84 |
|
As of April 30, 2022, there was $2.3 million of unrecognized share-based compensation cost related to options, which is expected to be recognized over a period up to 4 years, or 3.1 years on a weighted average basis.
Options Granted Prior to Fiscal Year 2022
Prior to the stock options granted in the year ended April 30, 2022, we did not grant any stock option awards since the year ended April 30, 2016. As of April 30, 2019, all outstanding options vested, allowing the participant the right to exercise their awards, and there was no unrecognized share-based compensation expense remaining related to these stock options.
For the years ended April 30, 2015 and prior, options generally vest 50% on the fourth and fifth anniversary date after the award is granted. For the year ended April 30, 2016, options vest 25% per year on April 30.
The fair value of the options granted in the year ended April 30, 2016 was $14.77 using the Black-Scholes option-pricing model. The significant weighted average assumptions used in the fair value determination was the expected life, which represented an estimate of the period of time stock options will be outstanding based on the historical exercise behavior of option recipients. The risk-free interest rate was based on the corresponding US Treasury yield curve in effect at the time of the grant. The expected volatility was based on the historical volatility of our Common Stock price over the estimated life of the option, while the dividend yield was based on the expected dividend payments to be made by us.
A summary of the activity and status of our stock option plans follows:
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
|
Number of Options (in 000’s) |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Term (in years) |
|
|
Aggregate Intrinsic Value (in millions) |
|
|
Number of Options (in 000’s) |
|
|
Weighted Average Exercise Price |
|
|
Number of Options (in 000’s) |
|
|
Weighted Average Exercise Price |
|
Outstanding at beginning of year |
|
|
141 |
|
|
$ |
51.17 |
|
|
|
|
|
|
|
|
|
286 |
|
|
$ |
50.14 |
|
|
|
372 |
|
|
$ |
49.70 |
|
Granted |
|
|
300 |
|
|
$ |
61.84 |
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
Exercised |
|
|
(49 |
) |
|
$ |
45.85 |
|
|
|
|
|
|
|
|
|
(60 |
) |
|
$ |
43.91 |
|
|
|
(34 |
) |
|
$ |
38.32 |
|
Expired or forfeited |
|
|
(82 |
) |
|
$ |
60.36 |
|
|
|
|
|
|
|
|
|
(85 |
) |
|
$ |
52.78 |
|
|
|
(52 |
) |
|
$ |
54.57 |
|
Outstanding at end of year |
|
|
310 |
|
|
$ |
59.89 |
|
|
|
8.1 |
|
|
$ |
0.2 |
|
|
|
141 |
|
|
$ |
51.17 |
|
|
|
286 |
|
|
$ |
50.14 |
|
Exercisable at end of year |
|
|
72 |
|
|
$ |
54.53 |
|
|
|
4.2 |
|
|
$ |
7.6 |
|
|
|
141 |
|
|
$ |
51.17 |
|
|
|
286 |
|
|
$ |
50.14 |
|
Vested and expected to vest in the future at April 30 |
|
|
306 |
|
|
$ |
60.55 |
|
|
|
9.1 |
|
|
$ |
— |
|
|
|
141 |
|
|
$ |
51.17 |
|
|
|
286 |
|
|
$ |
50.14 |
|
The intrinsic value is the difference between our common stock price and the option grant price. The total intrinsic value of options exercised during the years ended April 30, 2022, 2021, and 2020 was $0.4 million, $0.2 million, and $0.3 million, respectively. The total grant date fair value of stock options vested during the year ended April 30, 2022 was $1.3 million. As noted above, as of April 30, 2019, all outstanding stock options, prior to those granted in the year ended April 30, 2022 vested allowing the participant the right to exercise their awards.
The following table summarizes information about stock options outstanding and exercisable at April 30, 2022:
|
|
Options Outstanding |
|
Options Exercisable |
Range of Exercise Prices |
|
Number of Options (in 000’s) |
|
Weighted Average Remaining Term (in years) |
|
Weighted Average Exercise Price |
|
Number of Options (in 000’s) |
|
Weighted Average Exercise Price |
$39.53 |
|
17 |
|
1.2 |
|
$ |
39.53 |
|
17 |
|
$ |
39.53 |
$48.06 to $49.55 |
|
33 |
|
0.2 |
|
$ |
52.69 |
|
3 |
|
$ |
48.06 |
$55.62 to $63.07 |
|
260 |
|
5.4 |
|
$ |
62.17 |
|
52 |
|
$ |
59.98 |
Total/average |
|
310 |
|
8.1 |
|
$ |
59.89 |
|
72 |
|
$ |
54.53 |
Performance-Based and Other Restricted Stock Activity
Under the terms of our long-term incentive plans, performance-based restricted unit awards are payable in restricted shares of our Class A Common Stock upon the achievement of certain three-year or less financial performance-based targets. During each three-year period or less, we adjust compensation expense based upon our best estimate of expected performance. For the year ended April 30, 2017, restricted performance shares vest 50% on June 30 following the end of the three-year performance cycle and 50% on April 30 of the following year. Beginning in the year ended April 30, 2018, restricted performance share units vest 100% on June 30 following the end of the three-year performance cycle.
We may also grant individual restricted unit awards payable in restricted shares of our Class A Common Stock to key employees in connection with their employment. Starting with the year ended April 30, 2016 grants, restricted shares generally vest ratably 25% per year.
Under certain circumstances relating to a change of control or termination, as defined, the restrictions would lapse and shares would vest earlier.
Activity for performance-based and other restricted stock awards during the years ended April 30, was as follows (shares in thousands):
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
|
Restricted Shares |
|
|
Weighted Average Grant Date Value |
|
|
Restricted Shares |
|
|
Restricted Shares |
|
Nonvested shares at beginning of year |
|
|
1,280 |
|
|
$ |
45.73 |
|
|
|
943 |
|
|
|
756 |
|
Granted |
|
|
658 |
|
|
$ |
56.53 |
|
|
|
706 |
|
|
|
759 |
|
Change in shares due to performance |
|
|
(3 |
) |
|
$ |
30.41 |
|
|
|
118 |
|
|
|
(70 |
) |
Vested and issued |
|
|
(432 |
) |
|
$ |
50.87 |
|
|
|
(362 |
) |
|
|
(329 |
) |
Forfeited |
|
|
(229 |
) |
|
$ |
48.23 |
|
|
|
(125 |
) |
|
|
(173 |
) |
Nonvested shares at end of year |
|
|
1,274 |
|
|
$ |
49.17 |
|
|
|
1,280 |
|
|
|
943 |
|
For the years ended April 30, 2022, 2021 and 2020, we recognized stock-based compensation expense (including stock options), on a pretax basis, of $25.7 million, $22.0 million and $20.0 million, respectively.
As of April 30, 2022, there was $39.2 million of unrecognized share-based compensation cost related to performance-based and other restricted stock awards, which is expected to be recognized over a period up to 4 years, or 2.4 years on a weighted average basis.
Compensation expense for restricted stock awards is measured using the closing market price of our Class A Common Stock at the date of grant. The total grant date value of shares vested during the years ended April 30, 2022, 2021, and 2020 was $22.0 million, $17.6 million, and $17.5 million, respectively.
President and CEO New Hire Equity Awards
On October 17, 2017, we announced Brian A. Napack as the new President and Chief Executive Officer of Wiley effective December 4, 2017 (the Commencement Date). Upon the Commencement Date, Mr. Napack also became a member of our Board of Directors (the Board). In connection with his appointment, Wiley and Mr. Napack entered into an employment offer letter (the Employment Agreement).
The Employment Agreement provides that beginning with the year ended April 30, 2018–2020 performance cycle, eligibility to participate in annual grants under our Executive Long-Term Incentive Program (ELTIP). Targeted long-term incentive for this cycle was equal to 300% of base salary, or $2.7 million. Sixty percent of the ELTIP value was delivered in the form of target performance share units and forty percent in restricted share units. The grant date fair value for restricted share units was $59.15 per share and included 20,611 restricted share units, which vested 25% each year starting on April 30, 2018 to April 30, 2021. In addition, there was a performance share unit award with a target of 30,916 units and a grant date fair value of $59.15. The performance metrics were based on cumulative EBITDA for the year ended April 30, 2018–2020 and cumulative normalized free cash flow for the year ended April 30, 2018–2020.
In addition, the Employment Agreement provided for a sign-on grant of restricted share units, with a grant value of $4.0 million, converted to shares using our Class A closing stock price as of the Commencement Date, and vesting in two equal installments on the first and second anniversaries of the employment date. The grant date fair value for this award was $59.15 per share and included 67,625 units at the date of grant. Grants were subject to forfeiture in the case of voluntary termination prior to vesting and accelerated vesting in the case of earlier termination of employment without Cause, due to death or Disability or Constructive Discharge, or upon a Change in Control (as such terms are defined in the Employment Agreement).
Director Stock Awards
Under the terms of our 2018 Director Stock Plan (the Director Plan), each nonemployee director, other than the Chairman of the Board, receives an annual award of restricted shares of our Class A Common Stock equal in value to 100% of the annual director stock retainer fee, based on the stock price at the close of the New York Stock Exchange on the date of grant. Such restricted shares will vest on the earliest of (i) the day before the next Annual Meeting following the grant, (ii) the nonemployee director’s death or disability (as determined by the Governance Committee), or (iii) a change in control (as defined in the 2014 Key Employee Stock Plan). The granted shares may not be sold or transferred during the time the nonemployee director remains a director. There were 18,384, 28,360, and 20,048 restricted shares awarded under the Director Plan for the years ended April 30, 2022, 2021, and 2020, respectively. In addition, pursuant to the John Wiley & Sons, Inc. Deferred Compensation Plan for Directors’ 2005 & After Compensation, as amended through December 15, 2021, each nonemployee director has the option of receiving all or part of the annual retainer in the form of deferred stock and shall be subject to the same vesting terms as specified therein.
Note 19 – Capital Stock and Changes in Capital Accounts
Each share of our Class B Common Stock is convertible into one share of Class A Common Stock. The holders of Class A stock are entitled to elect 30% of the entire Board of Directors and the holders of Class B stock are entitled to elect the remainder. On all other matters, each share of Class A stock is entitled to one tenth of one vote and each share of Class B stock is entitled to one vote.
Share Repurchases
During the year ended April 30, 2020, our Board of Directors approved an additional share repurchase program of $200 million of Class A or B Common Stock. As of April 30, 2022, we had authorization from our Board of Directors to purchase up to $197.5 million that was remaining under this program.
The share repurchase program described above is in addition to the share repurchase program approved by our Board of Directors during the year ended April 30, 2017 of four million shares of Class A or B Common Stock. As of April 30, 2022, no additional shares were remaining under this program for purchase.
The following table summarizes the share repurchases of Class A and B Common Stock during the years ended April 30 (shares in thousands):
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Shares repurchased – Class A |
|
|
542 |
|
|
|
308 |
|
|
|
1,080 |
|
Shares repurchased – Class B |
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
Average price – Class A and Class B |
|
$ |
55.14 |
|
|
$ |
50.93 |
|
|
$ |
43.05 |
|
Dividends
The following table summarizes the cash dividends paid during the year ended April 30, 2022:
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 22, 2021 |
$0.3450 per common share |
$19.3 million |
Class A and Class B |
July 21, 2021 |
July 6, 2021 |
September 29, 2021 |
$0.3450 per common share |
$19.2 million |
Class A and Class B |
October 27, 2021 |
October 12, 2021 |
December 15, 2021 |
$0.3450 per common share |
$19.2 million |
Class A and Class B |
January 12, 2022 |
December 28, 2021 |
March 23, 2022 |
$0.3450 per common share |
$19.2 million |
Class A and Class B |
April 20, 2022 |
April 5, 2022 |
Changes in Common Stock
The following is a summary of changes during the years ended April 30, in shares of our common stock and common stock in treasury (shares in thousands).
Changes in Class A Common Stock: |
|
2022 |
|
|
2021 |
|
|
2020 |
|
Number of shares, beginning of year |
|
|
70,208 |
|
|
|
70,166 |
|
|
|
70,127 |
|
Common stock class conversions |
|
|
18 |
|
|
|
42 |
|
|
|
39 |
|
Number of shares issued, end of year |
|
|
70,226 |
|
|
|
70,208 |
|
|
|
70,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Class A Common Stock in treasury: |
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares held, beginning of year |
|
|
23,419 |
|
|
|
23,405 |
|
|
|
22,634 |
|
Purchases of treasury shares |
|
|
542 |
|
|
|
308 |
|
|
|
1,080 |
|
Restricted shares issued under stock-based compensation plans – non-PSU Awards |
|
|
(323 |
) |
|
|
(268 |
) |
|
|
(232 |
) |
Restricted shares issued under stock-based compensation plans – PSU Awards |
|
|
(108 |
) |
|
|
(88 |
) |
|
|
(68 |
) |
Shares issued under the Director Plan to Directors |
|
|
(2 |
) |
|
|
(6 |
) |
|
|
(97 |
) |
Restricted shares, forfeited |
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Restricted shares issued from exercise of stock options |
|
|
(49 |
) |
|
|
(60 |
) |
|
|
(34 |
) |
Shares issued related to the acquisition of a business |
|
|
(129 |
) |
|
|
— |
|
|
|
— |
|
Shares withheld for taxes |
|
|
167 |
|
|
|
129 |
|
|
|
122 |
|
Other |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
Number of shares held, end of year |
|
|
23,515 |
|
|
|
23,419 |
|
|
|
23,405 |
|
Number of Class A Common Stock outstanding, end of year |
|
|
46,711 |
|
|
|
46,789 |
|
|
|
46,761 |
|
Changes in Class B Common Stock: |
|
2022 |
|
|
2021 |
|
|
2020 |
|
Number of shares, beginning of year |
|
|
12,974 |
|
|
|
13,016 |
|
|
|
13,055 |
|
Common stock class conversions |
|
|
(18 |
) |
|
|
(42 |
) |
|
|
(39 |
) |
Number of shares issued, end of year |
|
|
12,956 |
|
|
|
12,974 |
|
|
|
13,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Class B Common Stock in treasury: |
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares held, beginning of year |
|
|
3,922 |
|
|
|
3,920 |
|
|
|
3,918 |
|
Purchase of treasury shares |
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
Number of shares held, end of year |
|
|
3,924 |
|
|
|
3,922 |
|
|
|
3,920 |
|
Number of Class B Common Stock outstanding, end of year |
|
|
9,032 |
|
|
|
9,052 |
|
|
|
9,096 |
|
Warrants
In connection with the acquisition of The Learning House, Inc. on November 1, 2018, a portion of the fair value of the consideration transferred was $0.6 million of warrants. The warrants were classified as equity and allowed 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 was three years and expired on November 1, 2021. The fair value of the warrants was determined using the Black-Scholes option pricing model.
Note 20 – Segment Information
We report our segment information in accordance with the provisions of FASB ASC Topic 280, “Segment Reporting.” These segments reflect the way our chief operating decision maker evaluates our business performance and manages the operations. The performance metric used by our chief operating decision maker to evaluate performance of our reportable segments is Adjusted Contribution to Profit. Our segment reporting structure consists of three reportable segments, which are listed below, as well as a Corporate category, which includes certain costs that are not allocated to the reportable segments:
|
• |
Research Publishing & Platforms |
|
• |
Academic & Professional Learning |
Segment information is as follows:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
Research Publishing & Platforms |
|
$ |
1,111,343 |
|
|
$ |
1,015,349 |
|
|
$ |
948,839 |
|
Academic & Professional Learning(1) |
|
|
646,823 |
|
|
|
641,861 |
|
|
|
650,115 |
|
Education Services(1) |
|
|
324,762 |
|
|
|
284,291 |
|
|
|
232,529 |
|
Total revenue |
|
$ |
2,082,928 |
|
|
$ |
1,941,501 |
|
|
$ |
1,831,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Contribution to Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
Research Publishing & Platforms |
|
$ |
295,227 |
|
|
$ |
273,023 |
|
|
$ |
265,353 |
|
Academic & Professional Learning(1) |
|
|
111,917 |
|
|
|
92,363 |
|
|
|
85,515 |
|
Education Services(1) |
|
|
3,289 |
|
|
|
20,488 |
|
|
|
(4,713 |
) |
Total adjusted contribution to profit |
|
$ |
410,433 |
|
|
$ |
385,874 |
|
|
$ |
346,155 |
|
Adjusted corporate contribution to profit |
|
|
(192,584 |
) |
|
|
(167,053 |
) |
|
|
(165,487 |
) |
Total adjusted operating income |
|
$ |
217,849 |
|
|
$ |
218,821 |
|
|
$ |
180,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
Research Publishing & Platforms |
|
$ |
94,899 |
|
|
$ |
83,866 |
|
|
$ |
69,495 |
|
Academic & Professional Learning(1) |
|
|
69,561 |
|
|
|
71,997 |
|
|
|
69,807 |
|
Education Services(1) |
|
|
34,157 |
|
|
|
29,654 |
|
|
|
24,131 |
|
Total depreciation and amortization |
|
$ |
198,617 |
|
|
$ |
185,517 |
|
|
$ |
163,433 |
|
Corporate depreciation and amortization |
|
|
16,553 |
|
|
|
14,672 |
|
|
|
11,694 |
|
Total depreciation and amortization |
|
$ |
215,170 |
|
|
$ |
200,189 |
|
|
$ |
175,127 |
|
(1) |
In May 2021, we moved the WileyNXT product offering from Academic & Professional Learning to Education Services. As a result, the prior period results related to the WileyNXT product offering have been included in Education Services. The Revenue, Adjusted Contribution to Profit and Depreciation and Amortization for WileyNXT was $2.7 million, $(0.7) million, and none, respectively, for the year ended April 30, 2021, and $0.7 million, $(0.9) million, and none, respectively, for the year ended April 30, 2020. There were no changes to our total consolidated financial results. |
The following table shows a reconciliation of our consolidated US GAAP Operating Income (Loss) to Non-GAAP Adjusted Operating Income:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
US GAAP Operating Income (Loss) |
|
$ |
219,276 |
|
|
$ |
185,511 |
|
|
$ |
(54,287 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and related (credits) charges(1) |
|
|
(1,427 |
) |
|
|
33,310 |
|
|
|
32,607 |
|
Impairment of goodwill(1) |
|
|
— |
|
|
|
— |
|
|
|
110,000 |
|
Impairment of Blackwell trade name(1) |
|
|
— |
|
|
|
— |
|
|
|
89,507 |
|
Impairment of developed technology intangible(1) |
|
|
— |
|
|
|
— |
|
|
|
2,841 |
|
Non-GAAP Adjusted Operating Income |
|
$ |
217,849 |
|
|
$ |
218,821 |
|
|
$ |
180,668 |
|
(1) |
See Note 7, “Restructuring and Related (Credits) Charges” and Note 11, “Goodwill and Intangible Assets” for these charges by segment. |
See Note 3, “Revenue Recognition, Contracts with Customers,” for revenue from contracts with customers disaggregated by segment and product type for the years ended April 30, 2022, 2021, and 2020.
The following tables shows assets allocated by reportable segment and by the corporate category as of April 30 as follows:
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
Research Publishing & Platforms |
|
$ |
1,593,297 |
|
|
$ |
1,692,366 |
|
|
$ |
1,225,313 |
|
Academic & Professional Learning |
|
|
894,516 |
|
|
|
946,760 |
|
|
|
924,924 |
|
Education Services |
|
|
542,508 |
|
|
|
472,814 |
|
|
|
486,316 |
|
Corporate |
|
|
331,374 |
|
|
|
334,499 |
|
|
|
532,241 |
|
Total |
|
$ |
3,361,695 |
|
|
$ |
3,446,439 |
|
|
$ |
3,168,794 |
|
The following table shows product development spending and additions to technology, property, and equipment by reportable segment and by the corporate category:
|
|
For the Years Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
Research Publishing & Platforms |
|
$ |
(30,139 |
) |
|
$ |
(24,284 |
) |
|
$ |
(16,329 |
) |
Academic & Professional Learning |
|
|
(44,082 |
) |
|
|
(41,897 |
) |
|
|
(38,229 |
) |
Education Services |
|
|
(7,308 |
) |
|
|
(3,449 |
) |
|
|
(613 |
) |
Corporate |
|
|
(34,329 |
) |
|
|
(33,731 |
) |
|
|
(60,030 |
) |
Total |
|
$ |
(115,858 |
) |
|
$ |
(103,361 |
) |
|
$ |
(115,201 |
) |
Revenue for the years ended April 30 from external customers is based on the location of the customer, and technology, property and equipment, net by geographic area as of April 30 were as follows:
|
|
Revenue, net |
|
|
Technology, Property, and Equipment, Net |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
United States |
|
$ |
1,011,716 |
|
|
$ |
990,499 |
|
|
$ |
944,075 |
|
|
$ |
232,824 |
|
|
$ |
241,217 |
|
|
$ |
261,296 |
|
United Kingdom |
|
|
164,205 |
|
|
|
145,806 |
|
|
|
174,567 |
|
|
|
19,260 |
|
|
|
19,436 |
|
|
|
18,076 |
|
China |
|
|
140,323 |
|
|
|
92,305 |
|
|
|
58,870 |
|
|
|
2,609 |
|
|
|
567 |
|
|
|
492 |
|
Japan |
|
|
94,040 |
|
|
|
91,957 |
|
|
|
75,104 |
|
|
|
807 |
|
|
|
234 |
|
|
|
112 |
|
Australia |
|
|
80,993 |
|
|
|
57,569 |
|
|
|
73,718 |
|
|
|
476 |
|
|
|
890 |
|
|
|
1,051 |
|
Canada |
|
|
80,640 |
|
|
|
67,635 |
|
|
|
56,370 |
|
|
|
194 |
|
|
|
1,067 |
|
|
|
1,734 |
|
Germany |
|
|
75,805 |
|
|
|
78,035 |
|
|
|
113,664 |
|
|
|
7,267 |
|
|
|
8,459 |
|
|
|
8,059 |
|
France |
|
|
43,007 |
|
|
|
45,681 |
|
|
|
45,033 |
|
|
|
3,284 |
|
|
|
4,329 |
|
|
|
1,358 |
|
India |
|
|
38,279 |
|
|
|
32,228 |
|
|
|
27,691 |
|
|
|
984 |
|
|
|
1,012 |
|
|
|
1,066 |
|
Other Countries |
|
|
353,920 |
|
|
|
339,786 |
|
|
|
262,391 |
|
|
|
3,867 |
|
|
|
5,059 |
|
|
|
4,761 |
|
Total |
|
$ |
2,082,928 |
|
|
$ |
1,941,501 |
|
|
$ |
1,831,483 |
|
|
$ |
271,572 |
|
|
$ |
282,270 |
|
|
$ |
298,005 |
|
Note 21 – Subsequent Events
Restructuring
In May 2022, the Company initiated a global program to restructure and align our cost base with current and anticipated future market conditions. This program will include the exit of certain leased office space beginning in the first quarter of fiscal year 2023 and the reduction of our occupancy at other facilities. In addition, the program will include severance related charges for the elimination of certain positions. These actions are estimated to result in an initial pretax restructuring charge of approximately $19.0 million to $21.0 million in the first quarter of fiscal year 2023.
Dividend
On June 22, 2022, our Board of Directors declared a quarterly dividend of $0.3475 per share, or approximately $19.4 million, on our Class A and Class B Common Stock. The dividend is payable on July 20, 2022 to shareholders of record on July 6, 2022.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Disclosure 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.
Management’s Report on Internal Control over Financial Reporting: Our Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on their evaluation, our management concluded that our internal control over financial reporting is effective as of April 30, 2022.
KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of our internal control over financial reporting.
There were no changes in our internal control over financial reporting in the fourth quarter of fiscal year 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
For information with respect to Executive Officers of the Company, see “Information About Our Executive Officers” as set forth in Part I of this Annual Report on Form 10-K.
The name, age, and background of each of the directors nominated for election are contained under the caption “Election of Directors” in the Proxy Statement for our 2022 Annual Meeting of Shareholders (2022 Proxy Statement) and are incorporated herein by reference.
Information on the audit committee financial experts is contained in the 2022 Proxy Statement under the caption “Report of the Audit Committee” and is incorporated herein by reference.
Information on the Audit Committee Charter is contained in the 2022 Proxy Statement under the caption “Committees of the Board of Directors and Certain Other Information concerning the Board.”
Information with respect to the Company’s Corporate Governance principles is publicly available on the Company’s Corporate Governance website at https://www.wiley.com/en-us/corporategovernance.
Item 11. Executive Compensation
Information on compensation of the directors and executive officers is contained in the 2022 Proxy Statement under the captions “Directors’ Compensation” and “Executive Compensation,” respectively, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information on the beneficial ownership reporting for the directors and executive officers is contained under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” within the “Beneficial Ownership of Directors and Management” section of the 2022 Proxy Statement and is incorporated herein by reference. Information on the beneficial ownership reporting for all other shareholders that own 5% or more of the Company’s Class A or Class B Common Stock is contained under the caption “Voting Securities, Record Date, Principal Holders” in the 2022 Proxy Statement and is incorporated herein by reference.
The following table summarizes the Company’s equity compensation plan information as of April 30, 2022:
Plan Category |
|
Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) |
|
|
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights |
|
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (2) |
|
Equity compensation plans approved by shareholders |
|
|
1,582,784 |
|
|
$ |
59.89 |
|
|
|
1,390,492 |
|
(1) |
This amount includes the following awards issued under the 2014 Key Employee Stock Plan: |
|
● |
310,409 shares issuable upon the exercise of outstanding stock options with a weighted average exercise price of $59.89. |
|
● |
1,272,375 non-vested performance-based and other restricted stock awards. Since these awards have no exercise price, they are not included in the weighted average exercise price calculation. |
(2) |
Per the terms of the 2014 Key Employee Stock Plan (Plan), a total of 6,500,000 shares shall be authorized for awards granted under the Plan, less one (1) share for every one (1) share that was subject to an option or stock appreciation right granted after April 30, 2014 under the 2009 Key Employee Stock Plan and 1.76 shares for every one (1) share that was subject to an award other than an option or stock appreciation right granted after April 30, 2014 under the 2009 Key Employee Stock Plan. Any shares that are subject to options or stock appreciation rights shall be counted against this limit as one (1) share for every one (1) share granted, and any shares that are subject to awards other than options or stock appreciation rights shall be counted against this limit as 1.76 shares for every one (1) share granted. After the Effective Date of the Plan, no awards may be granted under the 2009 Key Employee Stock Plan. |
All of the Company’s equity compensation plans are approved by shareholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information on related party transactions and the policies and procedures for reviewing and approving related party transactions are contained under the caption “Transactions with Related Persons” within the “Board and Committee Oversight of Risk” section of the 2022 Proxy Statement and are incorporated herein by reference.
Information on director independence is contained under the caption “Director Independence” within the “Board of Directors and Corporate Governance” section of the 2022 Proxy Statement.
Item 14. Principal Accountant Fees and Services
Our independent registered public accounting firm is KPMG LLP, New York, NY, Auditor ID: 185
Information required by this item is contained in the 2022 Proxy Statement under the caption “Report of the Audit Committee” and is incorporated herein by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as a part of this Annual Report on Form 10-K:
(1) Financial Statements
See Index to Consolidated Financial Statements and Schedule of this Annual Report on Form 10-K in Part II Item 8.
(2) Financial Statement Schedule
See Schedule II - Valuation and Qualifying Accounts and Reserves - Years Ended April 30, 2022, 2021, and 2020 of this Annual Report on Form 10-K. The other schedules are omitted as they are not applicable, or the amounts involved are not material.
(3) Exhibits
Articles of Incorporation and By-Laws |
3.1 |
|
|
|
3.2 |
|
|
|
3.3 |
|
|
|
3.4 |
|
|
|
3.5 |
|
|
|
Instruments Defining the Rights of Security Holders, Including Indentures |
4.1 |
|
|
|
Material Contracts |
|
10.1 |
|
10.2 |
|
|
|
10.3 |
|
|
|
10.4 |
|
|
|
10.5 |
|
|
|
10.6 |
|
|
|
10.7 |
|
|
|
10.8 |
|
|
|
10.9 |
|
|
|
10.10 |
|
|
|
10.11 |
|
|
|
10.12 |
|
|
|
10.13 |
|
|
|
10.14 |
|
|
|
10.15 |
|
|
|
10.16 |
|
|
|
10.17 |
|
|
|
10.18 |
|
10.19 |
|
|
|
10.20 |
|
|
|
10.21 |
|
|
|
10.22 |
|
|
|
10.23 |
|
|
|
10.24 |
|
|
|
10.25 |
|
|
|
10.26 |
|
|
|
10.27 |
|
|
|
10.28 |
|
|
|
10.29 |
|
|
|
10.30 |
|
|
|
10.31 |
|
|
|
10.32 |
|
|
|
10.33 |
|
|
|
10.34 |
|
10.35 |
|
|
|
10.36 |
|
|
|
10.37 |
|
|
|
10.38 |
|
|
|
10.39 |
|
|
|
Subsidiaries |
|
List of Subsidiaries of the Company. |
|
|
Consent of Independent Registered Public Accounting Firm |
|
Consent of KPMG LLP. |
|
|
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
Inline XBRL |
101.INS* |
Inline 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.SCH* |
Inline XBRL Taxonomy Extension Schema Document. |
|
|
101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
|
|
* Filed herewith
Item 16. Form 10-K Summary
Not applicable.
(2) Financial Statement Schedule
Schedule II
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 2022, 2021, AND 2020
(Dollars in thousands)
Description |
|
Balance at Beginning of Period |
|
|
Cumulative Effect of Change in Accounting Principle(1) |
|
|
Charged to Expenses |
|
|
Deductions From Reserves and Other(2) |
|
|
Balance at End of Period(3) |
|
Year Ended April 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for sales returns(4) |
|
$ |
22,199 |
|
|
$ |
— |
|
|
$ |
29,191 |
|
|
$ |
31,968 |
|
|
$ |
19,422 |
|
Allowance for doubtful accounts |
|
$ |
21,474 |
|
|
$ |
— |
|
|
$ |
4,029 |
|
|
$ |
4,282 |
|
|
$ |
21,221 |
|
Allowance for inventory obsolescence |
|
$ |
13,970 |
|
|
$ |
— |
|
|
$ |
6,786 |
|
|
$ |
9,537 |
|
|
$ |
11,219 |
|
Valuation allowance on deferred tax assets |
|
$ |
4,855 |
|
|
$ |
— |
|
|
$ |
230 |
|
|
$ |
(24,915 |
) |
|
$ |
30,000 |
|
Year Ended April 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for sales returns(4) |
|
$ |
19,642 |
|
|
$ |
— |
|
|
$ |
36,997 |
|
|
$ |
34,440 |
|
|
$ |
22,199 |
|
Allowance for doubtful accounts |
|
$ |
18,335 |
|
|
$ |
1,776 |
|
|
$ |
6,957 |
|
|
$ |
5,594 |
|
|
$ |
21,474 |
|
Allowance for inventory obsolescence |
|
$ |
16,067 |
|
|
$ |
— |
|
|
$ |
9,236 |
|
|
$ |
11,333 |
|
|
$ |
13,970 |
|
Valuation allowance on deferred tax assets |
|
$ |
23,287 |
|
|
$ |
— |
|
|
$ |
3,213 |
|
|
$ |
21,645 |
|
|
$ |
4,855 |
|
Year Ended April 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for sales returns(4) |
|
$ |
18,542 |
|
|
$ |
— |
|
|
$ |
48,829 |
|
|
$ |
47,729 |
|
|
$ |
19,642 |
|
Allowance for doubtful accounts |
|
$ |
14,307 |
|
|
$ |
— |
|
|
$ |
5,470 |
|
|
$ |
1,442 |
|
|
$ |
18,335 |
|
Allowance for inventory obsolescence |
|
$ |
15,825 |
|
|
$ |
— |
|
|
$ |
8,699 |
|
|
$ |
8,457 |
|
|
$ |
16,067 |
|
Valuation allowance on deferred tax assets |
|
$ |
21,179 |
|
|
$ |
— |
|
|
$ |
2,108 |
|
|
$ |
— |
|
|
$ |
23,287 |
|
(1) |
See Note 2, “Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards” of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K regarding the adoption of ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments”. 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. |
(2) |
Deductions From Reserves and Other for the years ended April 30, 2022, 2021, and 2020 include foreign exchange translation adjustments. Included in Allowance for doubtful accounts are accounts written off, less recoveries. Included in Allowance for inventory obsolescence are items removed from inventory. |
(3) |
Included in Valuation allowance on deferred tax assets for the years ended April 30, 2022 and 2020 are valuation allowances related to, and required with respect to foreign tax credits generated by the Tax Act. In connection with a 5-year loss carryback and a subsequent audit, certain foreign tax credits requiring a valuation allowance were reinstated. |
(4) |
Allowance for sales returns represents anticipated returns net of a recovery of inventory and royalty costs. The provision is reported as a reduction of gross sales to arrive at revenue and the reserve balance is reported as an increase in Contract liabilities with a corresponding increase in Inventories, net and a reduction in Accrued royalties for the years ended April 30, 2022, 2021, and 2020. |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
JOHN WILEY & SONS, INC. |
|
|
|
(Company) |
|
|
|
|
|
Dated: June 24, 2022 |
By: |
/s/ Brian A. Napack |
|
|
|
Brian A. Napack |
|
|
|
President and Chief Executive Officer |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signatures |
|
Titles |
|
Dated |
|
|
|
|
|
|
|
/s/ Brian A. Napack |
|
President and Chief Executive Officer and |
|
June 24, 2022 |
|
Brian A. Napack |
|
Director |
|
|
|
|
|
|
|
|
|
/s/ Christina Van Tassell |
|
Executive Vice President and Chief Financial Officer |
|
June 24, 2022 |
|
Christina Van Tassell |
|
|
|
|
|
|
|
|
|
|
|
/s/ Christopher F. Caridi |
|
Senior Vice President, Global Corporate Controller and |
|
June 24, 2022 |
|
Christopher F. Caridi |
|
Chief Accounting Officer |
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/s/ Jesse C. Wiley |
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Chairman of the Board |
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June 24, 2022 |
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Jesse C. Wiley |
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/s/ Mari J. Baker |
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Director |
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June 24, 2022 |
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Mari J. Baker |
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/s/ George D. Bell |
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Director |
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June 24, 2022 |
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George D. Bell |
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/s/ Beth A. Birnbaum |
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Director |
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June 24, 2022 |
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Beth A. Birnbaum |
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/s/ David C. Dobson |
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Director |
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June 24, 2022 |
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David C. Dobson |
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/s/ Mariana Garavaglia |
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Director |
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June 24, 2022 |
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Mariana Garavaglia |
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/s/ Laurie A. Leshin |
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Director |
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June 24, 2022 |
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Laurie A. Leshin |
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/s/ Raymond W. McDaniel, Jr. |
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Director |
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June 24, 2022 |
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Raymond W. McDaniel, Jr. |
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/s/ William J. Pesce |
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Director |
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June 24, 2022 |
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William J. Pesce |
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/s/ Inder Singh |
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Director |
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June 24, 2022 |
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Inder Singh |
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John Wiley and Sons (NYSE:JW.B)
Gráfica de Acción Histórica
De Abr 2024 a May 2024
John Wiley and Sons (NYSE:JW.B)
Gráfica de Acción Histórica
De May 2023 a May 2024