10-K 1 form10k.htm FORM 10-K  
John Wiley & Sons, Inc.
10-K on 07/01/2019   Download
SEC Document
SEC Filing



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

FORM 10-K

(Mark One)
          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended:  April 30, 2019

OR

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

For the transition period from _________ to _________
Commission file number   001-11507

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

NEW YORK
 
13-5593032
State or other jurisdiction of incorporation or organization
 
I.R.S. Employer Identification No.
     
111 River Street, Hoboken, NJ
 
07030
Address of principal executive offices
 
Zip Code

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
 
Trading Symbol
Class A Common Stock, par value $1.00 per share
 
New York Stock Exchange
 
JW.A
Class B Common Stock, par value $1.00 per share
 
New York Stock Exchange
 
JW.B

 
Securities registered pursuant to Section 12(g) of the Act:
 
 
None
 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes    No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes    No

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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

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

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

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

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last business day of the registrant’s most recently completed second fiscal quarter, October 31, 2018, was approximately $2,465 million. The registrant has no non-voting common stock.

The number of shares outstanding of the registrant’s Class A and Class B Common Stock as of May 31, 2019 was 47,499,550 and 9,132,133 respectively.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for use in connection with its annual meeting of stockholders scheduled to be held on September 26, 2019, are incorporated by reference into Part III of this Form 10-K.


JOHN WILEY & SONS, INC. AND SUBSIDIARIES
FORM 10-K
FOR THE FISCAL YEAR ENDED APRIL 30, 2019
INDEX

PART I
 
PAGE
Business
4
Risk Factors
10
Unresolved Staff Comments
17
Properties
18
Legal Proceedings
18
Mine Safety Disclosures
18
 
19
     
PART II
   
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
20
Selected Financial Data
20
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22
Quantitative and Qualitative Disclosures About Market Risk
42
Financial Statements and Supplementary Data
44
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
92
Controls and Procedures
92
Other Information
92
     
PART III
   
Directors, Executive Officers and Corporate Governance
93
Executive Compensation
93
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
93
Certain Relationships and Related Transactions, and Director Independence
94
Principal Accounting Fees and Services          
94
     
PART IV
   
Exhibits, Financial Statement Schedules
95
Form 10-K Summary
 96
     
   

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

This report contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 concerning our business, consolidated financial condition and results of operations. The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “should,” “estimates,” “expects,” “intends,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding our fiscal year 2020 outlook, anticipated restructuring charges and savings, operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon many assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond our control, and are subject to change based on many important factors. Such factors include, but are not limited to (i) the level of investment in new technologies and products; (ii) subscriber renewal rates for our journals; (iii) the financial stability and liquidity of journal subscription agents; (iv) the consolidation of book wholesalers and retail accounts; (v) the market position and financial stability of key retailers; (vi) the seasonal nature of our educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) our ability to protect our copyrights and other intellectual property worldwide; (ix) our ability to successfully integrate acquired operations and realize expected opportunities; (x) achievement of targeted run rate savings through restructuring activities; and (xi) other factors detailed from time to time in our filings with the SEC. We undertake no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.

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

Non-GAAP Financial Measures:

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

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

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

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

For example:

 •
Adjusted EPS, Adjusted Revenue, Adjusted Operating Profit, Adjusted Contribution to Profit, and Adjusted EBITDA provide a more comparable basis to analyze our operating results and earnings over time and are measures commonly used by shareholders to measure our performance.
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 •
Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders as it represents cash available to repay debt, pay common stock dividends and fund share repurchases and acquisitions.

 •
Results on a constant currency basis removes distortion from the effects of foreign currency movements to provide better comparability of our business trends from period to period. We measure our performance before the impact of foreign currency (or at “constant currency”), which means that we apply the same foreign currency exchange rates for the current and equivalent prior period.

In addition, we have historically provided these or similar non-GAAP performance measures and understand that some investors and financial analysts find this information helpful in analyzing our operating margins, and net income and comparing our financial performance to that of our peer companies and competitors. Based on interactions with investors, we also believe that our non-GAAP performance measures are regarded as useful to our investors as supplemental to our U.S. GAAP financial results, and that there is no confusion regarding the adjustments or our operating performance to our investors due to the comprehensive nature of our disclosures. We have not provided our 2020 outlook for the most directly comparable U.S. GAAP financial measures, as they are not available without unreasonable effort due to the high variability, complexity, and low visibility with respect to certain items, including restructuring charges and credits, gains and losses on foreign currency, and other gains and losses. These items are uncertain, depend on various factors, and could be material to our consolidated results computed in accordance with U.S. GAAP.

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

PART I

Item 1. 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 of our subsidiaries, except where the context indicates otherwise.

Please refer to Part II, Item 8, “Financial Statements and Supplementary Data,” for financial information about the Company and its subsidiaries, which is incorporated herein by reference. Also, when we cross reference to a “Note,” we are referring to our “Notes to Consolidated Financial Statements,” unless the context indicates otherwise.

We are a global research and learning company. Through the Research segment, we 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. The Publishing segment provides scientific, professional, and education books and related content in print and digital formats, as well as test preparation services and course workflow tools, to libraries, corporations, students, professionals, and researchers.  The Solutions segment provides online program management services for higher education institutions and learning, development, and assessment services for businesses and professionals. Our operations are primarily located in the United States (“U.S.”), United Kingdom (“U.K.”), Germany, Russia, Singapore, and France.

Business growth strategies include driving pricing and volume growth from existing journal and book brands and titles, as well as learning services related to education and professional development, the development of new journal titles or through publishing partnerships, technology and content acquisitions which complement our existing businesses, designing and implementing new methods of delivering products to our customers, and the development of new products and services.

Business Segments

We report our segment information in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 280, “Segment Reporting” (“FASB ASC Topic 280”). Our segment reporting structure consists of three reportable segments, which are listed below, and a Corporate category:
Research; 
Publishing; and 
Solutions 

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Research:

Research’s mission is to support researchers, professionals and learners in the discovery and use of research knowledge to help them achieve their goals in research, learning and practice.  Research provides 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. Journal publishing areas include the physical sciences and engineering, health sciences, social sciences and humanities and life sciences. Research also includes Atypon Systems, Inc. (“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’s 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’s products are sold and distributed globally in digital and print formats 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 United Kingdom, and the United States. Research’s revenue accounted for approximately 52% of our consolidated revenue in the year ended April 30, 2019.

Research’s major products are: Journal Subscriptions, Licensing, Reprints, Backfiles, and Other, Open Access and Publishing Technology Services (Atypon). The graphs below present Research revenue by product type for the years ended April 30, 2019 and 2018:


Key growth strategies for the Research business include evolving and developing new licensing models for our institutional customers, developing new open access products and revenue streams, focusing resources on high-growth and emerging markets, and developing new digital products, services, and workflow solutions to meet the needs of researchers, authors, societies, and corporate customers.

Journal Subscriptions

We publish approximately 1,700 academic research journals. We sell journal subscriptions directly through our sales representatives, indirectly through independent subscription agents, through promotional campaigns, and through memberships in professional societies for those journals that are sponsored by societies. Journal subscriptions, making up approximately 37% of our consolidated 2019 total company revenue, are primarily licensed through contracts for digital content available online through Wiley Online Library, which we migrated to our Literatum platform in March 2018, acquired as part of our purchase of Atypon. Contracts are negotiated by us directly with customers or their subscription agents. Subscription periods typically cover calendar years. Print journals are generally mailed to subscribers directly from independent printers. We do not own or manage printing facilities. Subscription revenue is generally collected in advance.

Approximately 50% of Journal Subscription revenue is derived from publishing rights owned by us. Publishing alliances also play a major role in Research’s success. Approximately 50% of Journal Subscription revenue is derived from publication rights that are owned by professional societies and published by us pursuant to a long-term contract (generally 5–10 years) or owned jointly with a professional society. These society alliances bring mutual benefit, with the societies gaining Wiley’s publishing, marketing, sales, and distribution expertise, while Wiley benefits from being affiliated with prestigious societies and their members. Societies that sponsor or own such journals generally receive a royalty and/or other financial consideration. We may procure editorial services from such societies on a pre-negotiated fee basis. We also enter into agreements with outside independent editors of journals that define the duties of the editors and the fees and expenses for their services. Contributors of articles to our journal portfolio transfer publication rights to us or a professional society, as applicable. We publish the journals of many prestigious societies, including the American Cancer Society, the American Heart Association, the British Journal of Surgery Society, the European Molecular Biology Organization, the American Anthropological Association, the American Geophysical Union, and the German Chemical Society.
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Literatum, our online publishing platform for our Research segment, delivers integrated access to over 7 million articles from 1,700 journals, as well as 19,000 online books and hundreds of multi-volume reference works, laboratory protocols and databases. Wiley Online Library, which is delivered through our Literatum platform, provides the user with intuitive navigation, enhanced discoverability, expanded functionality, and a range of personalization options. Access to abstracts is free and full content is accessible through licensing agreements or as individual article purchases. Large portions of the content are provided free or at nominal cost to nations in the developing world through partnerships with certain non-profit organizations. Our online publishing platforms provide revenue growth opportunities through new applications and business models, online advertising, deeper market penetration, and individual sales and pay-per-view options. The Literatum platform hosts over 40% of the world’s English language journals.

In 2018, Wiley saw an increase in impact factors across more than half of its indexed titles. An Impact Factor is an industry measure of the importance of a journal within its field and is determined based on the number of citations received by the journal, from other journals. According to the 2017 Journal Citation Reports (“JCR”), re-released in October 2018 by Clarivate Analytics, 58% of Wiley journals increased their impact factor between 2016 and 2017.  Wiley had 1,221 journals indexed (72% of the Wiley portfolio), with 13 Wiley titles receiving their first impact factor in this year’s JCR release. In addition, 25 Wiley journals achieved a top-category rank, including CA:A Cancer Journal for Clinicians (Impact Factor of 244.585, ranked #1 in Oncology), World Psychiatry (Impact Factor of 30.000, ranked #1 in Psychiatry – the first Social Sciences title to reach an Impact Factor of 30) and Journal of Cachexia, Sarcopenia and Muscle (Impact Factor of 12.511, ranked #1 in Geriatrics & Gerontology). The Clarivate Analytics index is a barometer of journal influence across the research community.

Licensing, Reprints, Backfiles, and Other

Licensing, Reprints, Backfiles, and Other includes advertising, backfile sales, the licensing of publishing rights, journal and article reprints, and individual article sales. We generate advertising revenue from print and online journal subscription products, our online publishing platform, Literatum, online events such as webinars and virtual conferences, community interest Web sites such as spectroscopyNOW.com, and other Web sites.  A backfile license provides access to a historical collection of Wiley journals, generally for a one-time fee. We also engage with international publishers and receive licensing revenue from photocopies, reproductions, translations, and other digital uses of our content. Journal and article reprints are primarily used by pharmaceutical companies and other industries for marketing and promotional purposes. Through the Article Select and PayPerView programs, we provide fee-based access to non-subscribed journal articles, content, book chapters, and major reference work articles. The Research business is also a provider of content and services in evidence-based medicine (“EBM”). Through our alliance with The Cochrane Collaboration, we publish The Cochrane Library, a premier source of high-quality independent evidence to inform healthcare decision-making. EBM facilitates the effective management of patients through clinical expertise informed by best practice evidence that is derived from medical literature.

Open Access

Under the Author-Funded Access business model, accepted research articles are published subject to payment of Article Publication Charges ("APCs"). All Author-Funded articles are immediately free to access online. Contributors of Author-Funded Access articles retain many rights and typically license their work under terms that permit re-use.

Author-Funded Access offers authors choices in how to share and disseminate their work, and it serves the needs of researchers who may be required by their research funder to make articles freely accessible without embargo. APCs are typically paid by the individual author or by the author’s funder, and payments are often mediated by the author’s institution. We provide specific workflows and infrastructure to authors, funders, and institutions to support the requirements of the Author-Funded Access model.

We offer two Open Access publishing models. The first of these is Hybrid Open Access where, upon payment of an APC, authors publishing in the majority of our paid subscription journals are offered, after article acceptance, the opportunity to make their individual research article openly available through the OnlineOpen service.

The second offering of the Open Access model is a growing portfolio of fully open access journals, also known as Gold Open Access Journals, in which all accepted articles are published subject to receipt of an APC. All Open Access articles are subject to the same rigorous peer-review process applied to our subscription-based journals. As with our subscription portfolio, a number of the Gold Open Access Journals are published under contract for, or in partnership with, prestigious societies, including the American Geophysical Union, the American Heart Association, the European Molecular Biology Organization and the British Ecological Society. The Open Access portfolio spans life, physical, medical and social sciences and includes a choice of high impact journals and broad-scope titles that offer a responsive, author-centered service.

In January 2019, Wiley announced a new contractual arrangement in support of Open Access, a countrywide partnership agreement with Projekt DEAL, a representative of nearly 700 academic institutions in Germany. This transformative three-year agreement 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. We are compensated primarily through a fee per article published.
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Publishing Technology Services (Atypon)

Atypon is 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. 

Publishing:

Our Publishing segment acquires, develops, and publishes scientific, professional and education books and related content, as well as test preparation services and course workflow tools, to libraries, corporations, students, professionals, and researchers. Communities served include business, finance, accounting, workplace learning, management, leadership, technology, behavioral health, engineering/ architecture, science and medicine, and education.  Products are developed in print and digitally 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 United Kingdom, and the United States. Publishing accounted for approximately 32% of our consolidated revenue in the year ended April 30, 2019.

Publishing revenue by product type are: STM (Scientific, Technical and Medical) and Professional Publishing, Education Publishing, Test Preparation and Certification, Courseware (WileyPLUS), and Licensing, Distribution, Advertising and Other. The graphs below present Publishing revenue by product type for the years ended April 30, 2019 and 2018:

Key growth strategies for the Publishing business include developing and acquiring products and services to drive corporate development and professional career development, developing leading brands and franchises, executing strategic acquisitions and partnerships, and innovating digital book formats while expanding their global discoverability and distribution. We continue to implement strategies to manage declines in print revenue through cost improvement initiatives and focusing our efforts on growing its digital lines of business. We are continuing to perform portfolio reviews and workforce realignment, restructuring, and operational excellence initiatives. In certain areas, we will explore new formats or promote digital-only, and in other areas, we may rationalize our portfolio. Our approach is to continue to realign our cost structure to help mitigate the market changes that are contributing to revenue decline, and to sharpen our focus on high performing areas and digital opportunities, while improving operating efficiency.

Publishing

Book products accounted for approximately 24% of our consolidated fiscal year 2019 revenue. Categories include STM, Professional, and Education Publishing.

STM books are sold and distributed globally in digital and print formats through multiple channels, including research libraries and library consortia, independent subscription agents, direct sales to professional society members, bookstores, online booksellers, and other customers.

Professional books, which include business and finance, technology, and other professional categories, as well as the For Dummies brand, are sold to bookstores and online booksellers serving the general public, wholesalers who supply such bookstores, warehouse clubs, college bookstores, individual practitioners, industrial organizations and government agencies. We employ sales representatives who call upon independent bookstores, national and regional chain bookstores, and wholesalers. Sales of professional books also result from direct mail campaigns, telemarketing, online access, advertising, and reviews in periodicals.
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Education textbooks and related supplementary material and digital products are sold primarily to bookstores and online booksellers serving both for-profit and nonprofit educational institutions (primarily colleges and universities), and direct-to-students. We employ sales representatives who call on faculty responsible for selecting books to be used in courses, and on the bookstores that serve such institutions and their students. The textbook business is seasonal, with the majority of textbook sales occurring during the July-through- October and December-through-January periods. There are active used and rental print textbook markets, which adversely affect the sale of new textbooks. We are exploring opportunities to expand into the print rental market.

Book sales for STM, Professional and Education Publishing are generally made on a returnable basis with certain restrictions. We provide for estimated future returns on sales made during the year based on historical return experience and current market trends.

Materials for book publications are obtained from authors throughout most of the world, utilizing the efforts of an editorial staff, outside editorial advisors, and advisory boards. Most materials are originated by the authors themselves or as a result of suggestion or solicitations by editors and advisors. We enter into agreements with authors that state the terms and conditions under which the materials will be published, the name in which the copyright will be registered, the basis for any royalties, and other matters. Most of the authors are compensated with royalties, which vary depending on the nature of the product. We may make advance royalty payments against future royalties to authors of certain publications. Royalty advances are reviewed for recoverability and a reserve for loss is maintained, if appropriate.

We continue to add new titles, revise existing titles, and discontinue the sale of others in the normal course of our business, and we also create adaptations of original content for specific markets based on customer demand. Our general practice is to revise our textbooks approximately every three years, if warranted, and to revise other titles as appropriate. Subscription-based products are updated on a more frequent basis.

We generally contract with independent printers and binderies globally for their services. Management believes that adequate printing and binding facilities and sources of paper and other required materials are available to it, and that it is not dependent upon any single supplier.

In fiscal year 2016, we entered into an agreement to outsource our US-based book distribution operations to Cengage Learning, with the continued aim of improving efficiency in our distribution activities and moving to a more variable cost model. As of April 30, 2019, we had one global warehousing and distribution facility remaining, which is in the United Kingdom.

We develop content in a digital format that can be used for both digital and print products, resulting in productivity and efficiency savings, and enabling print-on-demand delivery. Book content is available online through Wiley Online Library (delivered through our Literatum platform), WileyPLUS, Wiley Custom Select, and other proprietary platforms. Digital books are delivered to intermediaries, including Amazon, Apple, Google and Ingram/Vital-Source, for re-sale to individuals in various industry-standard formats, which are now the preferred deliverable for licensees of all types, including foreign language publishers. Digital books are also licensed to libraries through aggregators. Specialized formats for digital textbooks go to distributors servicing the academic market, and digital book collections are sold by subscription through independent third-party aggregators servicing distinct communities. Custom deliverables are provided to corporations, institutions, and associations to educate their employees, generate leads for their products, and extend their brands. Content from digital books is also used to create online articles, mobile apps, newsletters, and promotional collateral. This continual re-use of content improves margins, speeds delivery, and helps satisfy a wide range of customer needs. Our online presence not only enables us to deliver content online, but also to sell more books. The growth of online booksellers benefits us because they provide unlimited virtual “shelf space” for our entire backlist.

Publishing alliances and franchise products are important to our strategy. Professional publishing alliance partners include the AICPA, the CFA Institute, ACT (American College Test), IEEE, American Institute of Chemical Engineers, and many others.  Education publishing alliance partners include Microsoft®, Blackboard, Instructure, and the Culinary Institute of America. The ability to join Wiley’s product development, sales, marketing, distribution, and technology with a partner’s content, technology, and/or brand name has contributed to our success.

We also promote active and growing custom professional and education publishing programs. Our custom professional publications are used by professional organizations for internal promotional or incentive programs and include digital and print books written specifically for a customer and customizations of existing publications to include custom cover art, such as imprints, messages, and slogans. More specific are customized For Dummies publications, which leverage the power of this well-known brand to meet the specific information needs of a wide range of organizations around the world. Our custom education publishing program offers an array of tools and services designed to put the creation of customized content in instructors’ hands to create high-quality, affordable education solutions tailored to meet individual classroom needs. Through Wiley Custom Select, an online custom textbook system, instructors can build print and digital materials tailored to their specific course needs and add their own content to create a customized solution.
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Courseware (WileyPLUS)

We offer high-quality online learning solutions, including WileyPLUS, a research-based, online environment for effective teaching and learning that is integrated with a complete digital textbook. WileyPLUS improves student learning through instant feedback, personalized learning plans, and self-evaluation tools, as well as a full range of course-oriented activities, including online planning, presentations, study, homework, and testing. In selected courses, WileyPLUS includes a personalized adaptive learning component, Orion, which is based on cognitive science. Orion helps to build student proficiency on topics while improving the effectiveness of their study time. It assists educators in identifying areas that need reinforcement and measures student engagement and proficiency throughout the course.

Test Preparation and Certification

The Test Preparation and Certification business represents learning solutions, training activities and print and digital formats that are delivered to customers directly through online digital delivery platforms, bookstores, online booksellers, and other customers.  Products include CPAExcel, a modular, digital platform comprised of online self-study, videos, mobile apps, and sophisticated planning tools to help professionals prepare for the CPA exam, and test preparation products for the CFA®, CMA, CIA®, CMT®, FRN®, FINRA, Banking, and PMP® exams.

Licensing, Distribution, Advertising, and Other

Licensing and distribution services are made available to other publishers under agency arrangements. We also engage in co-publishing titles with international publishers and receive licensing revenue from photocopies, reproductions, translations, and digital uses of our content. Wiley also realizes advertising revenue from branded Web sites (e.g., Dummies.com, etc.) and online applications.

Solutions:

Our Solutions segment provides online program management services for higher education institutions and learning, development, and assessment services for businesses and professionals. Key growth strategies include developing new products and services for existing university partners, increasing enrollments for online program management programs, signing new and prestigious university partners, and developing new digital learning solutions by integrating our professional assessment products and services with our Corporate Learning content and technology.

Solutions revenue by product type are Education Services, Professional Assessment, and Corporate Learning. The graphs below present Solutions revenue by product type for the years ended April 30, 2019 and 2018:
Education Services

As student demand for online degree and certificate programs continues to increase, traditional institutions are partnering with online program management providers to develop and support these programs. Education Services include 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. Revenue is derived from pre-negotiated contracts with institutions that provide for a share of tuition generated from students who enroll in a program. As of April 30, 2019, the legacy Education Services business had 39 university partners and 276 degree programs under contract.

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On November 1, 2018, Wiley acquired The Learning House, Inc. (“Learning House”) headquartered in Louisville (KY). Learning House provides online program management services including graduate and undergraduate programs; short courses, boot camps, and other skills training and credentialing for students and professionals; pathway services for international students; professional development services for teachers; and learning solutions for corporate clients.

Corporate Learning

The Corporate Learning business offers online learning and training solutions for global corporations, universities, and small and medium-sized enterprises, which are sold on a subscription or fee basis. Learning formats and modules on topics such as leadership development, value creation, client orientation, change management and corporate strategy are delivered on a cloud-based Learning Management System (“LMS”) platform that hosts over 20,000 content assets (videos, digital learning modules, written files, etc.) in 17 languages. Its Mohive offering also provides a collaborative e-learning publishing and program creation system. Revenue growth is derived from legacy markets, such as France, England, and other European markets, and newer markets, such as the U.S. and Brazil. In addition, content and LMS offerings are continuously refreshed and expanded to serve a wider variety of customer needs. These digital learning solutions are sold directly to corporate customers either direct or through our partners.

Professional Assessment

Our professional assessment services include pre-hire screening and post-hire personality assessments, which are delivered to business customers through online digital delivery platforms, either directly or through an authorized distributor network of independent consultants, trainers, and coaches. Wiley’s leadership assessment offerings also include Kouzes and Posner’s Leadership Practices Inventory® and The Five Behaviors of a Cohesive TeamTM.

Our assessment tools enable employers to optimize candidate selections and develop the full potential of their employees. These solutions include pre-hire assessments, including those designed to measure and match personality, knowledge, skills, managerial fit, loyalty, and values, and post-hire assessments, focused on measuring sales and managerial effectiveness, employee performance, and career potential.

Employees

As of April 30, 2019, we employed approximately 5,700 persons on a full-time equivalent basis worldwide.

Financial Information About Business Segments

The information set forth in Note 19, “Segment Information,” of the Notes to Consolidated Financial Statements and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K are incorporated herein by reference.

Available Information

Our Internet address is www.wiley.com. We make available, free of charge, on or through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports that we file or furnish pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, as soon as reasonably practicable after we electronically file these materials with, or furnish them to, the SEC. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this Form 10-K.

Item 1A. Risk Factors

You should carefully consider all of the information set forth in this Form 10-K, including the following risk factors, before deciding to invest in any of our securities. The risks below are the most significant risks we face but are not the only risk factors we face. Additional risks not currently known to us or that we presently deem insignificant could impact our consolidated financial position and results of operations. Our business, consolidated financial position, and results of operations could be materially adversely affected by any of these risks. The trading price of our securities could decline due to any of these risks, and investors in our securities may lose all or part of their investment.

The trading price of the shares of our common stock may fluctuate materially, and investors of our common stock could incur substantial losses.

Our stock price may fluctuate materially. The stock market in general has experienced significant volatility that has often been unrelated to the operating performance of companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The market price for our common stock may be influenced by many factors, including:

10

actual or anticipated changes in our consolidated operating results;
variances between actual consolidated operating results and the expectations of securities analysts, investors and the financial community;
changes in financial estimates by us or by any securities analysts who might cover our stock;
conditions or trends in our industry, the stock market or the economy;
the level of demand for our stock, the stock market price and volume fluctuations of comparable companies;
announcements by us or our competitors of new product or service offerings, significant acquisitions, strategic partnerships or divestitures;
announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;
capital commitments;
investors’ general perception of the Company and our business;
recruitment or departure of key personnel; and
sales of our common stock, including sales by our directors and officers or specific stockholders.

If we are unable to introduce new technologies, products, and services, our ability to be profitable may be adversely affected.

We must continue to invest in technology and other innovations to adapt and add value to our products and services to remain competitive. This is particularly true in the current environment, where investment in new technology is ongoing and there are rapid changes in the products competitors are offering, the products our customers are seeking, and our sales and distribution channels. In some cases, investments will take the form of internal development; in others, they may take the form of an acquisition. There are uncertainties whenever developing or acquiring new products and services, and it is often possible that such new products and services may not be launched, or, if launched, may not be profitable or as profitable as existing products and services.

The demand for digital and lower cost books could impact our sales volumes and pricing in an adverse way.

A common trend facing each of our businesses is the digitization of content and proliferation of distribution channels through the internet and other electronic means, which are replacing traditional print formats. The trend to digital content has also created contraction in the print book retail market which increases the risk of bankruptcy for certain retail customers, potentially leading to the disruption of short-term product supply to consumers, as well as potential bad debt write-offs. New distribution channels, such as digital formats, the internet, online retailers, and growing delivery platforms (e.g. tablets and e-readers), combined with the concentration of retailer power, present both risks and opportunities to our traditional publishing models, potentially impacting both sales volumes and pricing.

As the market has shifted to digital products, customer expectations for lower-priced products have increased due to customer awareness of reductions in production costs and the availability of free or low-cost digital content and products.  As a result, there has been pressure to sell digital versions of products at prices below their print versions.  Increased customer demand for lower prices could reduce our revenue.

We publish educational content for undergraduate, graduate, and advanced placement students, lifelong learners, and in Australia, for secondary school students. Due to growing student demand for less expensive textbooks, many college bookstores, online retailers and other entities offer used or rental textbooks to students at lower prices than new textbooks. The internet has made the used and rental textbook markets more efficient and has significantly increased student access to used and rental books.  Further expansion of the used and rental book markets could further adversely affect our sales of print textbooks, subsequently affecting our consolidated financial position and results of operations.

A reduction in enrollment at colleges and universities could adversely affect the demand for our higher education products.

Enrollment in U.S. colleges and universities can be adversely affected by many factors, including changes in government and private student loan and grant programs, uncertainty about current and future economic conditions, increases in tuition, general decreases in family income and net worth, and a perception of uncertain job prospects for graduates. In addition, enrollment levels at colleges and universities outside the United States are influenced by global and local economic factors, local political conditions, and other factors that make predicting foreign enrollment levels difficult. Reductions in expected levels of enrollment at colleges and universities both within and outside the United States could adversely affect demand for our higher education products, which could adversely impact our consolidated financial position and results of operations.
11

The competitive pressures we face in our business, as well as our ability to retain our business relationships with our authors and professional societies, could adversely affect our consolidated financial position and results of operations.

We operate in highly competitive markets. Success and continued growth depend greatly on developing new products and the means to deliver them in an environment of rapid technological change. Attracting new authors and professional societies while retaining our existing business relationships is critical to our success. If we are unable to retain our existing business relationships with authors and professional societies, this could have an adverse impact on our consolidated financial position and results of operations.

Our intellectual property rights may not be protected, which could adversely affect our consolidated financial position and results of operations.

A substantial portion of our publications are protected by copyright, held either in our name, in the name of the author of the work, or in the name of a sponsoring professional society. Such copyrights protect our exclusive right to publish the work in many countries abroad for specified periods, in most cases, the author’s life plus 70 years, but in any event, a minimum of 50 years for works published after 1978. Our ability to continue to achieve our expected results depends, in part, upon our ability to protect our intellectual property rights. Our consolidated financial position and results of operations may be adversely affected by lack of legal and/or technological protections for its intellectual property in some jurisdictions and markets.

Adverse publicity could negatively impact our reputation, which could adversely affect our consolidated financial position and results of operations.

Our professional customers worldwide rely upon many of our publications to perform their jobs. It is imperative that we consistently demonstrate our ability to maintain the integrity of the information included in our publications. Adverse publicity, whether valid or not, may reduce demand for our publications and adversely affect our consolidated financial position and results of operations.

In our journal publishing business we have a trade concentration and credit risk related to subscription agents, and in our book business the industry has a concentration of customers in national, regional, and online bookstore chains. Changes in the financial position and liquidity of our subscription agents and customers, could adversely impact our consolidated financial position and results of operations.

In the journal publishing business, subscriptions are primarily sourced through journal subscription agents who, acting as agents for library customers, facilitate ordering by consolidating the subscription orders/billings of each subscriber with various publishers. Cash is generally collected in advance from subscribers by the subscription agents and is principally remitted to us between the months of December and April. Although at fiscal year-end we had minimal credit risk exposure to these agents, future calendar-year subscription receipts from these agents are highly dependent on their financial condition and liquidity.

Subscription agents account for approximately 20% of total annual consolidated revenue and one affiliated group of subscription agents accounts for approximately 10% of total annual consolidated revenue.

Our book business is not dependent upon a single customer; however, the industry is concentrated in national, regional, and online bookstore chains. Although no one book customer accounts for more than 8% of total consolidated revenue and 11% of accounts receivable at April 30, 2019, the top 10 book customers account for approximately 13% of total consolidated revenue and approximately 21% of accounts receivable at April 30, 2019. We maintain approximately $25 million of trade credit insurance, covering balances due from certain named customers, subject to certain limitations and annual renewal.

Changes in laws, tariffs, and regulations, including regulations related to open access, could adversely impact our consolidated financial position and results of operations.

We maintain operations in Asia, Australia, Canada, Europe, and the United States. The conduct of our business, including the sourcing of content, distribution, sales, marketing, and advertising, is subject to various laws and regulations administered by governments around the world. Changes in laws, regulations, or government policies, including tax regulations and accounting standards, may adversely affect our future consolidated financial position and results of operations.

The scientific research publishing industry generates much of its revenue from paid customer subscriptions to online and print journal content. There is debate within government, academic, and library communities whether such journal content should be made available for free, immediately or following a period of embargo after publication, referred to as “open access,” For instance, certain governments and privately held funding bodies have implemented mandates that require journal articles derived from government-funded research to be made available to the public at no cost after an embargo period. Open access can be achieved in two ways: Green, which enables authors to publish articles in subscription based journals and self–archive the author accepted version of the article for free public use after an embargo period, and Gold, which enables authors to publish their articles in journals that provide immediate free access to the final version of the article on the publisher’s Web site, and elsewhere under permissive licensing terms, following payment of an APC. These mandates have the potential to put pressure on subscription-based publications. If such regulations are widely implemented, our consolidated financial position and results of operations could be adversely affected.
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To date, the majority of governments that have taken a position on open access have favored the green model and have generally specified embargo periods of twelve months. The publishing community generally takes the view that this period should be sufficient to protect subscription revenues, provided that publishers’ platforms offer sufficient added value to the article. Governments in Europe have been more supportive of the gold model, which thus far is generating incremental revenue for publishers with active open access programs. A number of European administrations are showing interest in a business model which combines the purchasing of subscription content with the purchase of open access publishing for authors in their country. This development removes an element of risk by fixing revenues from that market, provided that the terms, price, and rate of transition negotiated are acceptable.

The uncertainty surrounding the implementation and effect of Brexit may cause increased economic volatility, affecting our operations and business.

In June 2016, voters in the U.K. approved an advisory referendum to withdraw from the European Union, commonly referred to as "Brexit." On March 29, 2017, the U.K. formally notified the European Council of the U.K.'s intention to withdraw from the European Union under Article 50 of the Treaty of Lisbon. The notice began the two-year negotiation period to establish the withdrawal terms. The U.K.'s separation was to become effective on March 29, 2019. However, on April 12, 2019, the European Union agreed to an extension to October 31, 2019. A withdrawal without a trade agreement in place could significantly disrupt the free movement of goods, services, and people between the U.K. and the European Union, and result in increased legal and regulatory complexities, as well as potential higher costs of conducting business in Europe. Additional Brexit-related impacts on our business could include potential inventory shortages in the U.K., increased regulatory burdens and costs to comply with U.K.-specific regulations and higher transportation costs for our products coming into and out of the U.K. Further, the uncertainty surrounding the terms of the U.K.'s withdrawal and its consequences could adversely impact consumer and investor confidence and could affect sales or regulation of our products. Any of these effects, among others, could materially and adversely affect our business and consolidated financial position and results of operations.

A disruption or loss of data sources could limit our collection and use of certain kinds of information, which could adversely impact our communication with our customers.

A number of our businesses rely extensively upon content and data from external sources. Data is obtained from public records, governmental authorities, customers and other information companies, including competitors. Legal regulations, such as the European Union’s General Data Protection Regulation (“GDPR”), relating to internet communications, privacy and data protection, e-commerce, information governance, and use of public records, are becoming more prevalent worldwide. The disruption or loss of data sources, either because of changes in the law or because data suppliers decide not to supply them, may impose limits on our collection and use of certain kinds of information about individuals and our ability to communicate such information effectively with our customers. In addition, GDPR imposes a strict data protection compliance regime with severe penalties of up to 4% of worldwide revenue or €20 million, whichever is greater.

If we are unable to retain key employees and other personnel, our consolidated financial condition or results of operations may be adversely affected.

We have a significant investment in our employees around the world. We offer competitive salaries and benefits in order to attract and retain the highly skilled workforce needed to sustain and develop new products and services required for growth. Employment and benefit costs are affected by competitive market conditions for qualified individuals, and factors such as healthcare and retirement benefit costs.

We are highly dependent on the continued services of key employees who have in-depth market and business knowledge and/or key relationships with business partners. The loss of the services of key personnel for any reason and our inability to replace them with suitable candidates quickly or at all, as well as any negative market perception resulting from such loss, could have a material adverse effect on our business, consolidated financial position, and results of operation.

We may not realize the anticipated cost savings and benefits from, or our business may be disrupted by, our business transformation and restructuring efforts.

We continue to transform our business from a traditional publishing model to a global provider of content-enabled solutions with a focus on digital products and services. The acquisitions of Deltak.edu, LLC (“Deltak”), Inscape Holdings, Inc. (“Inscape”), Profiles International (“Profiles”), CrossKnowledge Group Limited (“CrossKnowledge”), and The Learning House, Inc. (“Learning House”), comprise our Solutions reporting segment and, along with Atypon in our Research segment, represent examples of strategic initiatives that were implemented as part of our business transformation. We will continue to explore opportunities to develop new business models and enhance the efficiency of our organizational structure. The rapid pace and scope of change increases the risk that not all of our strategic initiatives will deliver the expected benefits within the anticipated timeframes. In addition, these efforts may somewhat disrupt our business activities, which could adversely affect our consolidated financial position and results of operations.
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We continue to restructure and realign our cost base with current and anticipated future market conditions. Significant risks associated with these actions that may impair our ability to achieve the anticipated cost savings or that may disrupt our business include delays in the implementation of anticipated workforce reductions in highly regulated locations outside of the U.S., decreases in employee morale, the failure to meet operational targets due to the loss of key employees, and disruptions of third parties to whom we have outsourced business functions. In addition, our ability to achieve the anticipated cost savings and other benefits from these actions within the expected timeframe is subject to many estimates and assumptions. These estimates and assumptions are subject to significant economic, competitive, and other uncertainties, some of which are beyond our control. If these estimates and assumptions are incorrect, if we experience delays, or if other unforeseen events occur, our business and consolidated financial position and results of operations could be adversely affected.

We may not realize the anticipated cost savings and processing efficiencies associated with the outsourcing of certain business processes.

We have outsourced certain business functions, principally in technology, content management, printing, manufacturing, warehousing, fulfillment, distribution, returns processing, and certain other transactional processing functions, to third-party service providers to achieve cost savings, and efficiencies. If these third-party service providers do not perform effectively, we may not be able to achieve the anticipated cost savings, and depending on the function involved, we may experience business disruption or processing inefficiencies, all with potential adverse effects on our consolidated financial position and results of operations.

We may be susceptible to information technology risks that may adversely impact our business, consolidated financial position and results of operations.

Information technology is a key part of our business strategy and operations. As a business strategy, Wiley’s technology enables us to provide customers with new and enhanced products and services and is critical to our success in migrating from print to digital business models. Information technology is also a fundamental component of all of our business processes, collecting and reporting business data, and communicating internally and externally with customers, suppliers, employees, and others.

Our business is dependent on information technology systems to support our businesses. We provide internet-based products and services to our customers. We also use complex information technology systems and products to support our business activities, particularly in infrastructure, and as we move our products and services to an increasingly digital delivery platform.

We face technological risks associated with internet-based product and service delivery in our businesses, including with respect to information technology capability, reliability and security, enterprise resource planning, system implementations and upgrades. Failures of our information technology systems and products (including because of operational failure, natural disaster, computer virus, or hacker attacks) could interrupt the availability of our internet-based products and services, result in corruption or loss of data or breach in security, and result in liability or reputational damage to our brands and/or adversely impact our consolidated financial position and results of operations.

Management has designed and implemented policies, processes and controls to mitigate risks of information technology failure and to provide security from unauthorized access to our systems. In addition, we have disaster recovery plans in place to maintain business continuity.  The size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to cyber-attacks common to most industries from inadvertent or intentional actions by employees, vendors, or malicious third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives. While we have taken steps to address these risks, there can be no assurance that a system failure, disruption, or data security breach would not adversely affect our business and could have an adverse impact on our consolidated financial position and results of operations.

We are continually improving and upgrading our computer systems and software. We are in the process of implementing a new global Enterprise Resource Planning (“ERP”) system as part of a multi-year plan to integrate and upgrade our operational and financial systems and processes. As of April 30, 2019, we have completed the implementation of record-to-report, purchase-to-pay, and several other business processes within all locations through fiscal year 2017. We completed the implementation of order-to-cash for certain businesses in May 2018 and may continue to roll out additional processes and functionality of the ERP system in phases in the foreseeable future. Implementation of a new ERP system involves risks and uncertainties. Any disruptions, delays, or deficiencies in the design or implementation of a new system could result in increased costs, disruptions in operations, or delays in the collection of cash from our customers, as well as having an adverse effect on our ability to timely report our financial results, all of which could materially adversely affect our business, consolidated financial position and results of operations.
14

Cyber risk and the failure to maintain the integrity of our operational or security systems or infrastructure, or those of third parties with which we do business, could have a material adverse effect on our business, consolidated financial condition, and results of operations.

Cyber-attacks and hackers are becoming more sophisticated and pervasive. Our business is dependent on information technology systems to support our businesses. We provide internet-based products and services to our customers. We also use complex information technology systems and products to support our business activities, particularly in infrastructure and as we move our products and services to an increasingly digital delivery platform. Across our businesses, we hold personal data, including that of employees and customers.

Efforts to prevent cyber-attacks and hackers from entering our systems are expensive to implement and may limit the functionality of our systems. Individuals may try to gain unauthorized access to our systems and data for malicious purposes, and our security measures may fail to prevent such unauthorized access. Cyber-attacks and/or intentional hacking of our systems could adversely affect the performance or availability of our products, result in loss of customer data, adversely affect our ability to conduct business, or result in theft of our funds or proprietary information, the occurrence of which could have an adverse impact on our consolidated financial position and results of operations.

Fluctuations in interest rates and foreign currency exchange rates could materially impact our consolidated financial condition and results of operations.

Non-U.S. revenues, as well as our substantial non-U.S. net assets, expose our consolidated results to volatility from changes in foreign currency exchange rates. Non-U.S. dollar revenues accounted for 46% of our total consolidated revenues for fiscal year 2019, which primarily includes revenues in British pound sterling of 26% and euro of 12%. In addition, our interest-bearing loans and borrowings are subject to risk from changes in interest rates. These risks and the measures we have taken to help mitigate them are discussed in Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of this Annual Report on Form 10-K. We may, from time-to-time, use derivative instruments to hedge such risks. Notwithstanding our efforts to foresee and mitigate the effects of changes in external market or fiscal circumstances, we cannot predict with certainty changes in foreign currency exchange rates and interest rates, inflation, or other related factors affecting our business, consolidated financial position and results of operations.

We may not be able to mitigate the impact of inflation and cost increases, which could have an adverse impact on our consolidated financial position and results of operations.

From time to time, we experience cost increases reflecting, in part, general inflationary factors. There is no guarantee that we can increase selling prices or reduce costs to fully mitigate the effect of inflation on our costs, which may adversely impact our consolidated financial position and results of operations.

Changes in tax laws, including regulations and other guidance in connection with the U.S. Federal tax legislation originally known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), could have a material impact on our consolidated financial position and results of operations.

We are subject to tax laws within the jurisdictions in which we conduct business, including the U.S. and many foreign jurisdictions. In addition to the Tax Act in the U.S., changes in tax laws and interpretations in other jurisdictions where we do business, such as the U.K. and Germany, could significantly impact the taxation of our non-U.S. earnings. This could have a material impact on our consolidated financial position and results of operations as most of our income is earned outside the U.S. In addition, we are subject to audit by tax authorities and are regularly audited by various tax authorities. Although we believe our tax estimates are reasonable, the final determination of tax audits could be materially different from our historical income tax provisions and accruals and could have a material impact on our consolidated financial position and results of operations.

Challenges and uncertainties associated with operating in developing markets has a higher risk due to political instability, economic volatility, crime, terrorism, corruption, social and ethnic unrest, and other factors, which may adversely impact our consolidated financial position and results of operations.

We sell our products to customers in certain sanctioned and previously sanctioned developing markets where we do not have operating subsidiaries. We do not own any assets or liabilities in these markets except for trade receivables. In the year ended April 30, 2019, we recorded an immaterial amount of revenue and net earnings related to sales to Cuba, Sudan, Syria and Iran. While sales in these markets are not material to our consolidated financial position and results of operations, adverse developments related to the risks associated with these markets may cause actual results to differ from historical and forecasted future consolidated operating results.
15

We have certain technology development operations in Russia and Sri Lanka related to software development and architecture, digital content production, and system testing services. Due to the political instability within these regions, there is the potential for future government embargos and sanctions, which could disrupt our operations in this area. While we have developed business continuity plans to address these issues, further adverse developments in the region could have a material impact on our consolidated financial position and results of operations.

Approximately 19% of Research journal articles are sourced from authors in China. Any restrictions on exporting intellectual property could adversely affect our business and consolidated financial position and results of operations.

Changes in global economic conditions could impact our ability to borrow funds and meet our future financing needs.

Changes in global financial markets have not had, nor do we anticipate they will have, a significant impact on our liquidity. Due to our significant operating cash flow, financial assets, access to capital markets, and available lines of credit and revolving credit agreements, we continue to believe that we have the ability to meet our financing needs for the foreseeable future. As market conditions change, we will continue to monitor our liquidity position. However, there can be no assurance that our liquidity or our consolidated financial position and results of operations will not be adversely affected by possible future changes in global financial markets and global economic conditions. Unprecedented market conditions including illiquid credit markets, volatile equity markets, dramatic fluctuations in foreign currency rates, and economic recession could affect future results.

Changes in pension costs and related funding requirements may impact our consolidated financial position and results of operations.

We provide defined benefit pension plans for certain employees worldwide. Our Board of Directors approved amendments to the U.S., Canada and U.K. defined benefit plans that froze the future accumulation of benefits effective June 30, 2013, December 31, 2015, and April 30, 2015, respectively. The funding requirements and costs of these plans are dependent upon various factors, including the actual return on plan assets, discount rates, plan participant population demographics, and changes in pension regulations. Changes in these factors affect our plan funding, consolidated financial position, and results of operations.

We may not be able to realize the expected benefits of our growth strategies, including successfully integrating acquisitions, which could adversely impact our consolidated financial position and results of operations.

Our growth strategy includes title, imprint, and other business acquisitions, including knowledge-enabled services, which complement our existing businesses. Acquisitions may have a substantial impact on our consolidated financial position and results of operations. Acquisitions involve risks and uncertainties, including difficulties in integrating acquired operations and in realizing expected opportunities, cost synergies, diversions of management resources, and loss of key employees, challenges with respect to operating new businesses, and other uncertainties.

As a result of acquisitions, we may record a significant amount of goodwill and other identifiable intangible assets and we may never realize the full carrying value of these assets.

As a result of acquisitions, we record a significant amount of goodwill and other identifiable intangible assets, including customer relationships, trademarks and developed technologies. At April 30, 2019, we had $1,095.7 million of goodwill and $865.6 million of intangible assets, of which $217.1 million are indefinite-lived intangible assets, on our Consolidated Statements of Financial Position. The intangible assets are principally composed of content and publishing rights, customer relationships, and brands and trademarks. Failure to achieve business objectives and financial projections could result in an asset impairment charge, which would result in a non-cash charge to our consolidated results of operations. Goodwill and intangible assets with indefinite lives are tested for impairment on an annual basis and also when events or changes in circumstances indicate that impairment may have occurred. Intangible assets with determinable lives, which were $648.5 million at April 30, 2019, are tested for impairment only when events or changes in circumstances indicate that an impairment may have occurred. Determining whether an impairment exists can be difficult as a result of increased uncertainty and current market dynamics and requires management to make significant estimates and judgments. A non-cash intangible asset impairment charge could have a material adverse effect on our consolidated financial position and results of operations.
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If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act (“Sarbanes-Oxley Act”) and the rules and regulations of the New York Stock Exchange. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are required to perform system and process evaluations and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting in our Annual Report on Form 10-K, as required by Section 404 of the Sarbanes-Oxley Act. This may require us to incur substantial additional professional fees and internal costs to further expand our accounting and finance functions and expend significant management efforts.

We may in the future discover material weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. In addition, our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to errors or fraud will not occur or that all control issues and instances of fraud will be detected.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by the New York Stock Exchange, the SEC, or other regulatory authorities.

Item 1B. Unresolved Staff Comments

None

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Item 2. Properties

We occupy office, warehouse, and distribution facilities in various parts of the world, as listed below (excluding those locations with less than 10,000 square feet of floor area, none of which is considered material property). All of the buildings and the equipment owned or leased are believed to be in good operating condition and are suitable for the conduct of our business.

Location
 
Purpose
 
Owned or Leased
 
Approx. Sq. Ft.
United States:
           
New Jersey
 
Corporate Headquarters
 
Leased
 
294,000
   
Office
 
Leased
 
185,000
Indiana
 
Offices
 
Leased
 
166,000
California
 
Office
 
Leased
 
11,000
Massachusetts
 
Office
 
Leased
 
26,000
Illinois
 
Office
 
Leased
 
52,000
Florida
 
Office
 
Leased
 
58,000
Minnesota
 
Office
 
Leased
 
22,000
Texas
 
Office
 
Leased
 
11,000
Colorado
 
Office
 
Leased
 
15,000
Kentucky
 
Office
 
Leased
 
47,000
             
International:
           
Australia
 
Offices
 
Leased
 
34,000
Canada
 
Office
 
Leased
 
12,000
England
 
Distribution Centers
 
Leased
 
298,000
   
Offices
 
Leased
 
80,000
   
Offices
 
Owned
 
70,000
France
 
Offices
 
Leased
 
36,000
Germany
 
Office
 
Owned
 
104,000
   
Office
 
Leased
 
18,000
Jordan
 
Office
 
Leased
 
24,000
Singapore
 
Office
 
Leased
 
35,000
Russia
 
Office
 
Leased
 
27,000
China
 
Offices
 
Leased
 
18,000
India
 
Distribution Centers
 
Leased
 
12,000
   
Office
 
Leased
 
25,000
Greece
 
Office
 
Leased
 
16,000

Item 3. Legal Proceedings

The information set forth in Note 15, “Commitment and Contingencies,” of the Notes to Consolidated Financial Statements is incorporated herein by reference.

We are involved in routine litigation in the ordinary course of our business. In the opinion of management, the ultimate resolution of all pending litigation will not have a material effect upon our consolidated financial position or results of operations.

Item 4. Mine Safety Disclosures

Not applicable.

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Information About Our Executive Officers
Set forth below are the current executive officers of the Company. Each of the officers listed will serve until the next organizational meetings of the Board of Directors of the Company and until each of the respective successors are duly elected and qualified.

Name, Current and Former Positions
 
Age
 
First Elected to
Current Position
         
BRIAN A. NAPACK
 
57
 
December 2017
President and Chief Executive Officer and Director
       
March 2012 – Senior Advisor, Providence Equity Partners LLC
       
         
JOHN A. KRITZMACHER
 
58
 
July 2013
Chief Financial Officer and Executive Vice President, Operations
       
October 2012 – Senior Vice President of Business Operations, Organizational Planning & Structure at WebMD Health Corp
       
         
MATTHEW S. KISSNER
 
65
 
February 2019
Executive Vice President, Group Executive
       
December 2017 – Chairman of Company's Board of Directors
       
May 2017 – Interim Chief Executive Officer of the Company
       
October 2015 – Chairman of Company's Board of Directors
       
         
GARY M. RINCK
 
67
 
September 2014
Executive Vice President, General Counsel
       
2004 – Senior Vice President, General Counsel
       
         
JUDY VERSES
 
62
 
October 2016
Executive Vice President, Research
       
October 2011 – President – Global Enterprise and Education, Rosetta Stone Inc.
       
         
CHRISTOPHER F. CARIDI
 
53
 
March 2017
Senior Vice President, Corporate Controller and Chief Accounting Officer
       
March 2014 – Vice President Finance, Thomson Reuters
       
September 2009 – Vice President, Controller/Global Head of Accounting Operations, Thomson Reuters
       
         
KEVIN MONACO
 
55
 
October 2018
Senior Vice President, Treasurer and Tax
       
October 2009 – SVP, Finance, Treasurer and Investor Relations, Coty Inc.
       
         
AREF MATIN
 
60
 
May 2018
Executive Vice President, Chief Technology Officer
       
February 2015 – Executive Vice President, Chief Technology Officer, Ascend Learning
       
July 2012 – Executive Vice President, Chief Technology Officer, Pearson Learning Technologies & Pearson Higher Education
       
         
TANELI D. RUDA
 
45
 
July 2018
Executive Vice President, Chief Strategy Officer
       
March 2018 – Head of Corporate Strategy, Thomson Reuters
       
March 2014 – SVP and Managing Director, Global Trade Management, Thomson Reuters
       
January 2010 – SVP, Strategy, Thomson Reuters
       

19

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our Class A and Class B shares are listed on the New York Stock Exchange under the symbols JW.A and JW.B, respectively.

On a quarterly basis, the Board of Directors considers the payment of cash dividends based upon its review of earnings, our financial position, and other relevant factors. As of May 31, 2019, the approximate number of holders of our Class A and Class B Common Stock were 758 and 57, respectively, based on the holders of record.

During the year ended April 30, 2017, our Board of Directors approved an additional share repurchase program of four million shares of Class A or B Common Stock. During the fourth quarter of 2019, we made the following purchases of Class A Common Stock under this publicly announced stock repurchase program.

   
Total Number
of Shares Purchased
   
Average Price
Paid Per Share
   
Total Number
of Shares Purchased
as Part of a Publicly
Announced Program
   
Maximum Number
of Shares that
May be Purchased
Under the Program
 
February 2019
   
   
$
     
     
2,446,640
 
March 2019
   
557,665
     
44.83
     
557,665
     
1,888,975
 
April 2019
   
     
     
     
1,888,975
 
Total
   
557,665
   
$
44.83
     
557,665
     
1,888,975
 

Item 6. Selected Financial Data

   
For the Years Ended April 30, (a)(b)
 
Dollars (in millions, except per share data)
 
2019
   
2018
   
2017
   
2016
   
2015
 
Revenue, net
 
$
1,800.1
   
$
1,796.1
   
$
1,718.5
   
$
1,727.0
   
$
1,822.4
 
Operating Income (c)
   
224.0
     
231.5
     
211.5
     
188.1
     
237.7
 
Net Income (a)
   
168.3
     
192.2
     
113.6
     
145.8
     
176.9
 
Working Capital (d)
   
(379.8
)
   
(394.3
)
   
(428.1
)
   
(111.1
)
   
(62.8
)
Contract Liability (Deferred Revenue) in Working Capital (d)
   
(507.4
)
   
(486.4
)
   
(436.2
)
   
(426.5
)
   
(372.1
)
Total Assets
   
2,937.0
     
2,839.5
     
2,606.2
     
2,921.1
     
3,004.2
 
Long-Term Debt
   
478.8
     
360.0
     
365.0
     
605.0
     
650.1
 
Shareholders' Equity
   
1,181.3
     
1,190.6
     
1,003.1
     
1,037.1
     
1,055.0
 
Per Share Data
                                       
Earnings Per Share
                                       
Basic
 
$
2.94
   
$
3.37
   
$
1.98
   
$
2.51
   
$
3.01
 
Diluted
 
$
2.91
   
$
3.32
   
$
1.95
   
$
2.48
   
$
2.97
 
Cash Dividends
                                       
Class A Common
 
$
1.32
   
$
1.28
   
$
1.24
   
$
1.20
   
$
1.16
 
Class B Common
 
$
1.32
   
$
1.28
   
$
1.24
   
$
1.20
   
$
1.16
 

(a)
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for a discussion of the factors that contributed to our consolidated operating results for the three years ended April 30, 2019. Certain tax benefits and charges included in the years ended April 30, 2019 – 2015 include:
The year ended April 30, 2019 includes a favorable benefit of $2.9 million, or $0.05 per share in connection with the reduction in our deferred tax liabilities as a result of a lower U.S. state tax rate resulting from more favorable apportionment factors in 2019. Refer to Note 12, “Income Taxes,” in the Notes to Consolidated Financial Statements for more information.
The year ended April 30, 2018 includes a favorable impact of $25.1 million ($0.43 per share) from the U.S. government enacted comprehensive Federal tax legislation originally known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). Refer to Note 12, “Income Taxes,” in the Notes to Consolidated Financial Statements for more information.
The year ended April 30, 2017 includes the effect of the German Tax litigation of $49.1 million ($0.85 per share).
The years ended April 30, 2017 and 2016 include tax benefits of $2.6 million ($0.04 per share) and $5.9 million ($0.10 per share), respectively, principally associated with a reduction in our deferred tax liabilities from consecutive tax legislation enacted in the United Kingdom that reduced the U.K. corporate income tax rates.
The year ended April 30, 2015 includes a non-recurring tax benefit of $3.1 million ($0.05 per share) related to tax deductions claimed on the write-up of certain foreign tax assets to fair market value.

20

(b)
On May 1, 2018, we adopted the U.S. accounting standard regarding revenue recognition ("Topic 606," or "ASC 606"). The adoption of Topic 606 did not have a material impact to our consolidated results of operations. Refer to Note 2, " Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," in the Notes to Consolidated Financial Statements for more information.
(c)
Due to the retrospective adoption of Accounting Standards Update (“ASU”) 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,”, total net benefits (costs) of $8.1 million and $(5.3) million related to the non-service components of defined benefit and other post-employment benefit plans were reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense) for the years ended April 30, 2018 and 2017, respectively. Total net benefits related to the non-service components of defined benefit and other post-employment benefit plans were $8.8 million for the year ended April 30, 2019. Refer to Note 2, "Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," in the Notes to Consolidated Financial Statements for more information.
(d)
The primary driver of the negative working capital is unearned contract liabilities (deferred revenue) related to subscriptions for which cash has been collected in advance. Cash received in advance for subscriptions is used by us for a number of purposes, including acquisitions, debt repayments, funding operations, dividend payments, and purchasing treasury shares. The contract liabilities (deferred revenue) will be recognized as income when the products are shipped or made available online to the customers over the term of the subscription period.

21

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

The information in our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with our Consolidated Financial Statements and related notes set forth in Part II, Item 8, as well as the discussion included above, “Cautionary Notice Regarding Forward-Looking Statements “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995” and “Non-GAAP Financial Measures,” along with Part I, Item 1A, “Risk Factors,” of this Annual Report on Form 10-K.  All amounts and percentages are approximate due to rounding and all dollars are in thousands, except per share amounts or where otherwise noted. When we cross-reference to a “Note,” we are referring to our “Notes to Consolidated Financial Statements,” unless the context indicates otherwise.

Recent Events

On July 1, 2019, we completed the acquisition of Zyante Inc. ("Zyante"), a leading provider of computer science and STEM education courseware. Under the terms of the agreement, Zyante shareholders received $56 million in cash. Zyante will be included in our Education Publishing segment.
On June 28, 2019, our Board of Directors declared a quarterly dividend of $0.34 per share, or approximately $19.2 million, on our Class A and Class B Common Stock.  The dividend is payable on July 24, 2019 to shareholders of record on July 10, 2019.
On May 31, 2019, we completed the acquisition of certain assets of Knewton, Inc. (“Knewton”), included in our Publishing segment. Knewton is a provider of affordable courseware and adaptive learning technology for an undisclosed amount.
 •
On May 30, 2019, we amended and restated our existing credit agreement with a (i) five-year revolving credit facility in an aggregate principal amount up to $1.25 billion, and (ii) a five-year term loan A facility consisting of $250 million.

Fourth Quarter Highlights

Increase in GAAP Results: Revenue of $491.2 million, an increase of 3%, Operating Income of $80.0 million, an increase of 10% and Diluted EPS of $1.10, an increase of 19%;
Non-GAAP Adjusted Results on a constant currency basis: Adjusted Revenue increase of 7%, Adjusted Operating Income increase of 14%, and Adjusted EPS increase of 19%;
Non-GAAP Adjusted Results on a constant currency basis and excluding the impact from Learning House acquisition: Adjusted Revenue increase of 3%, Adjusted Operating Income increase of 17%, and Adjusted EPS increase of 26%.

Results of Operations

FISCAL YEAR 2019 AS COMPARED TO FISCAL YEAR 2018 SUMMARY RESULTS

Revenue:

Revenue for the year ended April 30, 2019 was flat at $1,800 million, as compared with prior year. On a constant currency basis, revenue increased 2% as compared with prior year. This increase was primarily due to the following:
the incremental impact of the acquisition of Learning House on November 1, 2018, which contributed $31.5 million of revenue,
increased revenue in our Research segment primarily driven by Open Access; and to a lesser extent, Licensing, Reprints, Backfiles, and Other offerings; and,
increased revenue in all of our Solutions segment businesses, excluding the impact of Learning House.

These increases were offset by declines in Publishing print product sales.

Refer to Note 4, “Acquisition,” for more information related to the acquisition of Learning House.

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

Cost of Sales:

Cost of sales for the year ended April 30, 2019 increased $23.7 million, or 4%, as compared with prior year.  On a constant currency basis, cost of sales increased 6%. This increase was primarily due to the following factors:
the incremental impact of Learning House, primarily due to marketing and employment related costs,
an increase in legacy Education Services business marketing costs of $8.1 million primarily due to increased investments to support revenue growth;

22

higher royalty costs of $6.6 million; and, to a lesser extent,
higher employment costs of $3.4 million.

These increases were offset by lower inventory costs of $5.8 million primarily due to lower Publishing print sales.

In connection with the acquisition of Learning House, we changed our accounting policy for certain advertising and marketing costs incurred by our Education Services business to fulfill performance obligations from contracts with educational institutions. Under the new accounting policy, these costs are included in Cost of Sales whereas they were previously included in Operating and Administrative Expenses on the Consolidated Statements of Income. Including these expenses in Cost of Sales will better align these costs with the related revenue and conform with the presentation of such costs for Learning House. This change in accounting policy was applied retrospectively. The amount reclassified for the year ended April 30, 2018 was $45.8 million. Refer to “Change in Accounting Policy” in Note 2, “Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards,” for more information on the accounting policy change and Note 4, “Acquisition,” for more information related to the acquisition of Learning House.

Gross Profit Margin:

Gross profit margin for the year ended April 30, 2019 was 69.2% compared with 70.4% in the prior year. On a constant currency basis, the gross profit margin would have been 69.3%.

Operating and Administrative Expenses:

Operating and administrative expenses for the year ended April 30, 2019 increased $6.8 million, or 1%, as compared with prior year and 2% on a constant currency basis. The increase was primarily due to higher costs related to increased resources in editorial resources to increase article output, as well as higher marketing, advertising and sales costs and the incremental impact of the acquisition of Learning House. These factors were partially offset by lower technology costs and the impairment charge in the prior year related to one of our Publishing brands of $3.6 million.

Restructuring and Related Charges:

In the years ended April 30, 2019 and 2018, we recorded pre-tax restructuring charges of $3.1 million and $28.6 million, respectively, related to the Restructuring and Reinvestment Program.

These charges are reflected in Restructuring and Related Charges on the Consolidated Statements of Income and summarized in the following table:
   
2019
   
2018
   
Total Charges
Incurred to Date
 
Charges by Segment:
                 
Research
 
$
1,131
   
$
5,257
   
$
26,544
 
Publishing
   
650
     
6,443
     
39,581
 
Solutions
   
878
     
3,695
     
7,125
 
Corporate Expenses
   
459
     
13,171
     
96,378
 
Total Restructuring and Related Charges
 
$
3,118
   
$
28,566
   
$
169,628
 
                         
Charges (Credits) by Activity:
                       
Severance
 
$
1,456
   
$
27,213
   
$
116,259
 
Consulting and Contract Termination Costs
   
526
     
1,815
     
21,155
 
Other activities
   
1,136
     
(462
)
   
32,214
 
Total Restructuring and Related Charges
 
$
3,118
   
$
28,566
   
$
169,628
 

The charges above are net of changes in estimates for previously accrued restructuring charges. Other Activities for the year ended April 30, 2019 reflect lease impairment related costs. The credits in Other Activities for the year ended April 30, 2018 mainly reflect changes in estimates for previously accrued restructuring charges related to facility lease reserves.

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

Amortization of Intangibles:

Amortization of intangibles was $54.7 million for the year ended April 30, 2019, an increase of $6.4 million as compared with prior year. On a constant currency basis, amortization of intangibles increased 14%. The increase in amortization was primarily due to the acquisition of intangibles as part of the acquisition of Learning House and, to a lesser extent, in the Research segment due to the timing of the acquisitions of publishing rights in the second half of 2018.

23

Operating Income:

Operating income was $224.0 million for the year ended April 30, 2019, a decrease of $7.5 million, or 3%, as compared with prior year. On a constant currency basis, excluding the impact from Learning House, which reported an operating loss of $8.0 million, and restructuring charges and the brand impairment charge in the prior year, operating income decreased 6%, due to higher expenses, partially offset by higher revenue.

Interest Expense:

Interest expense for the year ended April 30, 2019 increased $2.8 million to $16.1 million on a reported basis. This increase was due to a higher average debt balances outstanding, which included borrowings for the funding of the acquisition of Learning House, and a higher weighted average effective borrowing rate.

Foreign Exchange Transaction (Losses) Gains:

Foreign exchange transaction losses were $6.0 million for the year ended April 30, 2019 and were primarily due to the net impact of the change in average foreign exchange rates as compared to the U.S. dollar on our intercompany accounts receivable and payable balances. For the year ended April 30, 2018, foreign exchange transaction losses were $12.8 million which were primarily due to the impact of changes in average foreign exchange rates as compared to the U.S. dollar on our intercompany and third-party accounts receivable and payable balances.

Provision for Income Taxes:

The following table summarizes the effective tax rate for the years ended April 30, 2019 and 2018:
 
2019
 
2018
Effective tax rate as reported
 
21.0%
   
10.2%
State tax adjustment in 2019
 
1.3%
   
Deferred Tax from the Tax Act Rate Change
 
(0.1)%
   
11.7%
Effective tax rate excluding the deferred tax from the Tax Act and state tax adjustment
 
22.2%
   
21.9%

The effective tax rate for the year ended April 30, 2019 was greater than the rate for the year ended April 30, 2018 due to the net deferred tax benefit from the Tax Act in the year ended April 30, 2018 compared to the relatively small net deferred benefit in the year ended April 30, 2019 from state tax apportionment changes.

The effective tax rate was equal to the U.S. statutory rate for the year ended April 30, 2019 as the increase from higher taxes on non-U.S. income and various other items was offset by a state tax benefit from more favorable apportionment factors which reduced our deferred tax liabilities, net of federal benefit.

The Tax Act
The information set forth in Note 12, "Income Taxes” under the caption "The Tax Act," is incorporated herein by reference and further describes the impact of the Tax Act.

Diluted Earnings Per Share (“EPS”):

EPS for the year ended April 30, 2019 was $2.91 per share compared with $3.32 per share in the prior year. Excluding the impact of the items included in the table below, Adjusted EPS for the year ended April 30, 2019 decreased 14% to $2.96 per share compared with $3.43 per share in the prior year.

24

Below is a reconciliation of our GAAP EPS to Non-GAAP Adjusted EPS:
   
2019
   
2018
 
GAAP EPS
 
$
2.91
   
$
3.32
 
Adjustments:
               
Restructuring and related charges
   
0.04
     
0.39
 
Foreign exchange losses on intercompany transactions
   
0.06
     
0.15
 
Impact of Tax Cuts and Job Act
   
     
(0.43
)
Impact of reduction in certain U.S. state tax rates in 2019
   
(0.05
)
   
 
Non-GAAP Adjusted EPS
 
$
2.96
   
$
3.43
 

On a constant currency basis, Adjusted EPS decreased 8% due to lower Adjusted Operating Income. Adjusted EPS for the year ended April 30, 2019 was also lower as compared with prior year due to an $0.15 per share dilutive impact of the Learning House acquisition.

SEGMENT OPERATING RESULTS:
   
2019
   
2018
   
% Change
   
% Change
w/o FX (b)
 
RESEARCH:
                       
Revenue:
                       
Journal Subscriptions
 
$
661,055
   
$
677,685
     
(2
)%
   
 
Open Access
   
54,671
     
41,997
     
30
%
   
33
%
Licensing, Reprints, Backfiles, and Other
   
185,619
     
181,806
     
2
%
   
4
%
Total Journal Revenue
 
$
901,345
   
$
901,488
     
     
3
%
                                 
Publishing Technology Services (Atypon)
   
35,968
     
32,907
     
9
%
   
9
%
                                 
Total Research Revenue
 
$
937,313
   
$
934,395
     
     
3
%
                                 
Cost of Sales
   
254,338
     
247,654
     
3
%
   
5
%
                                 
Gross Profit
 
$
682,975
   
$
686,741
     
(1
)%
   
2
%
Gross Profit Margin
   
72.9
%
   
73.5
%
               
                                 
Operating Expenses (a)
   
394,870
     
383,329
     
3
%
   
4
%
Amortization of Intangibles
   
28,099
     
26,829
     
5
%
   
6
%
Restructuring Charges (See Note 7)
   
1,131
     
5,257
     
(78
)%
   
(78
)%
                                 
Contribution to Profit
 
$
258,875
   
$
271,326
     
(5
)%
   
(1
)%
Contribution Margin
   
27.6
%
   
29.0
%
               

(a)
Due to the retrospective adoption of ASU 2017-07, total net benefits related to defined benefit and other post-employment benefit plans were reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense). The amount for the year ended April 30, 2018 for the Research segment was $4.2 million. Refer to Note 2, "Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," for more information.

(b)  Adjusted to exclude FX impact and Restructuring Charges.

Revenue:

Research revenue for the year ended April 30, 2019 increased $2.9 million, or flat as compared with prior year. On a constant currency basis, revenue increased 3%, compared with prior year, primarily due to continued strong growth in publication volumes for Open Access, particularly hybrid journals.

Gross Profit:

Gross profit for the year ended April 30, 2019 decreased 1% compared with prior year and, on a constant currency basis, increased 2%. This was due to higher revenues, partially offset by higher costs of sales, primarily due to increased royalty costs.

25

Gross profit margin was 72.9% compared with prior year of 73.5%. On a constant currency basis, gross profit margin would have been 73%.

Contribution to Profit:

Contribution to profit decreased 5% to $258.9 million for the year ended April 30, 2019 as compared with the prior year. On a constant currency basis and excluding restructuring charges, contribution to profit decreased 1% as compared with prior year. This decrease was due to higher operating costs partially offset by higher gross profit.  The higher operating costs include additional resources in editorial to support increased journal publishing of $11.2 million, increased costs related to advertising and marketing of $3.0 million, and sales resources of $2.5 million, which were partially offset by lower administrative costs.

Society Partnerships

For calendar year 2019, 17 new society contracts were signed, with combined annual revenue of approximately $5.4 million, and 4 society contracts were not renewed with combined annual revenue of approximately $1.8 million.

Projekt DEAL

In the third quarter of 2019, we completed a new agreement with a national consortium representing all 700 German academic institutions. This new three-year agreement provides those German libraries and their researchers with both subscriptions access and open access publishing. We expect to generate modestly more revenue from this new arrangement and the opportunity to grow revenue through higher publishing volumes.

   
2019
   
2018
   
% Change
   
% Change
w/o FX (b)
 
PUBLISHING:
                       
Revenue:
                       
STM and Professional Publishing
 
$
265,719
   
$
287,315
     
(8
)%
   
(6
)%
Education Publishing
   
157,579
     
187,178
     
(16
)%
   
(14
)%
Courseware (WileyPLUS)
   
63,485
     
59,475
     
7
%
   
7
%
Test Preparation and Certification
   
40,606
     
35,534
     
14
%
   
15
%
Licensing, Distribution, Advertising and Other
   
46,803
     
48,146
     
(3
)%
   
(1
)%
                                 
Total Publishing Revenue
 
$
574,192
   
$
617,648
     
(7
)%
   
(6
)%
                                 
Cost of Sales
   
178,050
     
194,900
     
(9
)%
   
(7
)%
                                 
Gross Profit
 
$
396,142
   
$
422,748
     
(6
)%
   
(5
)%
Gross Profit Margin
   
69.0
%
   
68.4
%
               
                                 
Operating Expenses (a)
   
268,425
     
282,958
     
(5
)%
   
(4
)%
Amortization of Intangibles
   
8,166
     
8,108
     
1
%
   
1
%
Restructuring Charges (see Note 7)
   
650
     
6,443
     
(90
)%
   
(90
)%
Publishing brand impairment charge
   
     
3,600
     
(100
)%
   
(100
)%
                                 
Contribution to Profit
 
$
118,901
   
$
121,639
     
(2
)%
   
(8
)%
Contribution Margin
   
20.7
%
   
19.7
%
               

(a)
Due to the retrospective adoption of ASU 2017-07, total net benefits related to defined benefit and other post-employment benefit plans were reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense). The amount for the year ended April 30, 2018 for the Publishing segment was $2.3 million. Refer to Note 2, "Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," for more information.

(b)
Adjusted to exclude FX impact and Restructuring Charges, and in the year ended April 30, 2018, a Publishing brand impairment charge was also excluded.

Revenue:

Publishing revenue decreased 7% to $574.2 million on a reported basis, and 6% on a constant currency basis as compared with prior year. The decrease was primarily due to a decline in Education Publishing and STM and Professional Publishing due to a continued shift in market demand for print products. This decline was partially offset by an increase in volume of Test Preparation and Certification product offerings and an increase in WileyPLUS mainly due to the timing of revenue recognition.

26

Gross Profit:

Gross profit decreased 6% as compared with prior year and 5% on a constant currency basis, due to the decline in Education Publishing and STM and Professional Publishing revenue; partially offset by a decrease in inventory costs and to a lesser extent, book composition and product development amortization expense.

Contribution to Profit:

Contribution to profit decreased 2% to $118.9 million for the year ended April 30, 2019 as compared with the prior year. On a constant currency basis and excluding restructuring charges and a brand impairment charge in the prior year, contribution to profit decreased 8% as compared with the prior year. This decrease was primarily due to lower gross profit, partially offset by, lower operating expenses including employee related costs, content related costs and, to a lesser extent, technology costs.
   
2019
   
2018
   
% Change
   
% Change
w/o FX (b)
 
SOLUTIONS:
                       
Revenue:
                       
Education Services
 
$
157,549
   
$
119,131
     
32
%
   
32
%
Professional Assessment
   
65,889
     
61,094
     
8
%
   
8
%
Corporate Learning
   
65,126
     
63,835
     
2
%
   
6
%
                                 
Total Solutions Revenue
 
$
288,564
   
$
244,060
     
18
%
   
19
%
                                 
Cost of Sales (a)
   
122,337
     
88,462
     
38
%
   
39
%
                                 
Gross Profit
 
$
166,227
   
$
155,598
     
7
%
   
8
%
Gross Profit Margin
   
57.6
%
   
63.8
%
               
                                 
Operating Expenses (a)
   
131,989
     
116,513
     
13
%
   
15
%
Amortization of Intangibles
   
18,393
     
13,291
     
38
%
   
39
%
Restructuring Charges (see Note 7)
   
878
     
3,695
     
(76
)%
   
(76
)%
                                 
Contribution to Profit
 
$
14,967
   
$
22,099
     
(32
)%
   
(39
)%
Contribution Margin
   
5.2
%
   
9.1
%
               

(a)
In connection with the acquisition of Learning House, we changed our accounting policy for certain advertising and marketing costs incurred by our Education Services business to fulfill performance obligations from contracts with educational institutions. Under the new accounting policy, these costs are included in Cost of Sales whereas they were previously included in Operating and Administrative Expenses on the Consolidated Statements of Income. The impact of this reclassification was an increase to Cost of Sales and a corresponding decrease to Operating and Administrative Expenses of $45.8 million for the year ended April 30, 2018. This reclassification had no impact on Revenue, net or Contribution to Profit.  Refer to “Change in Accounting Policy” in Note 2, “Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards,” for more information on the accounting policy change and Note 4, “Acquisition,” for more information related to the acquisition of Learning House.

(b)
Adjusted to exclude FX impact and Restructuring Charges.
  
Revenue:

Solutions revenue increased 18% to $288.6 million on a reported basis and 19% on a constant currency basis as compared with prior year. The increase was mainly driven by the impact of the acquisition of Learning House on November 1, 2018 which contributed $31.5 million in revenue, and to a lesser extent, higher revenue in the legacy Education Services business, Professional Assessment services and Corporate Learning.

27

Gross Profit:

Gross profit increased 7% to $166.2 million, and 8%, on a constant currency basis, as compared with prior year. The increase is primarily due to the impact of higher revenues as described above, partially offset by higher costs of sales due to the incremental impact of the acquisition of Learning House and higher marketing related costs of $8.1 million, due to the legacy Education Services business primarily due to increased investments to support revenue growth; and to a lesser extent, higher composition and product development amortization and employment related costs.

Contribution to Profit:

Contribution to profit for the year ended April 30, 2019 includes an operating loss from Learning House of $8.0 million.  On a constant currency basis, excluding restructuring charges and the impact from Learning House, contribution to profit decreased 8% as compared with prior year. This was due to higher operating expenses, including increased sales related costs, content costs, and, to a lesser extent, increased technology costs. These factors were partially offset by lower administrative costs.

Legacy Education Services Partners and Programs:

As of April 30, 2019, we had 39 university partners and 276 programs under contract.

CORPORATE EXPENSES:

Corporate Expenses for the year ended April 30, 2019 decreased 8% to $168.8 million as compared with prior year. On a constant currency basis and excluding restructuring charges, these expenses decreased 1%. This decrease was primarily due to lower employment related costs, including incentive compensation costs, partially offset by higher stock-based compensation expense of $2.3 million and costs associated with strategic planning of $1.4 million.

FISCAL YEAR 2018 AS COMPARED TO FISCAL YEAR 2017 SUMMARY RESULTS

Revenue:

Revenue for the year ended April 30, 2018 increased 5% to $1,796.1 million, or 1% on a constant currency basis as compared with prior year. The increase was mainly driven by an increase in Research revenue due to a full year of revenue from the Atypon acquisition in the year ended April 30, 2018 and growth in Open Access and, to a lesser extent, higher Education Services (OPM) revenue in Solutions. These increases were partially offset by a decline in Publishing revenue, primarily in STM and in Professional and Education Publishing, which reflected market conditions.

See the "Segment Operating Results" below for additional details on each segment's revenue and contribution to profit performance.

Cost of Sales and Gross Profit:

Cost of Sales for the year ended April 30, 2018 increased 6% to $531.0 million, or 3% on a constant currency basis as compared with prior year. The increase was primarily a result of higher revenues and higher royalty costs on Research journals due to title mix and an increase in new titles at a higher royalty rate.

Gross profit margin for the year ended April 30, 2018 was 70.4% and decreased slightly compared with the prior year on a constant currency basis, primarily in our Publishing segment as a result of the decline in revenue.

As noted above, in connection with the acquisition of Learning House, we changed our accounting policy for certain advertising and marketing costs incurred by our Education Services business to fulfill performance obligations from contracts with educational institutions. Under the new accounting policy, these costs are included in Cost of Sales whereas they were previously included in Operating and Administrative Expenses on the Consolidated Statements of Income. The amount reclassified for the year ended April 30, 2018 and 2017 was $45.8 million and $40.0 million, respectively. Refer to “Change in Accounting Policy” in Note 2, “Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards,” for more information on the accounting policy change and Note 4, “Acquisition,” for more information related to the acquisition of Learning House.

28

Operating and Administrative Expenses:

Operating and administrative expenses for the year ended April 30, 2018 increased 1% to $956.8 million, but decreased 1% on a constant currency basis as compared with prior year due to the following:
lower technology costs in the current year of $18 million associated with our ERP implementation and other reductions in outsourcing and system development consulting costs;
a one-time pension settlement charge in the prior year related to changes in our retiree and long-term disability plans of $9 million; and
savings from operational excellence initiatives and restructuring activities.

The factors were partially offset by:
one-time benefits in the prior year related to the changes in our retiree and long-term disability plans of $4 million and a life insurance recovery of $2 million;
a full year of costs in the year ended April 30, 2018 associated with the Atypon acquisition, which resulted in an incremental impact of $9 million;
an increase in strategy consultation costs in the current year of $7 million; and
an impairment charge in the current year related to one of our Publishing brands of $4 million.

Restructuring and Related Charges:

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

In the years ended April 30, 2018 and 2017, we recorded pre-tax restructuring charges of $29 million and $13 million, respectively, related to this program. These charges are reflected in Restructuring and Related Charges on the Consolidated Statements of Income and summarized in the following table:
   
2018
   
2017
 
Charges by Segment:
           
Research
 
$
5,257
   
$
1,949
 
Publishing
   
6,443
     
1,596
 
Solutions
   
3,695
     
1,787
 
Corporate Expenses
   
13,171
     
8,023
 
Total Restructuring and Related Charges
 
$
28,566
   
$
13,355
 
                 
Charges (Credits) by Activity:
               
Severance
 
$
27,213
   
$
8,386
 
Process reengineering consulting
   
1,815
     
148
 
Other activities
   
(462
)
   
4,821
 
Total Restructuring and Related Charges
 
$
28,566
   
$
13,355
 

The credits in Other Activities in 2018 mainly reflect changes in estimates for previously accrued restructuring charges related to facility lease reserves. Other Activities for the year ended April 30, 2017, reflect facility relocation and lease impairment related costs.

Amortization of Intangibles:

Amortization of intangibles for the year ended April 30, 2018 declined 3% to $48 million, or 5% on a constant currency basis compared with prior year. The decrease was a result of the completion of amortization of certain acquired intangible assets.

Interest Expense:

Interest expense for the year ended April 30, 2018 decreased $4 million to $13 million on a reported and constant currency basis. This decrease was due to lower average debt balances outstanding, partially offset by a higher average effective borrowing rate.

Foreign Exchange Transaction (Losses) Gains:

We reported foreign exchange transaction losses of $13 million for the year ended April 30, 2018 compared to gains of $0.4 million in the prior year. The losses in the year ended April 30, 2018 were primarily due to the impact of the change in average foreign exchange rates as compared to the U.S. dollar on our intercompany and third-party accounts receivable and payable balances.

29

Provision for Income Taxes:

The following table summarizes the effective tax rate for the years ended April 30, 2018 and 2017:
 
2018
 
2017
Effective tax rate as reported
 
10.2%
   
40.5%
Estimated net impact in the year ended April 30, 2018 of non-recurring items from Tax Act
 
11.7
   
Impact of unfavorable German court decision in the year ended April 30, 2017
 
   
(25.7)
Impact of reduction in U.K. statutory rate on deferred tax balances in the year ended April 30, 2017
 
   
1.3
Effective tax rate excluding the impact of non-recurring items from the Tax Act in the year ended April 30, 2018 and the unfavorable German court decision and U.K. tax rate reduction in the year ended April 30, 2017
 
21.9%
   
16.1%

On December 22, 2017, the U.S. government enacted comprehensive Federal tax legislation originally known as the Tax Cuts and Jobs Act of 2017 (the "Tax Act").  In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118"), which allowed us to record provisional amounts related to the effect of the Tax Act during a measurement period not to extend beyond one year of the enactment date. As the Tax Act was passed in December 2017, and ongoing guidance and accounting interpretation were expected over the 12 months following enactment, we considered the accounting of the transition tax, deferred tax re-measurements, and other items to be provisional due to the forthcoming guidance and our ongoing analysis of final data and tax positions.

The effective tax rate was lower in the year ended April 30, 2018 as compared with the year ended April 30, 2017 due to the net tax benefit from non-recurring items in the Tax Act and the effect of the German Tax litigation in the year ended April 30, 2017 as described below. Estimated non-recurring items in the Tax Act reduced our income tax expense by approximately $25 million ($0.43/share) or a reduction in our effective tax rate of 11.7 percentage points for the year ended April 30, 2018. Excluding the effect of the Tax Act, the rate was 21.9% for the year ended April 30, 2018.

The rate excluding the benefit from the non-recurring items in the Tax Act was lower than the U.S. statutory rate for the year ended April 30, 2018, primarily due to lower rates applicable to non-U.S. earnings.

German Tax Litigation Expense: In the year ended April 30, 2017, the German Federal Fiscal Court affirmed a lower court decision disallowing deductions related to a stepped-up basis in certain assets. As a result, we incurred an income tax charge of approximately $49 million ($0.85 per share).

Deferred Tax Benefit from U.K. Statutory Tax Rate Change: In the year ended April 30, 2016, the U.K. reduced its statutory rate to 19% beginning April 1, 2017 and 18% beginning April 1, 2020, and in the year ended April 30, 2017, the U.K. further reduced its statutory rate beginning on April 1, 2020, from 18% to 17%. This resulted in a non-cash deferred tax benefit from the re-measurement of our applicable U.K. deferred tax balances of $6 million ($0.10 per share) in the year ended April 30, 2016 and $3 million ($0.04 per share) in the year ended April 30, 2017.

The Tax Act
The information set forth in Note 12, "Income Taxes” of the Notes to Consolidated Financial Statements under the caption "The Tax Act," is incorporated herein by reference and further describes the impact of the Tax Act.

EPS:

EPS for the year ended April 30, 2018 was $3.32 per share compared with $1.95 per share in the prior year. EPS results included the following items, which impacted comparability:
   
2018
   
2017
 
GAAP EPS
 
$
3.32
   
$
1.95
 
Adjustments:
               
Restructuring and related charges
   
0.39
     
0.15
 
Foreign exchange losses on intercompany transactions
   
0.15
     
0.01
 
Estimated impact of the Tax Act
   
(0.43
)
   
 
Pension settlement
   
     
0.09
 
Unfavorable tax decisions
   
     
0.85
 
Deferred income tax benefit on U.K. tax rate change
   
     
(0.04
)
Non-GAAP Adjusted EPS
 
$
3.43
   
$
3.01
 

30


Excluding the impact of the items included above, Adjusted EPS for the year ended April 30, 2018 increased 14% to $3.43 per share compared with $3.01 per share in the prior year. On a constant currency basis, Adjusted EPS increased 3%.

SEGMENT OPERATING RESULTS:

   
2018
   
2017
   
% Change
   
% Change
w/o FX (b)
 
RESEARCH:
                       
Revenue:
                       
Journal Subscriptions
 
$
677,685
   
$
639,720
     
6
%
   
 
Open Access
   
41,997
     
30,633
     
37
%
   
34
%
Licensing, Reprints, Backfiles, and Other
   
181,806
     
164,070
     
11
%
   
8
%
Total Journal Revenue
 
$
901,488
   
$
834,423
     
8
%
   
3
%
                                 
Publishing Technology Services (Atypon)
   
32,907
     
19,066
     
73
%
   
73
%
                                 
Total Research Revenue
 
$
934,395
   
$
853,489
     
9
%
   
4
%
                                 
Cost of Sales
   
247,654
     
219,773
     
13
%
   
8
%
                                 
Gross Profit
 
$
686,741
   
$
633,716
     
8
%
   
3
%
Gross Profit Margin
   
73.5
%
   
74.3
%
               
                                 
Operating Expenses (a)
   
383,329
     
354,986
     
8
%
   
6
%
Amortization of Intangibles
   
26,829
     
26,133
     
3
%
   
 
Restructuring Charges (See Note 7)
   
5,257
     
1,949
                 
                                 
Contribution to Profit
 
$
271,326
   
$
250,648
     
8
%
   
(1
)%
Contribution Margin
   
29.0
%
   
29.4
%
               

(a)
Due to the retrospective adoption of ASU 2017-07, total net benefits related to defined benefit and other post-employment benefit plans were reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense). The amounts for the years ended April 30, 2018 and 2017 for the Research segment were $4.2 million and $1.6 million, respectively. Refer to Note 2, "Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," for more information.

(b)  Adjusted to exclude FX impact and Restructuring Charges

Revenue:

Research revenue increased 9% to $934.4 million, or 4% on a constant currency basis as compared with prior year. The increase was primarily due to:
a full year of revenue from Atypon, which was acquired in September 2016, of which $14 million was the incremental impact;
Open Access growth driven by the strong performance of existing titles and, to a lesser extent, new title launches; and
other Journal revenue increases, particularly in reprints, backfiles and the licensing of intellectual content.

As of April 30, 2018, calendar year 2018 journal subscription renewals were 2% higher than calendar year 2017 on a constant currency basis with approximately 97% of targeted business under contract.

Gross Profit:

Gross Profit increased 8% to $686.7 million, or 3% on a constant currency basis as compared with prior year. The increase was driven by higher revenues. Gross profit margin declined by 80 basis points due primarily to higher journal royalty costs associated with title mix and an increase in new titles at higher royalty rates. We anticipate that we will continue to experience gross margin pressure due to higher journal royalty rates in the year ended April 30, 2019. To offset this gross margin pressure, we will continue to pursue additional operations efficiencies.
31

Contribution to Profit:

Contribution to Profit increased 8% to $271.3 million as compared with prior year. On a constant currency basis and excluding restructuring charges, contribution to profit decreased 1% as compared with prior year as the increase in gross profit was offset by higher operating expenses.

The increase in operating expenses was primarily due to:
a full year of costs in the year ended April 30, 2018 from Atypon which resulted in an incremental impact of $9 million;
higher employment-related costs of $5 million, which included higher incentive compensation from the achievement of certain financial goals and targets;
higher content and editorial costs of $3 million; and
an increase in product technology costs of $5 million.

These factors were partially offset by savings from operational excellence initiatives and restructuring activities.

Society Partnerships

For calendar year 2018, 15 new society contracts were signed, with combined annual revenue of approximately $14 million, and 10 society contracts were not renewed with combined annual revenue of approximately $3 million.

PUBLISHING:
 
2018
   
2017
   
% Change
   
% Change
w/o FX (b)
 
Revenue:
                       
STM and Professional Publishing
 
$
287,315
   
$
291,255
     
(1
)%
   
(3
)%
Education Publishing
   
187,178
     
196,343
     
(5
)%
   
(6
)%
Courseware (WileyPLUS)
   
59,475
     
62,348
     
(5
)%
   
(5
)%
Test Preparation and Certification
   
35,534
     
35,609
     
     
 
Licensing, Distribution, Advertising, and Other
   
48,146
     
47,894
     
1
%
   
(2
)%
                                 
Total Publishing Revenue
 
$
617,648
   
$
633,449
     
(2
)%
   
(4
)%
                                 
Cost of Sales
   
194,900
     
194,837
     
     
(1
)%
                                 
Gross Profit
 
$
422,748
   
$
438,612
     
(4
)%
   
(5
)%
Gross Profit Margin
   
68.4
%
   
69.2
%
               
                                 
Operating Expenses (a)
   
282,958
     
302,682
     
(7
)%
   
(7
)%
Amortization of Intangibles
   
8,108
     
9,803
     
(17
)%
   
(17
)%
Restructuring Charges (see Note 7)
   
6,443
     
1,596
                 
Publishing brand impairment charge
   
3,600
     
                 
                                 
Contribution to Profit
 
$
121,639
   
$
124,531
     
(2
)%
   
1
%
Contribution Margin
   
19.7
%
   
19.7
%
               

(a)
Due to the retrospective adoption of ASU 2017-07, total net benefits related to defined benefit and other post-employment benefit plans were reclassified from Operating and Administrative Expenses to Interest and Other Income (Expense). The amounts for the years ended April 30, 2018 and 2017 for the Publishing segment were $2.3 million and $1.2 million, respectively. Refer to Note 2, "Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," for more information.

(b)  Adjusted in the years ended April 30, 2018 and 2017 to exclude FX impact and Restructuring Charges, and in the year ended April 30, 2018 also excludes a Publishing brand impairment charge.

Revenue:

Publishing revenue decreased 2% to $617.6 million, or 4% on a constant currency basis as compared with prior year. The decline was driven by lower print book revenues, particularly in Education Publishing, due to overall softness in the market as well as other retail options such as rental and digital. Also contributing to the decline in Publishing revenue was a decline in Courseware (WileyPLUS), primarily due to the timing of revenue recognition associated with multi-semester offerings, which are recognized in periods extending across two semesters.

32

Gross Profit:

Gross Profit decreased 4% to $422.7 million, or 5% on a constant currency basis as compared with prior year. The decrease was mainly driven by the decline in revenues, partially offset by lower inventory costs due to cost savings initiatives.

Contribution to Profit:

Contribution to Profit decreased 2% to $121.6 million as compared with prior year. On a constant currency basis and excluding restructuring charges and a brand impairment charge in the first quarter of the year ended April 30, 2018, contribution to profit increased 1%. This was primarily due to lower operating expenses, which were primarily savings from operational excellence initiatives and restructuring activities.
   
2018
   
2017
   
% Change
   
% Change
w/o FX (b)
 
SOLUTIONS:
                       
Revenue:
                       
Education Services
 
$
119,131
   
$
111,638
     
7
%
   
7
%
Professional Assessment
   
61,094
     
59,868
     
2
%
   
2
%
Corporate Learning
   
63,835
     
60,086
     
6
%
   
(1
)%
                                 
Total Solutions Revenue
 
$
244,060
   
$
231,592
     
5
%
   
3
%
                                 
Cost of Sales (a)
   
88,462
     
86,184
     
3
%
   
1
%
                                 
Gross Profit
 
$
155,598
   
$
145,408
     
7
%
   
5
%
Gross Profit Margin
   
63.8
%
   
62.8
%
               
                                 
Operating Expenses (a)
   
116,513
     
115,066
     
1
%
   
(1
)%
Amortization of Intangibles
   
13,291
     
13,733
     
(3
)%
   
(6
)%
Restructuring Charges (see Note 7)
   
3,695
     
1,787
                 
                                 
Contribution to Profit
 
$
22,099
   
$
14,822
     
49
%
   
56
%
Contribution Margin
   
9.1
%
   
6.4
%
               

(a)
In connection with the acquisition of Learning House, we changed our accounting policy for certain advertising and marketing costs incurred by our Education Services business to fulfill performance obligations from contracts with educational institutions. Under the new accounting policy, these costs are included in Cost of Sales whereas they were previously included in Operating and Administrative Expenses on the Consolidated Statements of Income. The impact of this reclassification was an increase to Cost of Sales and a corresponding decrease to Operating and Administrative Expenses of $45.8 million and $40.0 million for the years ended April 30, 2018 and 2017, respectively. This reclassification had no impact on Revenue, net or Contribution to Profit.  Refer to “Change in Accounting Policy” in Note 2, “Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards,” for more information on the accounting policy change and Note 4, “Acquisition,” for more information related to the acquisition of Learning House.

(b)  Adjusted to exclude FX impact and Restructuring Charges.

Revenue:

Solutions revenue increased 5% to $244.1 million, or 3%, on a constant currency basis as compared with prior year, mainly driven by growth in Education Services tuition revenue growth due to higher enrollments, partially offset by a decline in Corporate Learning (CrossKnowledge) where French government funding slowed for unemployment initiatives and blended learning programs.

Gross Profit:

Gross Profit increased 7% to $155.6 million, or 5% on a constant currency basis as compared with prior year. The increase primarily reflected the impact of higher revenue.

33

A 100-basis-point improvement in gross profit margin was due to higher revenues and increased efficiency in recruiting Education Services students, which resulted in lower recruitment costs.

Contribution to Profit:

Contribution to Profit increased 49% to $22.1 million as compared with prior year. On a constant currency basis and excluding restructuring charges, contribution to profit increased 56%, primarily due to the improvement in gross profit partially offset by higher operating expenses, including higher advertising and marketing expenses of $6 million to support sales growth.

Education Services Partners and Programs

As of April 30, 2018, we had 34 university partners and 239 programs under contract.

CORPORATE EXPENSES:

Corporate Expenses were $183.6 million and $178.5 million in the years ended April 30, 2018 and 2017, respectively. On a constant currency basis and excluding restructuring charges and a one-time pension settlement charge in the prior year, these expenses decreased 2%, primarily due to the following:
lower technology costs of approximately $10 million driven by reduced spending on our ERP system and other reductions in depreciation, outsourcing, and systems development consulting costs; and
savings from operational excellence initiatives and restructuring activities;
partially offset by:
strategy consultation costs in the current year of $7.1 million; and
one-time benefits in the prior year related to changes in our retiree and long-term disability plans of $4.2 million and a life insurance recovery of $2 million.
FISCAL YEAR 2020 OUTLOOK
(amounts in millions, except Adjusted EPS)

We are currently in the process of realigning our existing reporting structure to our new strategic focus areas. This realignment will include the following changes to our segment reporting structure: (1) Education and Professional Publishing, which now consists of the current Publishing segment plus our Corporate Learning and Professional Assessment businesses, and (2) Education Services, which will now include our OPM businesses, including Learning House. Our Research segment will be renamed Research Publishing and Platforms and will continue to include our current Research and Atypon businesses.
Item
 
Fiscal Year
2019 Actual
   
Fiscal Year 2020 Outlook
Constant Currency
 
Revenue
 
$
1,800
   
$
1,840 - 1,870
 
Research Publishing & Platforms
   
937
     
950-960
 
Education & Professional Publishing
   
705
     
690-700
 
Education Services
   
158
     
200-210
 
Adjusted EBITDA
 
$
388
   
$
360-375
 
Adjusted EPS
 
$
2.96
   
$
2.45-2.55
 
Free Cash Flow
 
$
149
   
$
210-230
 

Fiscal year 2020 Adjusted EPS is expected to decline primarily due to non-cash amortization expense related to acquisitions and increased investment to grow and optimize Research and Education Services.
Forward-looking metrics include impact from Learning House and Knewton acquisitions.
Fiscal year 2020 results exclude the impact of the first quarter of fiscal year 2020 restructuring charges related to our multi-year Business Optimization Program. We anticipate approximately $15 million to $20 million of restructuring charges, of which approximately $10 million to $15 million to be severance-related costs and the remainder to be related to non-cash costs. We estimate that this multi-year program will potentially yield approximately $30 million in operating savings over time, with half of those savings to be realized in fiscal year 2020.
Fiscal year 2020 Outlook reflects fiscal year 2019 average exchange rates.

34

Adjusted EBITDA:

Below is a reconciliation of GAAP net income to Non-GAAP EBITDA and Adjusted EBITDA:
   
Year Ended
 
   
April 30,
 
   
2019
 
Net Income
 
$
168,263
 
Interest expense
   
16,121
 
Provision for income taxes
   
44,689
 
Depreciation and amortization
   
161,155
 
Non-GAAP EBITDA
   
390,228
 
Restructuring and related (credits) charges
   
3,118
 
Foreign exchange transaction losses
   
6,016
 
Interest and other income
   
(11,100
)
Non-GAAP Adjusted EBITDA
 
$
388,262
 

LIQUIDITY AND CAPITAL RESOURCES:

Principal Sources of Liquidity

We believe that our operating cash flow, together with our revolving credit facilities and other available debt financing, will be adequate to meet our operating, investing, and financing needs in the foreseeable future, although there can be no assurance that continued or increased volatility in the global capital and credit markets will not impair our ability to access these markets on terms commercially acceptable. We do not have any off-balance-sheet debt.

As of April 30, 2019, we had cash and cash equivalents of $92.9 million, of which approximately $81.0 million, or 87% was located outside the U.S.  Maintenance of these cash and cash equivalent balances outside the U.S. does not have a material impact on the liquidity or capital resources of our operations. Notwithstanding the Tax Act which generally eliminated federal income tax on future cash repatriation to the U.S., cash repatriation may be subject to state and local taxes or withholding or similar taxes. As described in Note 12, “Income Taxes,” of the Notes to Consolidated Financial Statements, since April 30, 2018, we no longer intend to permanently reinvest earnings outside the U.S. We have a $2.0 million liability related to the estimated taxes that would be incurred upon repatriating certain non-U.S. earnings.

As of April 30, 2019, we had $478.8 million of debt outstanding and approximately $623.9 million of unused borrowing capacity under our Revolving Credit and other facilities. Our credit agreement contains certain restrictive covenants related to our consolidated leverage ratio and interest coverage ratio, which we were in compliance with as of April 30, 2019.
On May 30, 2019, we entered into a credit agreement that amended and restated the existing agreement. The credit agreement provides for senior unsecured credit facilities comprised of a (i) five-year revolving credit facility in an aggregate principal amount up to $1.25 billion, and (ii) a five-year term loan A facility consisting of $250 million. The agreement contains certain customary affirmative and negative covenants, including a financial covenant in the form of a consolidated net leverage ratio and consolidated interest coverage ratio. We incurred approximately $4.0 million of costs related to this agreement.
Contractual Obligations and Commercial Commitments

A summary of contractual obligations and commercial commitments, excluding unrecognized tax benefits further described in Note 12, “Income Taxes,” of the Notes to the Consolidated Financial Statements, as of April 30, 2019 is as follows:

         
Payments Due by Period
 
   
Total
   
Within
Year 1
   
2–3
Years
   
4–5
Years
   
After 5
Years
 
Total Debt
 
$
478.8
   
$
   
$
478.8
   
$
   
$
 
Interest on Debt (1)
   
31.9
     
17.5
     
14.4
     
     
 
Non-Cancelable Leases
   
248.6
     
30.9
     
50.5
     
37.8
     
129.4
 
Minimum Royalty Obligations
   
469.8
     
101.1
     
160.1
     
106.1
     
102.5
 
Other Operating Commitments
   
57.4
     
36.1
     
20.8
     
0.5
     
 
Total
 
$
1,286.5
   
$
185.6
   
$
724.6
   
$
144.4
   
$
231.9
 

(1)
Interest on Debt includes the effect of our interest rate swap agreements and the estimated future interest payments on our unhedged variable rate debt, assuming that the interest rates as of April 30, 2019 remain constant until the maturity of the debt.

35

Analysis of Historical Cash Flow

The following table shows the changes in our Consolidated Statements of Cash Flows for the years ended April 30, 2019, 2018 and 2017.
   
Year Ended April 30,
 
   
2019
   
2018
   
2017
 
Net Cash Provided by Operating Activities
 
$
250,831
   
$
382,322
   
$
314,903
 
Net Cash Used in Investing Activities
   
(301,502
)
   
(177,411
)
   
(243,010
)
Net Cash Used in Financing Activities
   
(17,595
)
   
(96,831
)
   
(346,172
)
Effect of Foreign Currency Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
   
(8,443
)
   
3,661
     
(31,011
)

Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders, as it represents cash available to repay debt, pay common dividends, and fund share repurchases and new acquisitions. Below are the details of Free Cash Flow less Product Development Spending for the years ended April 30, 2019, 2018, and 2017.

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

Free Cash Flow less Product Development Spending:
   
Year Ended April 30,
 
   
2019
   
2018
   
2017
 
Net Cash Provided by Operating Activities
 
$
250,831
   
$
382,322
   
$
314,903
 
Less: Additions to Technology, Property and Equipment
   
(77,167
)
   
(114,225
)
   
(105,058
)
Less: Product Development Spending
   
(24,426
)
   
(36,503
)
   
(43,603
)
Free Cash Flow less Product Development Spending
 
$
149,238
   
$
231,594
   
$
166,242
 

Net Cash Provided by Operating Activities

2019 compared to 2018

Net Cash Provided by Operating Activities in the year ended April 30, 2019 decreased $131.5 million compared to the year ended April 30, 2018 to $250.8 million primarily due to the following factors:
lower net earnings adjusted for non-cash items of $24 million, including Learning House;
the unfavorable net impact on accounts receivable and deferred revenue (contract liabilities) from the delay in billings and subsequent collections of calendar year 2019 journal subscriptions of $57 million;
the net use of cash for other working capital items, including the payment of accounts payable and accrued liabilities of $26 million, primarily due to timing of payments and lower accruals for incentive compensation;
a net use of cash related to employee retirement plan contributions of $13 million, which includes a $10.0 million tax-advantage discretionary contribution to the U.S. Employees' Retirement Plan in fiscal year 2019; and
certain one-time closing costs related to the Learning House acquisition of $10 million.

Our negative working capital was $379.8 million and $394.3 million as of April 30, 2019, and April 30, 2018, respectively, due to the seasonality of our businesses. The primary driver of the negative working capital is unearned contract liabilities (deferred revenue) related to subscriptions for which cash has been collected in advance. Cash received in advance for subscriptions is used by us for a number of purposes, including acquisitions, debt repayments, funding operations, dividend payments and purchasing treasury shares.

Our change in working capital of $14.6 million was primarily due to the delay in billings and subsequent cash collections for calendar year 2019 subscriptions partly related to our ERP transition. We estimate that approximately $35 million of cash collections for calendar year 2019 journal subscriptions collections were delayed into fiscal year 2020.

The contract liabilities (deferred revenue) will be recognized as income when the products are shipped or made available online to the customers over the term of the subscription. Current liabilities as of April 30, 2019 and as of April 30, 2018 includes $507.4 million and $486.4 million, respectively, primarily related to deferred subscription revenue for which cash was collected in advance.