A very strong first six months enabled John Wiley & Sons to withstand sluggish retail sales and tightening state budgets in the second half of the year to post a 16.5% increase in revenue, to $854 million, for the fiscal year ended April 30. Net income, excluding unusual items, increased 18%, to $76.7 million; including unusual items, earnings jumped 52.3%, to $87.3 million, a figure that includes a tax benefit of $12 million.
Revenue growth was attributed to internal expansion, the April 2002 purchases of GIT Verlag and A&M Publishing, plus a full year's contribution from Hungry Minds, which Wiley acquired in fall 2001. Excluding Hungry Minds, sales increased 8%. The largest sales gain in the year was in the professional/trade segment, which continues to benefit from the Hungry Minds purchase. Sales in the division increased 27%, to $322 million, and the division's contribution to profit rose 38%, to $87.4 million. The division's consumer books unit had a solid year, led by sales in the cooking, reference and travel segments. The division's business program did well in a soft market, and its computer book operation outperformed a weak market led by sales of consumer titles. Sales of professional computer books were down. Just prior to the close of the fiscal year, Wiley acquired 34 computer book titles from Wrox Press and also reached an agreement to publish a series of PCmagazine-branded books.
Sales in the domestic scientific/technical/medical segment rose 2%, to $168.2 million, and operating earnings increased 10%, to $77.9 million. Sales were hurt by the RoweCom bankruptcy and softness in the STM book market, due in part to tight library budgets. The company's online service, Wiley InterScience, had another strong year, and more than 60% of global journal subscription revenue is generated by InterScience licenses. In April, InterScience added a pay-per-view option that allows customers to buy individual articles by credit card. Wiley president Will Pesce said in a conference call with analysts that he expects the service will add incremental sales over time.
Sales in the U.S. higher education segment increased 5%, to $148.2 million, but contribution to profit fell 10%, to $39.9 million. Results in the year were once again hindered by sluggish sales in engineering. Sales were up in the division's life sciences, physical sciences and social sciences programs. Demand for Web-based products and course management tools also increased in the year.
Internationally, sales in Europe rose 28%, to $210.5 million. In addition to the GIT and A&M acquisitions, sales in Europe were driven by organic growth in the journals program, as well as indigenous titles from the professional/trade segment. A weak spot was Germany, where book sales were sluggish and journal advertising was off. In the Asia/Australia/Canada segment, sales rose 28%, to $87.3 million. Canada had a record year, Pesce said, led by the For Dummies brand and higher sales in its higher education division. Results were also up in Asia and Australia, although sales in Asia in the fourth quarter were somewhat affected by SARS.
Pesce predicted that sales and earnings in fiscal 2004 will be up in the middle-to-high single digits. He told analysts that the professional/trade and higher education segments may perform slightly better than the STM segment, which could be hurt by soft library budgets. International sales should do a bit better than sales in North America, Pesce said.
Dealing with B&N
Prompted by a story in the Wall Street Journal about Barnes & Noble's publishing program, an analyst asked if B&N's publishing efforts will have any effect on Wiley's dealings with the bookstore chain. Noting that B&N's publishing program is not a new strategy, Pesce said he was "not concerned" that B&N's publishing program will compromise the company's relationship with the retailer. He called Wiley's relationship with B&N "terrific," despite the fact that the chain stopped selling Wiley's Cliffs Notes last summer in favor of its own SparkNotes. Pesce said Cliffs Notes had a successful year without B&N, because the loss of sales to the chain were offset by higher sales in other channels.