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

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

For the quarterly period ended July 31, 2020

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

For the transition period from_____ to _____

Commission File No. 001-11507

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

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

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

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

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

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

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

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

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

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

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

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

Class A, par value $1.00 – 46,920,390
Class B, par value $1.00 – 9,083,163


JOHN WILEY & SONS, INC. AND SUBSIDIARIES
INDEX

PART I - FINANCIAL INFORMATION

Item 1.
 
Financial Statements
   
         
     
5
         
     
6
         
     
7
         
     
8
         
     
9
         
   
Notes to Unaudited Condensed Consolidated Financial Statements
   
     
10
     
10
     
12
     
14
     
15
     
17
     
18
     
18
     
19
     
21
     
22
     
22
     
23
     
23
     
24
     
25
     
25
     
26
         
Item 2.
   
27
         
Item 3.
   
35
         
Item 4.
   
36
         
PART II - OTHER INFORMATION
   
         
Item 1.
   
37
         
Item 1a.
   
37
         
Item 2.
   
37
         
Item 6.
   
38
         
 
39
2
Index

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

This report contains certain “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 concerning our business, consolidated financial condition and results of operations. The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “should,” “estimates,” “expects,” “intends,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding our fiscal year 2021 outlook, the anticipated impact on the ability of our employees, contractors, customers and other business partners to perform our and their respective responsibilities and obligations relative to the conduct of our business in the future due to the current coronavirus (COVID-19) outbreak, anticipated restructuring charges and savings, operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon many assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond our control, and are subject to change based on many important factors. Such factors include, but are not limited to (i) the level of investment in new technologies and products; (ii) subscriber renewal rates for our journals; (iii) the financial stability and liquidity of journal subscription agents; (iv) the consolidation of book wholesalers and retail accounts; (v) the market position and financial stability of key retailers; (vi) the seasonal nature of our educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) our ability to protect our copyrights and other intellectual property worldwide; (ix) our ability to successfully integrate acquired operations and realize expected opportunities; (x) the ability to realize operating savings over time and in fiscal year 2021 in connection with our multi-year Business Optimization Program; and (xi) other factors detailed from time to time in our filings with the SEC. We undertake no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.

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

Non-GAAP Financial Measures:

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

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

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

Management uses these non-GAAP performance measures as supplemental indicators of our operating performance and financial position as well for internal reporting and forecasting purposes, when publicly providing our 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 investors and financial analysts for operational trends and comparisons over time. The use of these non-GAAP performance measures may also provide a consistent basis to evaluate operating profitability and performance trends by excluding items that we do not consider to be controllable activities for this purpose.
3
Index
For example:

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

In addition, we have historically provided these or similar non-GAAP performance measures and understand that some investors and financial analysts find this information helpful in analyzing our operating margins, and net income and comparing our financial performance to that of our peer companies and competitors. Based on interactions with investors, we also believe that our non-GAAP performance measures are regarded as useful to our investors as supplemental to our U.S. GAAP financial results, and that there is no confusion regarding the adjustments or our operating performance to our investors due to the comprehensive nature of our disclosures. We have not provided our 2021 outlook for the most directly comparable U.S. GAAP financial measures, as they are not available without unreasonable effort due to the high variability, complexity, and low visibility with respect to certain items, including restructuring charges and credits, gains and losses on foreign currency, and other gains and losses. These items are uncertain, depend on various factors, and could be material to our consolidated results computed in accordance with U.S. GAAP.

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

4
Index

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

 
July 31, 2020
   
April 30, 2020
 
             
Assets:
           
Current Assets
           
Cash and cash equivalents
 
$
101,385
   
$
202,464
 
Accounts receivable, net
   
282,412
     
309,384
 
Inventories, net
   
45,051
     
43,614
 
Prepaid expenses and other current assets
   
59,155
     
59,465
 
Total Current Assets
   
488,003
     
614,927
 
                 
Product Development Assets, net
   
52,088
     
53,643
 
Royalty Advances, net
   
28,682
     
36,710
 
Technology, Property and Equipment, net
   
295,457
     
298,005
 
Intangible Assets, net
   
829,231
     
807,405
 
Goodwill
   
1,133,610
     
1,116,790
 
Operating Lease Right-of-Use Assets
   
139,798
     
142,716
 
Other Non-Current Assets
   
102,077
     
98,598
 
Total Assets
 
$
3,068,946
   
$
3,168,794
 
                 
Liabilities and Shareholders' Equity:
               
Current Liabilities
               
Accounts payable
 
$
52,556
   
$
93,691
 
Accrued royalties
   
82,691
     
87,408
 
Short-term portion of long-term debt
   
10,938
     
9,375
 
Contract liabilities
   
408,954
     
520,214
 
Accrued employment costs
   
70,211
     
108,448
 
Accrued income taxes
   
181
     
13,728
 
Short-term portion of operating lease liabilities
   
20,647
     
21,810
 
Other accrued liabilities
   
69,958
     
72,595
 
Total Current Liabilities
   
716,136
     
927,269
 
                 
Long-Term Debt
   
835,763
     
765,650
 
Accrued Pension Liability
   
183,284
     
187,969
 
Deferred Income Tax Liabilities
   
124,184
     
119,127
 
Operating Lease Liabilities
   
156,644
     
159,782
 
Other Long-Term Liabilities
   
79,190
     
75,373
 
Total Liabilities
   
2,095,201
     
2,235,170
 
                 
Shareholders’ Equity
               
Preferred Stock, $1 par value: Authorized – 2 million, Issued - 0
   
—
     
—
 
Class A Common Stock, $1 par value: Authorized - 180 million, Issued 70,177 and 70,166 as of July 31, 2020 and April 30, 2020, respectively
   
70,177
     
70,166
 
Class B Common Stock, $1 par value: Authorized - 72 million, Issued 13,005 and 13,016 as of July 31, 2020 and April 30, 2020, respectively
   
13,005
     
13,016
 
Additional paid-in-capital
   
431,241
     
431,680
 
Retained earnings
   
1,775,813
     
1,780,129
 
Accumulated other comprehensive loss, net of tax
   
(534,118
)
   
(575,497
)
Less Treasury Shares At Cost (Class A - 23,259 and 23,405 as of July 31, 2020 and April 30, 2020, respectively; Class B - 3,920 and 3,920 as of July 31, 2020 and April 30, 2020, respectively)
   
(782,373
)
   
(785,870
)
Total Shareholders’ Equity
   
973,745
     
933,624
 
Total Liabilities and Shareholders' Equity
 
$
3,068,946
   
$
3,168,794
 

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

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

 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Revenue, net
 
$
431,326
   
$
423,530
 
                 
Costs and Expenses
               
Cost of sales
   
144,809
     
143,096
 
Operating and administrative expenses
   
237,369
     
250,170
 
Restructuring and related charges
   
2,218
     
10,735
 
Amortization of intangibles
   
16,891
     
14,970
 
Total Costs and Expenses
   
401,287
     
418,971
 
                 
Operating Income
   
30,039
     
4,559
 
                 
Interest Expense
   
(4,614
)
   
(6,077
)
Foreign Exchange Transaction (Losses) Gains
   
(82
)
   
2,652
 
Interest and Other Income
   
4,391
     
2,833
 
                 
Income Before Taxes
   
29,734
     
3,967
 
Provision for Income Taxes
   
13,400
     
343
 
                 
Net Income
 
$
16,334
   
$
3,624
 
                 
Earnings Per Share
               
Basic
 
$
0.29
   
$
0.06
 
Diluted
 
$
0.29
   
$
0.06
 
                 
Weighted Average Number of Common Shares Outstanding
               
Basic
   
55,912
     
56,536
 
Diluted
   
56,193
     
56,905
 

See accompanying notes to the unaudited condensed consolidated financial statements.

6

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

 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Net Income
 
$
16,334
   
$
3,624
 
                 
Other Comprehensive Income (Loss):
               
Foreign currency translation adjustment
   
46,853
     
(35,539
)
Unamortized retirement (costs) credits, net of tax benefit (expense) of $1,705 and $(2,180), respectively
   
(5,665
)
   
8,168
 
Unrealized gain on interest rate swaps, net of tax (expense) benefit of $(30) and $44, respectively
   
191
     
85
 
Total Other Comprehensive Income (Loss)
   
41,379
     
(27,286
)
                 
Comprehensive Income (Loss)
 
$
57,713
   
$
(23,662
)

See accompanying notes to the unaudited condensed consolidated financial statements.
7

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

 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Operating Activities
           
Net income
 
$
16,334
   
$
3,624
 
Adjustments to reconcile net income to net cash used in operating activities:
               
Amortization of intangibles
   
16,891
     
14,970
 
Amortization of product development assets
   
9,148
     
8,714
 
Depreciation and amortization of technology, property and equipment
   
23,468
     
18,535
 
Restructuring and related charges
   
2,218
     
10,735
 
Stock-based compensation expense
   
4,314
     
4,604
 
Employee retirement plan expense
   
4,033
     
1,841
 
Royalty advances
   
(28,952
)
   
(25,687
)
Earned royalty advances
   
40,125
     
33,886
 
Foreign exchange transaction losses (gains)
   
82
     
(2,652
)
Other non-cash charges
   
15,285
     
3,750
 
    Net change in operating assets and liabilities
   
(223,729
)
   
(166,488
)
Net Cash Used In Operating Activities
   
(120,783
)
   
(94,168
)
Investing Activities
               
Product development spending
   
(5,325
)
   
(6,211
)
Additions to technology, property and equipment
   
(18,964
)
   
(24,202
)
Businesses acquired in purchase transactions, net of cash acquired
   
(136
)
   
(73,209
)
Acquisitions of publication rights and other
   
(3,855
)
   
(2,270
)
Net Cash Used In Investing Activities
   
(28,280
)
   
(105,892
)
Financing Activities
               
Repayment of long-term debt
   
(139,331
)
   
(10,400
)
Borrowing of long-term debt
   
206,687
     
264,248
 
Payment of debt issuance costs
   
—
     
(3,957
)
Purchase of treasury shares
   
—
     
(10,000
)
Change in book overdrafts
   
(3,292
)
   
(6,169
)
Cash dividends
   
(19,261
)
   
(19,252
)
Net payments from exercise of stock options and other
   
(1,319
)
   
(1,137
)
Net Cash Provided By Financing Activities
   
43,484
     
213,333
 
Effects of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash
   
4,500
     
(2,138
)
Cash Reconciliation:
               
Cash and Cash Equivalents
   
202,464
     
92,890
 
Restricted cash included in Prepaid expenses and other current assets
   
583
     
658
 
Balance at Beginning of Period
   
203,047
     
93,548
 
    (Decrease)/Increase for the Period
   
(101,079
)
   
11,135
 
Cash and cash equivalents
   
101,385
     
104,025
 
Restricted cash included in Prepaid expenses and other current assets
   
583
     
658
 
Balance at End of Period
 
$
101,968
   
$
104,683
 
Cash Paid During the Period for:
               
Interest
 
$
4,221
   
$
5,410
 
Income taxes, net of refunds
 
$
25,704
   
$
11,484
 

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

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

 
Common Stock
Class A
   
Common Stock
Class B
   
Additional
Paid-in Capital
   
Retained
Earnings
   
Accumulated Other Comprehensive Loss
   
Treasury Stock
   
Total
Shareholders' Equity
 
Balance at April 30, 2020
 
$
70,166
   
$
13,016
   
$
431,680
   
$
1,780,129
   
$
(575,497
)
 
$
(785,870
)
 
$
933,624
 
Cumulative Effect of Change in Accounting Principle, Net of Tax
   
—
     
—
     
—
     
(1,390
)
   
—
     
—
     
(1,390
)
Restricted Shares Issued under Stock-based Compensation Plans
   
—
     
—
     
(5,121
)
   
1
     
—
     
5,184
     
64
 
Net Proceeds (Payments) from Exercise of Stock Options and Other
   
—
     
—
     
368
     
—
     
—
     
(1,687
)
   
(1,319
)
Stock-based Compensation Expense
   
—
     
—
     
4,314
     
—
     
—
     
—
     
4,314
 
Class A Common Stock Dividends ($0.3425 per share)
   
—
     
—
     
—
     
(16,149
)
   
—
     
—
     
(16,149
)
Class B Common Stock Dividends ($0.3425 per share)
   
—
     
—
     
—
     
(3,112
)
   
—
     
—
     
(3,112
)
Common Stock Class Conversions
   
11
     
(11
)
   
—
     
—
     
—
     
—
     
—
 
Comprehensive Income, Net of Tax
   
—
     
—
     
—
     
16,334
     
41,379
     
—
     
57,713
 
Balance at July 31, 2020
 
$
70,177
   
$
13,005
   
$
431,241
   
$
1,775,813
   
$
(534,118
)
 
$
(782,373
)
 
$
973,745
 


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

See accompanying notes to the unaudited condensed consolidated financial statements.
9

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

Note 1 — Basis of Presentation

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

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

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

Note 2 — Recent Accounting Standards

Recently Adopted Accounting Standards

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

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

Changes to the Disclosure Requirements for Fair Value Measurement

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

10

Measurement of Credit Losses on Financial Instruments

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

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

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

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

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

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

11

Recently Issued Accounting Standards

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

Reference Rate Reform

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

Simplifying the Accounting for Income Taxes

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

Changes to the Disclosure Requirements for Defined Benefit Plans

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

Note 3 — Acquisitions

Fiscal Year 2020

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

mthree

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

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

mthree’s revenue included in our Education Services segment results for the three months ended July 31, 2020 was $12.4 million.
12

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

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

Zyante Inc.

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

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

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

Other Acquisitions in Fiscal Year 2020

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

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

On April 1, 2020, we completed the acquisition of Bio-Rad Laboratories Inc.’s Informatics products including the company’s spectroscopy software and spectral databases (“Informatics”). The results of Informatics are included in our Research Publishing & Platforms segment results.

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

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

13

On May 31, 2019, we completed the acquisition of certain assets of Knewton, Inc. (“Knewton”). Knewton is a provider of affordable courseware and adaptive learning technology. The results of Knewton are included in our Academic & Professional Learning segment results. The allocation of the consideration transferred to the assets acquired and the liabilities assumed for Knewton was final as of April 30, 2020.

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

Note 4 — Revenue Recognition, Contracts with Customers

Disaggregation of Revenue

The following table presents our revenue from contracts with customers disaggregated by segment and product type.

 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Research Publishing & Platforms:
           
Research Publishing
 
$
230,464
   
$
219,927
 
Research Platforms
   
10,346
     
9,448
 
Total Research Publishing & Platforms
   
240,810
     
229,375
 
                 
Academic & Professional Learning:
               
Education Publishing
   
64,084
     
65,523
 
Professional Learning
   
62,829
     
79,335
 
Total Academic & Professional Learning
   
126,913
     
144,858
 
                 
Education Services:
               
Education Services (1)
   
50,262
     
48,156
 
mthree (1)
   
13,341
     
1,141
 
Total Education Services
   
63,603
     
49,297
 
                 
Total Revenue
 
$
431,326
   
$
423,530
 

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

Accounts Receivable, net and Contract Liability Balances

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

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

 
July 31, 2020
   
April 30, 2020
   
Increase/
(Decrease)
 
Balances from contracts with customers:
                 
Accounts receivable, net
 
$
282,412
   
$
309,384
   
$
(26,972
)
Contract liabilities (1)
   
408,954
     
520,214
     
(111,260
)
Contract liabilities (included in Other Long-Term Liabilities)
 
$
15,357
   
$
14,949
   
$
408
 

(1)
The sales return reserve recorded in Contract Liabilities is $39.4 million and $32.8 million, as of July 31, 2020 and April 30, 2020, respectively.
14

For the three months ended July 31, 2020, we estimate that we recognized revenue of approximately 38% that was included in the current contract liability at April 30, 2020.

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

Remaining Performance Obligations included in Contract Liability

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

Assets Recognized for the Costs to Fulfill a Contract

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

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

Sales and value-added taxes are excluded from revenues. Shipping and handling costs, which are primarily incurred within the Academic & Professional Learning segment, occur before the transfer of control of the related goods. Therefore, in accordance with the revenue standard, it is not considered a promised service to the customer and would be considered a cost to fulfill our promise to transfer the goods. Costs incurred for third party shipping and handling are primarily reflected in Operating and Administrative Expenses on our Unaudited Condensed Consolidated Statements of Income. We incurred $6.7 million and $7.4 million in shipping and handling costs in the three months ended July 31, 2020 and 2019, respectively.

Note 5 — Operating Leases

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

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

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

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

15

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

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

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

Our total net lease costs are as follows:

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

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

Other supplemental information includes the following for our operating leases:

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

16

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

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

Note 6 — Stock-Based Compensation

We have stock-based compensation plans under which employees may be granted performance-based stock awards and other restricted stock awards.  Prior to fiscal year 2017, we also granted options to purchase shares of our common stock at the fair market value at the time of grant. We recognize the grant date fair value of stock-based compensation in net income on a straight-line basis, net of estimated forfeitures over the requisite service period. The measurement of performance for performance-based stock awards is based on actual financial results for targets established three years in advance. For the three months ended July 31, 2020 and 2019, we recognized stock-based compensation expense, on a pre-tax basis, of $4.3 million and $4.6 million, respectively.

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

 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Restricted Stock:
           
Awards granted
   
358
     
500
 
Weighted average fair value of grant
 
$
38.88
   
$
45.31
 

17

Note 7 — Accumulated Other Comprehensive Loss

Changes in Accumulated Other Comprehensive Loss by component, net of tax, for the three months ended July 31, 2020 and 2019 were as follows:

 
Foreign
Currency Translation
   
Unamortized
Retirement Costs
   
Interest
Rate Swaps
   
Total
 
Balance at April 30, 2020
 
$
(340,703
)
 
$
(227,920
)
 
$
(6,874
)
 
$
(575,497
)
Other comprehensive income (loss) before reclassifications
   
46,853
     
(7,190
)
   
(669
)
   
38,994
 
Amounts reclassified from Accumulated Other Comprehensive Loss
   
—
     
1,525
     
860
     
2,385
 
Total other comprehensive (loss) income
   
46,853
     
(5,665
)
   
191
     
41,379
 
Balance at July 31, 2020
 
$
(293,850
)
 
$
(233,585
)
 
$
(6,683
)
 
$
(534,118
)
                                 
Balance at April 30, 2019
 
$
(312,107
)
 
$
(196,057
)
 
$
(574
)
 
$
(508,738
)
Other comprehensive (loss) income before reclassifications
   
(35,539
)
   
7,130
     
328
     
(28,081
)
Amounts reclassified from Accumulated Other Comprehensive Loss
   
—
     
1,038
     
(243
)
   
795
 
Total other comprehensive (loss) income
   
(35,539
)
   
8,168
     
85
     
(27,286
)
Balance at July 31, 2019
 
$
(347,646
)
 
$
(187,889
)
 
$
(489
)
 
$
(536,024
)

During the three months ended July 31, 2020 and 2019, pre-tax actuarial losses included in Unamortized Retirement Costs of approximately $1.9 million and $1.3 million, respectively, were amortized from Accumulated Other Comprehensive Loss and recognized as pension and post-retirement benefit expense primarily in Operating and Administrative Expenses and Interest and Other Income on our Unaudited Condensed Consolidated Statements of Income.

Note 8 — Reconciliation of Weighted Average Shares Outstanding

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

 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Weighted average shares outstanding
   
55,916
     
56,564
 
Less: Unvested restricted shares
   
(4
)
   
(28
)
Shares used for basic earnings per share
   
55,912
     
56,536
 
Dilutive effect of unvested restricted stock units and other stock awards
   
281
     
369
 
Shares used for diluted earnings per share
   
56,193
     
56,905
 

Since their inclusion in the calculation of diluted earnings per share would have been anti-dilutive, options to purchase 201,743 and 252,704 shares of Class A Common Stock have been excluded for the three months ended July 31, 2020 and 2019, respectively.

There were no restricted shares excluded in the calculation of diluted earnings per share for the three months ended July 31, 2020 and 2019.

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

18

Note 9 — Restructuring and Related Charges

Business Optimization Program

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

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

 
Three Months Ended
July 31,
   
Total Charges
 
   
2020
   
2019
   
Incurred to Date
 
Charges (Credits) by Segment:
                 
Research Publishing & Platforms
 
$
(197
)
 
$
2,636
   
$
3,349
 
Academic & Professional Learning
   
(227
)
   
2,777
     
10,248
 
Education Services
   
139
     
2,192
     
3,913
 
Corporate Expenses
   
2,470
     
3,265
     
17,488
 
Total Restructuring and Related Charges
 
$
2,185
   
$
10,870
   
$
34,998
 
                         
Charges by Activity:
                       
Severance and termination benefits
 
$
1,110
   
$
10,709
   
$
27,974
 
Operating lease right-of-use asset impairment
   
—
     
161
     
161
 
Facility related charges
   
1,075
     
—
     
5,061
 
Other activities
   
—
     
—
     
1,802
 
Total Restructuring and Related Charges
 
$
2,185
   
$
10,870
   
$
34,998
 

The following table summarizes the activity for the Business Optimization Program liability for the three months ended July 31, 2020:

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

Approximately $12.0 million of the restructuring liability for accrued severance and termination benefits is reflected in Accrued Employment Costs and approximately $0.3 million is reflected in Other Long-Term Liabilities on our Unaudited Condensed Consolidated Statement of Financial Position.

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

The restructuring liability as of July 31, 2020 for other activities is reflected in Other Accrued Liabilities on our Unaudited Condensed Consolidated Statement of Financial Position.

Restructuring and Reinvestment Program

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

19

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

 
Three Months Ended
July 31,
   
Total Charges
 
   
2020
   
2019
   
Incurred to Date
 
Charges (Credits) by Segment:
                 
Research Publishing & Platforms
 
$
—
   
$
(16
)
 
$
26,884
 
Academic & Professional Learning
   
260
     
28
     
43,094
 
Education Services
   
—
     
(103
)
   
3,764
 
Corporate Expenses
   
(227
)
   
(44
)
   
95,713
 
Total Restructuring and Related Charges (Credits)
 
$
33
   
$
(135
)
 
$
169,455
 
                         
Charges (Credits) by Activity:
                       
Severance and termination benefits
 
$
33
   
$
(350
)
 
$
116,042
 
Consulting and contract termination costs
   
—
     
—
     
20,984
 
Other activities
   
—
     
215
     
32,429
 
Total Restructuring and Related Charges (Credits)
 
$
33
   
$
(135
)
 
$
169,455
 

The credits in severance and termination benefits activities for the three months ended July 31, 2019 primarily reflect changes in the number of headcount reductions and estimates for previously accrued benefit costs. Other activities for the three months ended July 31, 2019 include facility related costs.

The following table summarizes the activity for the Restructuring and Reinvestment Program liability for the three months ended July 31, 2020:

 
April 30, 2020
   
Charges
   
Payments
   
Foreign
Translation &
Other Adjustments
   
July 31, 2020
 
Severance and termination benefits
 
$
1,360
   
$
33
   
$
(888
)
 
$
62
   
$
567
 
Other activities
   
230
     
—
     
—
     
128
     
358
 
Total
 
$
1,590
   
$
33
   
$
(888
)
 
$
190
   
$
925
 

The restructuring liability as of July 31, 2020 for accrued severance and termination benefits is reflected in Accrued Employment Costs on our Unaudited Condensed Consolidated Statement of Financial Position.

The restructuring liability as of July 31, 2020 of $0.4 million of other activities are reflected in Other Long-Term Liabilities on our Unaudited Condensed Consolidated Statement of Financial Position and mainly relate to facility related costs. The amount included in Other Long-Term Liabilities is expected to be paid in the year ended April 30, 2022.

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

20

Note 10 — Segment Information

We report our segment information in accordance with the provisions of FASB ASC Topic 280, “Segment Reporting”. These segments reflect the way our chief operating decision maker evaluates our business performance and manages the operations.

Segment information is as follows:

 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Revenue:
           
Research Publishing & Platforms
 
$
240,810
   
$
229,375
 
Academic & Professional Learning
   
126,913
     
144,858
 
Education Services
   
63,603
     
49,297
 
Total Revenue
 
$
431,326
   
$
423,530
 
                 
Contribution to Profit:
               
Research Publishing & Platforms
 
$
69,818
   
$
55,646
 
Academic & Professional Learning
   
(380
)
   
4,911
 
Education Services
   
558
     
(7,199
)
Total Contribution to Profit
   
69,996
     
53,358
 
Corporate Expenses
   
(39,957
)
   
(48,799
)
Operating Income
 
$
30,039
   
$
4,559
 
                 
Adjusted Contribution to Profit: (1)
               
Research Publishing & Platforms
 
$
69,621
   
$
58,266
 
Academic & Professional Learning
   
(347
)
   
7,716
 
Education Services
   
697
     
(5,110
)
Total Adjusted Contribution to Profit
   
69,971
     
60,872
 
Adjusted Corporate Expenses
   
(37,714
)
   
(45,578
)
Total Adjusted Operating Income
 
$
32,257
   
$
15,294
 
                 
Depreciation and Amortization:
               
   Research Publishing & Platforms
 
$
19,701
   
$
17,153
 
   Academic & Professional Learning
   
18,804
     
16,524
 
   Education Services
   
7,279
     
5,498
 
Total Depreciation and Amortization
   
45,784
     
39,175
 
Corporate Depreciation and Amortization
   
3,723
     
3,044
 
Total Depreciation and Amortization
 
$
49,507
   
$
42,219
 
                 
Adjusted EBITDA:(2)
               
Research Publishing & Platforms
 
$
89,322
   
$
75,419
 
Academic & Professional Learning
   
18,457
     
24,240
 
Education Services
   
7,976
     
388
 
Total Segment Adjusted EBITDA
   
115,755
     
100,047
 
Corporate Adjusted EBITDA
   
(33,991
)
   
(42,534
)
Total Adjusted EBITDA
 
$
81,764
   
$
57,513
 

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

21

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

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

Note 11 — Inventories

Inventories, net consisted of the following:

 
July 31, 2020
   
April 30, 2020
 
Finished Goods
 
$
34,975
   
$
36,014
 
Work-in-Process
   
1,688
     
1,398
 
Paper and Other Materials
   
312
     
331
 
Total Inventories Before Estimated Sales Returns and LIFO Reserve
 
$
36,975
   
$
37,743
 
Inventory Value of Estimated Sales Returns
   
10,967
     
8,686
 
LIFO Reserve
   
(2,891
)
   
(2,815
)
Total Inventories
 
$
45,051
   
$
43,614
 

Note 12 — Goodwill and Intangible Assets

Goodwill

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

 
 
April 30, 2020
   
Acquisitions (1)
   
Foreign
Translation
Adjustment
   
July 31, 2020
 
Research Publishing & Platforms
 
$
448,130
   
$
(11,212
)
 
$
15,490
   
$
452,408
 
Academic & Professional Learning
   
501,091
     
—
     
8,794
     
509,885
 
Education Services
   
167,569
     
—
     
3,748
     
171,317
 
Total
 
$
1,116,790
   
$
(11,212
)
 
$
28,032
   
$
1,133,610
 

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

22

Intangible Assets

Intangible assets, net were as follows:

 
July 31, 2020
   
April 30, 2020
 
Intangible Assets with Definite Lives, net:
           
Content and Publishing Rights (1)
 
$
366,888
   
$
362,106
 
Customer Relationships (1)
   
284,433
     
290,418
 
Developed Technology (1)
   
28,734
     
13,111
 
Brands and Trademarks (1)
   
20,371
     
20,188
 
Covenants not to Compete
   
197
     
246
 
Total
   
700,623
     
686,069
 
Intangible Assets with Indefinite Lives:
               
Brands and Trademarks
   
37,000
     
37,000
 
Publishing Rights
   
91,608
     
84,336
 
Total
   
128,608
     
121,336
 
Total Intangible Assets, Net
 
$
829,231
   
$
807,405
 

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

Note 13 — Income Taxes

The effective tax rate for the three months ended July 31, 2020 was 45.1% compared to 8.6% for the three months ended July 31, 2019. The rate for the three months ended July 31, 2020 was greater than the rate for the corresponding prior period due to an increase in the UK statutory rate discussed below and a $0.5 million discrete item relating to compensation deductions from restricted stock which vested at lower values than the values at time of grant.

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

Note 14 — Retirement Plans

The components of net pension income for the defined benefit plans were as follows:

 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Service cost
 
$
333
   
$
224
 
Interest cost
   
4,521
     
5,834
 
Expected return on plan assets
   
(9,378
)
   
(10,059
)
Amortization of prior service cost
   
(25
)
   
(19
)
Amortization of net actuarial loss
   
1,987
     
1,600
 
Net pension income
 
$
(2,562
)
 
$
(2,420
)

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

Employer defined benefit pension plan contributions were $5.1 million and $4.7 million for the three months ended July 31, 2020 and 2019, respectively.

23

Defined Contribution Savings Plans

The expense for employer defined contribution savings plans was $6.6 million and $4.3 million for the three months ended July 31, 2020 and 2019, respectively.

Note 15 — Debt and Available Credit Facilities

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

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

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

Amended and Restated RCA

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

Under the terms of the Amended and Restated RCA, which can be drawn in multiple currencies, we have the option of borrowing at the following floating interest rates: (i) at a rate based on the London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging from 0.98% to 1.50%, depending on our consolidated net leverage ratio, as defined, or (ii) at the lender’s base rate plus an applicable margin ranging from zero to 0.50%, depending on our consolidated net leverage ratio. The lender’s base rate is defined as the highest of (i) the U.S. federal funds effective rate plus a 0.50% margin, (ii) the Eurocurrency rate, as defined, plus a 1.00% margin, or (iii) the Bank of America prime lending rate. In addition, we pay a facility fee for the revolving credit facility ranging from 0.15% to 0.25% depending on our consolidated net leverage ratio. We also have the option to request an increase in the revolving credit facility by an amount not to exceed $500 million, in minimum increments of $50 million, subject to the approval of the lenders.

The Amended and Restated RCA contains certain customary affirmative and negative covenants, including a financial covenant in the form of a consolidated net leverage ratio and consolidated interest coverage ratio, which we were in compliance with as of July 31, 2020.

In the three months ended July 31, 2019, we incurred an immaterial loss on the write-off of unamortized deferred costs in connection with the refinancing of our revolving credit agreement at that time which is reflected in Interest and Other Income on our Unaudited Condensed Consolidated Statements of Income for the three months ended July 31, 2019.

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

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

24

Note 16 — Derivative Instruments and Hedging Activities

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

Interest Rate Contracts

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

We had outstanding interest rate swap agreements with combined notional amounts of $300.0 million as of July 31, 2020 and April 30, 2020. These agreements were accounted for as cash flow hedges which fixed a portion of the variable interest due on our Amended and Restated RCA.

We record the fair value of our interest rate swaps on a recurring basis using Level 2 inputs of quoted prices for similar assets or liabilities in active markets. The fair value of the interest rate swaps as of July 31, 2020 and April 30, 2020 was a deferred loss of $8.2 million and $8.3 million, respectively. Based on the maturity dates of the contracts, the entire deferred loss as of July 31, 2020 and  April 30, 2020 was recorded within Other Long-Term Liabilities. The pre-tax (losses) gains that were reclassified from Accumulated Other Comprehensive Loss into Interest Expense for the three months ended July 31, 2020 and 2019 were $(0.9) million and $0.2 million, respectively.

Foreign Currency Contracts

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

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

Note 17 — Capital Stock and Changes in Capital Accounts

Share Repurchases

The following table summarizes the shares repurchased of Class A Common Stock for the three months ended July 31, 2019. There were no share repurchases during the three months ended July 31, 2020.

 
Three Months Ended
July 31, 2019
 
Shares Repurchased
   
217,511
 
Average Price
 
$
45.97
 

Dividends

The following table summarizes the cash dividends paid during the three months ended July 31, 2020:

Date of Declaration by
Board of Directors
 
Quarterly Cash Dividend
 
Total Dividend
 
Class of Common
Stock
 
Dividend Paid Date
 
 Shareholders of
Record as of Date
June 25, 2020
 
$0.3425 per common share
 
$19.2 million
 
Class A and
Class B
 
July 22, 2020
 
July 7, 2020

25

Changes in Common Stock

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

Changes in Common Stock A:
 
2020
   
2019
 
Number of shares, beginning of year
   
70,166
     
70,127
 
Common stock class conversions
   
11
     
12
 
Number of shares issued, end of period
   
70,177
     
70,139
 
                 
Changes in Common Stock A in treasury:
               
Number of shares held, beginning of year
   
23,405
     
22,634
 
Purchase of treasury shares
   
—
     
218
 
Restricted shares issued under stock-based compensation plans - non-PSU Awards
   
(94
)
   
(36
)
Restricted shares issued under stock-based compensation plans - PSU Awards
   
(86
)
   
(43
)
Restricted shares, forfeited
   
—
     
1
 
Restricted shares issued from exercise of stock options
   
(33
)
   
(12
)
Shares withheld for taxes
   
67
     
33
 
Number of shares held, end of period
   
23,259
     
22,795
 
Number of Common Stock A outstanding, end of period
   
46,918
     
47,344
 

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

Note 18 — Commitments and Contingencies

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

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

The information in our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with our Condensed Consolidated Financial Statements and related notes set forth in Item 1 of Part I of this Quarterly Report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our 2020 Form 10-K and our Consolidated Financial Statements and related notes set forth in Item 8 of Part II of our 2020 Form 10-K. See Part II, Item 1A, “Risk Factors,” below and “Cautionary Notice Regarding Forward-Looking Statements “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995,” above, and the information referenced therein, for a description of risks that we face and important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. All amounts and percentages are approximate due to rounding and all dollars are in thousands, except per share amounts or where otherwise noted. When we cross-reference to a “Note,” we are referring to our “Notes to Unaudited Condensed Consolidated Financial Statements,” unless the context indicates otherwise.

RESULTS OF OPERATIONS – THREE MONTHS ENDED JULY 31, 2020

CONSOLIDATED OPERATING RESULTS

Revenue:

Revenue for the three months ended July 31, 2020 increased $7.8 million, or 2%, as compared with the prior year. On a constant currency basis, revenue increased 2% as compared with the prior year. This increase was mainly driven by the following factors:
●
an increase of $14.5 million in Education Services, primarily due to the contributions from mthree, which was acquired in January 2020; and
●
an increase of $12.7 million in Research Publishing & Platforms.

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

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

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

Cost of Sales:

Cost of sales for the three months ended July 31, 2020 increased $1.7 million, or 1%, as compared with the prior year.  On a constant currency basis, cost of sales increased 2% as compared with the prior year. This increase was primarily due to employment related costs in Education Services, primarily due to the incremental impact from the acquisition of mthree; and to a lesser extent, an increase in royalty costs, partially offset by lower inventory costs in Academic & Professional Learning.

Operating and Administrative Expenses:

Operating and administrative expenses for the three months ended July 31, 2020 decreased $12.8 million, or 5%, as compared with the prior year. On a constant currency basis, operating and administrative expenses decreased 4% as compared with the prior year primarily reflecting lower discretionary spending and employee-related costs and, to a lesser extent, lower professional fees associated with strategic planning. These factors were partially offset by an increase in other administrative related costs, primarily due to the incremental impact of the acquisition of mthree.

Restructuring and Related Charges:

Business Optimization Program

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

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

27

Restructuring and Reinvestment Program

For the three months ended July 31, 2020 we recorded minimal charges and for the three months ended July 31, 2019, we recorded pre-tax restructuring credits of $0.1 million, related to this program. These charges and credits are reflected in Restructuring and Related Charges in our Unaudited Condensed Consolidated Statements of Income. See Note 9, “Restructuring and Related Charges” for more details on these charges.

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

Amortization of Intangibles:

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

Operating Income:

Operating income for the three months ended July 31, 2020 was $30.0 million compared with the prior year of $4.6 million. On a constant currency basis and excluding restructuring charges, Adjusted EBITDA increased 42%. The increase in operating income and Adjusted EBITDA was primarily due to higher revenue and lower operating and administrative expenses as described above.

Interest Expense:

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

Foreign Exchange Transaction (Losses) Gains:

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

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

Provision for Income Taxes:

The effective tax rate for the three months ended July 31, 2020 was 45.1%, compared to 8.6% for the three months ended July 31, 2019. The rate for the three months ended July 31, 2020 was greater than the rate for the corresponding prior period due to an increase in the UK statutory rate discussed below and a $0.5 million discrete item relating to compensation deductions from restricted stock which vested at lower values than the values at time of grant. Excluding the tax impact of the adjustments to Non-GAAP Adjusted EPS, discussed below, the effective tax rate was 22.5% for the three months ended July 31, 2020 compared to 20.1% for the three months ended July 31, 2019. This increase was due to the discrete item related to the compensation deductions mentioned above.

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

Diluted Earnings per Share (“EPS”):

EPS for the three months ended July 31, 2020 was $0.29 per share compared with $0.06 per share for the three months ended July 31, 2019.

28

Below is a reconciliation of our U.S. GAAP EPS to Non-GAAP Adjusted EPS:

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

On a constant currency basis, Adjusted EPS increased 124% primarily due to an increase in Adjusted EBITDA.

SEGMENT OPERATING RESULTS

 
Three Months Ended
July 31,
         
Constant Currency
 
RESEARCH PUBLISHING & PLATFORMS:
 
2020
   
2019
   
% Change
Favorable
(Unfavorable)
   
% Change
Favorable
(Unfavorable)
 
Revenue:
                       
Research Publishing
 
$
230,464
   
$
219,927
     
5
%
   
5
%
Research Platforms
   
10,346
     
9,448
     
10
%
   
10
%
Total Research Publishing & Platforms Revenue
   
240,810
     
229,375
     
5
%
   
6
%
                                 
Cost of Sales
   
65,701
     
64,097
     
(3
)%
   
(3
)%
Operating Expenses
   
97,821
     
99,548
     
2
%
   
1
%
Amortization of Intangibles
   
7,667
     
7,464
     
(3
)%
   
(4
)%
Restructuring (Credits) Charges (see Note 9)
   
(197
)
   
2,620
     
#
     
#
 
                                 
Contribution to Profit
   
69,818
     
55,646
     
25
%
   
26
%
Restructuring (Credits) Charges (see Note 9)
   
(197
)
   
2,620
                 
Adjusted Contribution to Profit
   
69,621
     
58,266
     
19
%
   
20
%
Depreciation and amortization
   
19,701
     
17,153
                 
Adjusted EBITDA
 
$
89,322
   
$
75,419
     
18
%
   
19
%
Adjusted EBITDA Margin
   
37.1
%
   
32.9
%
               

# Not meaningful

Revenue:

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

Adjusted EBITDA:

On a constant currency basis, Adjusted EBITDA increased 19% as compared with the prior year. This increase was primarily due to higher revenues, and lower discretionary spending.
29

Society Partnerships:

For the three months ended July 31, 2020:
●
3 new society contracts were signed with a combined annual revenue of approximately $13.4 million,
●
24 society contracts were renewed with a combined annual revenue of approximately $31.3 million,
●
3 society contracts were not renewed with a combined annual revenue of approximately $0.4 million.

 
Three Months Ended
July 31,
         
Constant Currency
 
ACADEMIC & PROFESSIONAL LEARNING:
 
2020
   
2019
   
% Change
Favorable
(Unfavorable)
   
% Change
Favorable
(Unfavorable)
 
Revenue:
                       
Education Publishing
 
$
64,084
   
$
65,523
     
(2
)%
   
(2
)%
Professional Learning
   
62,829
     
79,335
     
(21
)%
   
(20
)%
Total Academic & Professional Learning
   
126,913
     
144,858
     
(12
)%
   
(12
)%
                                 
Cost of Sales
   
36,788
     
43,814
     
16
%
   
16
%
Operating Expenses
   
86,334
     
89,530
     
4
%
   
3
%
Amortization of Intangibles
   
4,138
     
3,798
     
(9
)%
   
(9
)%
Restructuring Charges (see Note 9)
   
33
     
2,805
     
99
%
   
99
%
                                 
Contribution to Profit
   
(380
)
   
4,911
     
#
     
#
 
Restructuring Charges (see Note 9)
   
33
     
2,805
                 
Adjusted Contribution to Profit
   
(347
)
   
7,716
     
#
     
#
 
Depreciation and amortization
   
18,804
     
16,524
                 
Adjusted EBITDA
 
$
18,457
   
$
24,240
     
(24
)%
   
(23
)%
Adjusted EBITDA Margin
   
14.5
%
   
16.7
%
               

# Not meaningful

Revenue:

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

Adjusted EBITDA:

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


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

# Not meaningful

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

Revenue:

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

Adjusted EBITDA:

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

Education Services Partners:

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

CORPORATE EXPENSES:
Corporate expenses for the three months ended July 31, 2020 decreased 18% to $40.0 million as compared with the prior year. On a constant currency basis and excluding restructuring charges, these expenses decreased 16%. This decrease was primarily due to a decrease in employee-related costs and, to a lesser extent, lower professional fees related to strategic planning. These factors were partially offset by an increase in legal related costs.

31

FISCAL YEAR 2021 OUTLOOK:

COVID-19 continues to disrupt the global economy, and this has impacted Wiley’s more traditional revenue sources, such as physical books, test prep, and in-person training.  At the same time, the pandemic is accelerating opportunities in open research and online education, with strong underlying momentum in Research article output and content consumption, online enrollment, and digital courseware.  However, given the continued uncertainty with university budgets and student enrollment, Wiley cannot confidently predict the extent or duration of the impact of the pandemic on its operating results and therefore has not provided a specific fiscal year 2021 outlook.
•
In Research Publishing & Platforms, the Company anticipates that COVID-related budget constraints at libraries will result in pricing pressure for 2021, but it is too early to quantify.  This pressure is expected to be offset by continued strong growth in open access, research platforms and corporate solutions should offset this pressure.
•
In Academic & Professional Learning, print book sales will continue to be challenged by COVID lockdowns and enrollment declines, while digital content and courseware will continue to grow strongly.  Recovery in test prep and corporate training will be dependent on the reopening of physical sites.
•
In Education Services, universities continue to operate in a hybrid or virtual learning environment while dealing with financial shortfalls related to COVID-related enrollment declines. While navigating through this uncertainty, the Company is encouraged by enrollment trends, new partner opportunities, and expansion of existing partners.

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

Adjusted EBITDA:

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

 
 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Net Income
 
$
16,334
   
$
3,624
 
Interest expense
   
4,614
     
6,077
 
Provision for income taxes
   
13,400
     
343
 
Depreciation and amortization
   
49,507
     
42,219
 
Non-GAAP EBITDA
 
$
83,855
   
$
52,263
 
Restructuring and related charges
   
2,218
     
10,735
 
Foreign exchange transaction losses (gains)
   
82
     
(2,652
)
Interest and other income
   
(4,391
)
   
(2,833
)
Non-GAAP Adjusted EBITDA
 
$
81,764
   
$
57,513
 
32

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. 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 in the future. In addition, our liquidity could be adversely impacted by COVID-19 due to the continued impact on our customers, including cash collections. We do not have any off-balance-sheet debt. We will continue to pursue attractive opportunities to add scale and provide enhanced tech-enabled services in research and online education.

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

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

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

Analysis of Historical Cash Flow

The following table shows the changes in our Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended July 31, 2020 and 2019.

 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Net Cash Used In Operating Activities
 
$
(120,783
)
 
$
(94,168
)
Net Cash Used In Investing Activities
   
(28,280
)
   
(105,892
)
Net Cash Provided By Financing Activities
   
43,484
     
213,333
 
Effect of Foreign Currency Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
   
4,500
     
(2,138
)

Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders, as it represents cash available to repay debt, pay common dividends, and fund share repurchases and new acquisitions. Below are the details of Free Cash Flow less Product Development Spending for the three months ended July 31, 2020 and 2019.

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

Free Cash Flow less Product Development Spending:
 
 
Three Months Ended
July 31,
 
   
2020
   
2019
 
Net Cash Used In Operating Activities
 
$
(120,783
)
 
$
(94,168
)
Less: Additions to Technology, Property and Equipment
   
(18,964
)
   
(24,202
)
Less: Product Development Spending
   
(5,325
)
   
(6,211
)
Free Cash Flow less Product Development Spending
 
$
(145,072
)
 
$
(124,581
)

33

Net Cash Used In Operating Activities

The following is a summary of the $26.6 million change in Net Cash Used In Operating Activities for the three months ended July 31, 2020 as compared with the three months ended July 31, 2019 (amounts in millions).

Net Cash Used In Operating Activities – Three Months Ended July 31, 2019
 
$
(94.2
)
Working Capital Changes:
       
Accounts payable and royalties payable - primarily due to the timing of payments
   
(31.1
)
Accrued income taxes - primarily due to the timing of certain international and U.S. tax payments and refunds
   
(7.1
)
Accounts receivable, net and contract liabilities - due to the timing of customer payments, including customers payments that were delayed due to the economic downturn
   
(6.0
)
Other working capital items – primarily due to an increase in restructuring and employee related payments partially offset by lower inventory purchases
   
(13.1
)
Higher net income adjusted for items to reconcile net income to net cash used in operating activities
   
30.7
 
Net Cash Used In Operating Activities – Three Months Ended July 31, 2020
 
$
(120.8
)

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

The $84.2 million change in negative working capital was primarily due to the decrease in cash and cash equivalents, and in accounts receivable and contract liabilities due to the timing of customer payments, including customer payments that were delayed into fiscal year 2021 and the recognition of revenue, partially offset by a decrease in accounts payable due to the timing of payments, a decrease in accrued employment costs due to payments of annual incentive compensation and a decrease in accrued income taxes, primarily due to international tax payments, partially offset by the current year provision.

The contract liabilities will be recognized as income when the products are shipped or made available online to the customers over the term of the subscription. Current liabilities as of July 31, 2020 and as of April 30, 2020 includes $409.0 million and $520.2 million, respectively, primarily related to deferred subscription revenue for which cash was collected in advance.

Net Cash Used In Investing Activities

Net Cash Used In Investing Activities for the three months ended July 31, 2020 was $28.3 million compared to $105.9 million in the prior year. The decrease in cash used in investing activities was due to a reduction of $73.1 million in cash used to acquire businesses, and to a lesser extent, a decrease of $5.2 million for additions of technology, property and equipment in the three months ended July 31, 2020.

Net Cash Provided By Financing Activities

Net Cash Provided By Financing Activities was $43.5 million for the three months ended July 31, 2020 compared to $213.3 million for the three months ended July 31, 2019. This decrease in cash provided by financing activities was due to a decrease in net borrowings of $186.5 million, which was primarily due to an increase in repayments for the three months ended July 31, 2020, partially offset by $10.0 million of lower cash used for repurchases of common stock in the three months ended July 31, 2020.

During the three months ended July 31, 2020, we made no repurchases of shares of common stock. During the three months ended July 31, 2019, we repurchased 217,511 shares of Class A Common stock at an average price of $45.97.

In the three months ended July 31, 2020, we increased our quarterly dividend to shareholders to $1.37 per share annualized versus $1.36 per share annualized in the prior year.

34

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

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

Interest Rates

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

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

On an annual basis, a hypothetical one percent change in interest rates for the $547.3 million of unhedged variable rate debt as of July 31, 2020 would affect net income and cash flow by approximately $4.3 million.

Foreign Exchange Rates

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

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

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

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

Sales Return Reserves

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

35

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

 
July 31, 2020
   
April 30, 2020
 
Increase in Inventories, net
 
$
10,967
   
$
8,686
 
Decrease in Accrued royalties
 
$
(5,277
)
 
$
(4,441
)
Increase in Contract liabilities
 
$
39,384
   
$
32,769
 
Print book sales return reserve net liability balance
 
$
(23,140
)
 
$
(19,642
)

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

Customer Credit Risk

In the journal publishing business, subscriptions are primarily sourced through journal subscription agents who, acting as agents for library customers, facilitate ordering by consolidating the subscription orders/billings of each subscriber with various publishers. Cash is generally collected in advance from subscribers by the subscription agents and is principally remitted to us between the months of December and April. Although currently we have 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 book customer accounts for more than 11% of total consolidated revenue and 15% of accounts receivable at July 31, 2020, the top 10 book customers account for approximately 15% of total consolidated revenue and approximately 27% of accounts receivable at July 31, 2020.

Disclosure of Certain Activities Relating to Iran

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

ITEM 4.  CONTROLS AND PROCEDURES

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

Changes in Internal Control over Financial Reporting: During the three months ended January 31, 2020, we closed on the acquisition of mthree. We excluded mthree from the scope of management’s report on internal control over financial reporting for the year-ended April 30, 2020. We are in the process of integrating mthree into our overall internal control over financial reporting and will include them in scope for the year ending April 30, 2021. This process may result in additions or changes to our internal control over financial reporting.

36

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

As with any new information system we implement, this application, along with the internal controls over financial reporting included in this process, will require testing for effectiveness. In connection with this ERP implementation, we are updating our internal controls over financial reporting, as necessary, to accommodate modifications to our business processes and accounting procedures. We do not believe that the ERP implementation will have an adverse effect on our internal control over financial reporting.

Except as described above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the quarter ended July 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no significant developments related to legal proceedings during the three months ended July 31, 2020. For information regarding legal proceedings, see our Annual Report on Form 10-K for the fiscal year ended April 30, 2020 Note 16, “Commitment and Contingencies”.

ITEM 1a. RISK FACTORS

See Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended April 30, 2020. Except as required by the federal securities law, we undertake no obligation to update or revise any risk factor, whether as a result of new information, future events or otherwise.

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

During the three months ended July 31, 2020, there were no share repurchases of our Class A and Class B Common Stock under our publicly announced stock repurchase programs.
   
Total Number
of Shares
Purchased
   
Average
Price Paid
Per Share
   
Total Number
of Shares Purchased
as part of a Publicly
Announced Program
   
Maximum Number
of Shares that May
be Purchased
Under the Program
   
Maximum Dollar Value of Shares
that May be Purchased
Under Additional Plans or Programs
(Dollars in millions)
 
May 2020
   
—
   
$
—
     
—
     
806,758
   
$
200
 
June 2020
   
—
     
—
     
—
     
806,758
   
$
200
 
July 2020
   
—
     
—
     
—
     
806,758
   
$
200
 
Total
   
—
   
$
—
     
—
     
806,758
   
$
200
 

37

ITEM 6. EXHIBITS

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



38

SIGNATURES

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

   
JOHN WILEY & SONS, INC.
   
Registrant
     
     
     
 
By
/s/ Brian A. Napack
   
Brian A. Napack
   
President and Chief Executive Officer
     
     
     
 
By
/s/ John A. Kritzmacher
   
John A. Kritzmacher
   
Executive Vice President, Chief Financial Officer, and Interim Chief Accounting Officer
     
     
   
Dated: September 4, 2020


39
Index
Exhibit 31.1

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian A. Napack, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of John Wiley & Sons, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


By:
 
/s/ Brian A. Napack
 
   
Brian A. Napack
 
   
President and Chief Executive Officer
 
       
   
September 4, 2020
 

Exhibit 31.2

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John A. Kritzmacher, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of John Wiley & Sons, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:
 
/s/ John A. Kritzmacher
 
   
John A. Kritzmacher
 
   
Executive Vice President, Chief Financial Officer, and Interim Chief Accounting Officer
 
       
   
September 4, 2020
 

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of John Wiley & Sons, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian A. Napack, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:
 
/s/ Brian A. Napack
 
   
Brian A. Napack
 
   
President and Chief Executive Officer
 
       
   
September 4, 2020
 

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of John Wiley & Sons, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John A. Kritzmacher, Executive Vice President, Chief Financial Officer, and Interim Chief Accounting Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:
 
/s/ John A. Kritzmacher
 
   
John A. Kritzmacher
 
   
Executive Vice President, Chief Financial Officer, and Interim Chief Accounting Officer
 
       
   
September 4, 2020
 





FY2021


EXECUTIVE ANNUAL INCENTIVE PLAN


PLAN DOCUMENT





CONFIDENTIAL










MAY 1, 2020











CONTENTS

 Section
Subject
Page
 I.
Definitions
2
 II.
Plan Objectives
3
 III.
Eligibility
3
 IV.
Performance Measurement
3
 V.
Performance Evaluation
4
 VI.
Payouts
4
 VII.
Administration and Other Matters
5


1


I. DEFINITIONS

Following are definitions for words and phrases used in this document.  Unless the context clearly indicates otherwise, these words and phrases are considered to be defined terms and appear in this document in italicized print:
base salary   A participant's annualized base salary as of July 1, 2020 (excluding any temporary pay reductions), or the date of hire or promotion into the plan, if later, adjusted for any amount of time the participant may not be in the plan for reasons of hire, death, disability, retirement and/or termination.
business criteria An indicator of financial performance, chosen from the business criteria listed in Section  4(b)(ii) of the shareholder plan. The following business criteria are used in this plan:
operating income (corporate) Net revenue less cost of sales, amortization of intangibles and operating and administrative expenses, calculated consistently with the Company’s adjusted results reported publicly
revenue  (corporate) Gross annual revenue, net of provision for returns, cancellations, etc., in a manner consistent with amounts reported for the Company’s segment and total results
business unit A business or subsidiary of the Company.
Company    John Wiley & Sons, Inc.
Executive Compensation and Development Committee (Committee) The committee of the Company's Board of Directors responsible for the review and approval of executive compensation.
financial goal   A targeted level of attainment of a given business criteria.  For this plan year, financial goals will be set semi-annually.
financial results   Actual achievement of Company financial goals for the plan year and the business financial results derived therefrom.
funding  The percentage of financial results against financial goals deemed achieved for the Company, relative to the performance levels set, used to determine the aggregate amount available for annual incentives to be allocated to participants under the plan.
objectives    Assignment of strategic and measurable goals and objectives for each participant for the plan year, made by the President & CEO, and in the case of the President & CEO, the Committee.  For participants who lead a business unit, objectives include achievement of business unit financial goals.
participant   An employee of the Company selected to participate in the plan.
payout   Actual gross dollar amount paid to a participant under the plan, if any, based on achievement of objectives within the context of business funding.
performance levels
threshold   The minimum acceptable level of achievement of a financial goal in order to earn a payout, expressed as a percentage of target ( e.g., 95% of target).
target   Achievement of the assigned financial goal-100%.
outstanding   Superior achievement of a financial goal, earning the maximum payout, expressed as a percentage of target (e.g., 105% of target).


2
personal performance modifier    The assessment of each participant’s objectives for the plan year, made by the President & CEO, and in the case of the President & CEO, the Committee, expressed as a percentage between 0 and 200%.  For participants who lead a business unit, the personal performance modifier will be based 75% on achievement of financial goals for the plan year.
plan    This FY 2021 Executive Annual Incentive Plan.
plan year  The twelve-month period from May 1, 2020 to April 30, 2021, or a portion of this period, at the discretion of the Committee.
shareholder plan  The Company’s 2014 Executive Annual Incentive Plan.
target incentive amount   The amount that a participant is eligible to receive if financial goals are achieved at the target performance level and objectives are at 100%.
target incentive percent   The percent applied to the participant's base salary to determine the target incentive amount for this plan.


II. PLAN OBJECTIVES

The plan is intended to provide the officers and other key colleagues of the Company and of its subsidiaries, affiliates and certain joint venture companies, upon whose judgement, initiative and efforts the Company depends for its growth and for the profitable conduct of its business, with additional incentive to promote the success of the Company.


III. ELIGIBILITY

A participant is selected by the President & CEO and recommended for participation to the Committee, which has sole discretion for determining eligibility, from among those colleagues in key management positions deemed able to make the most significant contributions to the growth and profitability of the Company.  The President and CEO of the Company is a participant. Designation of a participant eligible to receive an incentive hereunder for a particular plan year shall not require designation of such participant eligible to receive a payout in any subsequent plan year.



IV. PERFORMANCE MEASUREMENT

The plan uses two categories for performance measurement:  Company financial performance and personal performance.

A.
Financial Performance

1.
The CEO recommends and the Committee adopts, in its sole discretion, financial goals and performance levels for the Company to be used in the plan year.

2.
Each financial goal is assigned a weight, such that the sum of the weights of all financial goals equals 100%.



3

B.
Personal Performance
1.
Each participant’s objectives are determined at the beginning of the plan year by the participant and the President & CEO.  The President & CEO’s objectives are determined by the President & CEO and the Committee.
2.
Objectives may be revised during the plan year, as appropriate.


V. PERFORMANCE EVALUATION

A.
Financial Performance
1.
Actual financial results achieved by the Company will be determined at the end of the plan year, by comparing financial results with previously set financial goals.
2.
In determining the attainment of financial results,
a.
the impact of foreign exchange gains or losses will be excluded.
b.
the impact of any of the events (1) through (9) listed in Section 4(b)(ii) of the shareholder plan will be excluded from the financial results of any affected business unit.
3.
Funding
a.
Funding under the plan is determined on a continuum, as follows:
1.
For performance below the threshold level, the funding is zero.
2.
For performance at the threshold level, the funding is 50%.
3.
For performance between the threshold and target levels, the funding is between 50% and 100%, determined on a pro-rata basis.
4.
For performance at the target level, the funding is 100%.
5.
For performance between the target and outstanding levels, the funding is between 100% and 150%, determined on a pro-rata basis.
6.
For performance at or above the outstanding level, the funding is 150%.
b.
In the case where the Company misses threshold performance for one or both financial goals, but achieves 80% of the Company’s full-year operating income target, a minimum funding of 50% will be available for payout under the plan.
B.
Personal Performance
1.
At the end of the plan year, each participant’s performance will be measured by achievement of his/her objectives, with a personal performance modifier in the range of 0-200%.  This assessment will be made by the President & CEO, and in the case of the President & CEO, by the Committee.  The personal performance modifier is multiplied by the funding to determine payout under the plan.
2.
The Committee approves payouts made to all participants under the plan.

VI. PAYOUTS

A.
Payouts will be made within 90 days after the end of the plan year.

B.
In the event of a participant's death, disability, retirement or leave of absence prior to the payout for the plan year, the payout, if any, will be determined by the Committee.  Any such payout will be calculated as noted in Section V.
C.
A participant must be actively employed by the Company on the date of payout without having given notice or having been given notice of termination to be eligible for a payout for the plan year. Exceptions to this provision shall be made with the approval of the Committee, in its sole discretion.



4

D.
A participant who is hired or promoted into an eligible position during the plan year may receive a prorated payout as determined by the Committee, in its sole discretion.

VII. ADMINISTRATION AND OTHER MATTERS

A.
The plan will be administered by the Committee, which shall have authority in its sole discretion to interpret and administer this plan, including, without limitation, all questions regarding eligibility and status of any participant, and no participant shall have any right to receive a payout or payment of any kind whatsoever, except as determined by the Committee hereunder.

B.
The Company will have no obligation to reserve or otherwise fund in advance any amount which may become payable under the plan.

C.
In the event that the Company is required to file a restatement of its financial results due to fraud, gross negligence or intentional misconduct by one or more employees, and/or material non-compliance with Securities laws, the Company will require reimbursement of any annual incentive compensation awarded to all participants in the amount by which such compensation exceeded any lower payment that would have been made based on the restated financial results, for the fiscal year in which the restatement was required, to the full extent required or permitted by law. 

If a participant is directly responsible for or involved in fraud, gross negligence or intentional misconduct that causes the Company to file a restatement of its financial results, the Company will require reimbursement of all annual incentive compensation awarded to such participant, for the fiscal year in which the restatement was required, to the full extent required or permitted by law.

The action permitted to be taken by the Company under this section (C) is in addition to, and not in lieu of, any and all other rights of the Company and/or the Committee under applicable law and shall apply notwithstanding anything to the contrary in this plan.

D.
This plan may not be modified or amended except with the approval of the Committee, in accordance with the provisions of the shareholder plan.

E.
In the event of a conflict between the provisions of this plan and the provisions of the shareholder plan, the provisions of the shareholder plan shall apply.
F.
In the event that any provision of this plan shall be considered illegal or invalid for any reason, such illegality and invalidity shall not affect the remaining provisions of the plan, but shall be fully severable, and the plan shall be construed and enforced as if such illegal or invalid provision had never been contained therein.



5





RESTRICTED SHARE UNIT GRANT AGREEMENT
UNDER THE EXECUTIVE LONG-TERM INCENTIVE PLAN,
UNDER THE BUSINESS OFFICER EQUITY PROGRAM,
PURSUANT TO THE 2014 KEY EMPLOYEE STOCK PLAN

TO: <<Participant>>
To recognize and reward your contribution toward the long-term success of John Wiley & Sons, Inc. (Company), you have been granted this restricted share unit award (Award) under the Executive Long-Term Incentive Plan or the Business Officer Equity Program (together herein defined as Program), pursuant to the Company’s 2014 Key Employee Stock Plan (Plan). The Award represents the right to receive shares of the Company’s Class A Common Stock (Shares) that are subject to the vesting conditions set forth in this agreement (Agreement).
The details of your Award are summarized below:
Grant ID: <<Grant ID>>
Grant Date: <<Grant Date>>
Number of Restricted Share Units: <<Number of RSUs>> 
Vesting Schedule: 25% on April 30, 2021, 25% on April 30, 2022, 25% on April 30, 2023, and 25% on April 30, 2024 except as otherwise provided in Section 2. 
The terms of the Award are as set forth in this Agreement and in the Plan, a copy of which is available on the UBS One Source Website. The Plan is incorporated into this Agreement by reference, which means that this Agreement is limited by and subject to the express terms and provisions of the Plan. In the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern.
1.
Issuance of Shares and Shareholder Rights. You shall not have any right in, to, or with respect to any of the Shares (including any voting rights or rights with respect to dividends paid on the Common Stock) issuable under the Award until the Award is settled by the issuance of such Shares to you.  The restricted share units shall vest in accordance with the above Vesting Schedule.  One Share shall be issuable for each restricted share unit that vests on such vesting date subject to the terms and provisions of the Plan and this Agreement.  On or promptly following those dates, the Company shall transfer such Shares to you upon satisfaction of any required tax withholding obligations.  Following settlement of the Award, and upon satisfaction of all tax withholding obligations, you become a shareholder of record, and shall receive voting rights and rights with respect to dividends paid thereafter on the Shares awarded.

2.
Termination of Employment.
a.
Retirement, Resignation or Termination with or without Cause or Constructive Discharge.  Except as otherwise provided in this Section or in a written agreement approved by the Executive Compensation and Development Committee (Committee), if you retire, or if you resign, or if your employment is terminated by the Company with or without Cause or Constructive Discharge before the Award vests, you shall forfeit the right to receive an Award.
b.
Death or Disability.  In the event of your death or Disability while in employment prior to the vesting of the Shares, all unvested Shares shall immediately become fully vested and payable to you (or, in the event of your death, your estate).  “Disability” for this purpose shall be determined by the Committee pursuant to Section 22(e) (3) of the Code.
c.
Change in Control.  In the event of a Change in Control, as that term is defined in the Plan, in cases where:
i.
the acquiring company is not publicly traded, or
ii.
where the acquiring company is publicly traded and the company does not assume or replace the outstanding equity, or
iii.
your employment is terminated due to a without Cause termination or Constructive Discharge within twenty-four (24) months following a Change in Control where the awards were assumed or replaced, 
all unvested Shares granted pursuant to this Agreement shall immediately become fully vested and settled through the issuance of Shares promptly following such event.
Cause is defined as:  (A) your refusal or willful and continued failure to substantially perform your material duties to the best of your ability (for reasons other than death or disability), in any such case after written notice thereof and your failure to remedy such refusal or failure; (B) your gross negligence in the performance of your material duties; (C) any act of fraud, misappropriation, material dishonesty, embezzlement, willful misconduct or similar conduct; (D) your conviction of or plea of guilty or nolo contendere to a felony or any crime involving moral turpitude; or (E) your material and willful violation of any of the Company’s reasonable rules, regulations, policies, directions and restrictions.
Constructive Discharge is defined as:  (A) any material reduction of your base salary or total compensation opportunity other than a general reduction in base salary and/or total compensation opportunity that affects all substantially similar executives in substantially the same proportion; (B) a material and adverse change to, or a material reduction of, your duties and responsibilities to the Company (other than temporarily while you are physically or mentally incapacitated, or as required by applicable law); or (C) the relocation of your primary office to any location more than fifty (50) miles from the Company’s principal executive offices, resulting in a materially longer commute for you.
3.
Restrictions.  Except as otherwise provided for in this Agreement or in the Plan, the restricted share units or rights granted hereunder may not be sold, pledged or otherwise transferred.


4.
Non-Compete, Non-Solicitation
a.
During your employment with the Company, you have and will become familiar with the Company’s trade secrets, information related to the operations, products and services of the Company, and with other Confidential Information concerning the Company, its subsidiaries, affiliates, and companies acquired by the Company. Therefore, during your employment period and for a period of one year thereafter, you agree that you shall not directly or indirectly own any interest in, manage, control, participate in, consult with, or render services for any Competing Business.
A “Competing Business” is any person or entity that (i) conducts or is planning to conduct a business similar to and/or in competition with any Company business unit to which you rendered services during the two year period prior to the date at issue or (ii) creates, develops, distributes, produces, offers for sale or sells a product or service that can be used as a substitute for, or is generally intended to satisfy the same customer needs for, any one or more products or services created, developed, distributed, produced or offered for sale or sold by the Company business unit to which you rendered services during the two year period prior to the date at issue.  In the event that you have an enterprise role at the Company, you will be deemed to render services to all Company business units.
b.
During your employment and for a period of one year thereafter, you agree that you shall not directly, or indirectly through another entity, (i) induce or attempt to induce any employee of the Company or any affiliate to leave the employ of the Company or such affiliate, or in any way interfere with the relationship between the Company or any affiliate and any employee thereof, (ii) hire any person who was an employee of the Company or any affiliate at any time during the last twelve (12) months, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any affiliate to cease doing business with the Company or such affiliate, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee or business relation and the Company or any affiliate (including, without limitation, making any negative statements or communications about the Company or its affiliates).
c.
Forfeiture of Awards.  By accepting the Award, you expressly agree and acknowledge that the forfeiture provisions will apply if the Committee determines, in its sole judgment, that you have engaged in an act that violates paragraph (a) and/or (b).  In such a determination, your outstanding Restricted Share Units will immediately be rescinded, and you will forfeit any rights you have with respect to these Restricted Share Units as of the date of the Committee’s determination.  In addition, you hereby agree and promise immediately to deliver to the Company, an amount equal to the value of any Restricted Share Units you received under this Award during the period beginning twelve (12) months prior to your Termination of Employment and ending on the date of the Committee’s determination.
5.
Taxes.
a.
Generally.  You are ultimately liable and responsible for all taxes owed in connection with the Award, regardless of any action the Company or UBS takes with respect to any tax withholding obligations that arise in connection with the Award.  Neither the Company nor UBS makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or vesting of the Award or the subsequent sale of Shares issuable pursuant to the Award.  The Company does not commit and is under no obligation to structure the Award to reduce or eliminate your tax liability.  The Company may refuse to issue any Shares to you until you satisfy the tax withholding obligation.   For purposes hereof, “UBS” includes the Plan third party administrator and any successor thereto.
b.
Payment of Withholding Taxes.  Prior to each vesting date in connection with the Award that results in any domestic or foreign tax withholding obligation, whether national, federal, state or local, including any social tax obligation, you must arrange for the satisfaction of the minimum amount of such tax withholding obligation, as required, in a manner acceptable to the Company.  You are responsible for obtaining professional advice as appropriate.  Prior to the vesting dates in connection with the Award, you shall be notified by UBS of any tax withholding obligation.  You have the option of satisfying your tax withholding obligation in one of two ways:
i.
By Surrendering Shares.  Unless you choose to satisfy the tax withholding obligation by some other means in accordance with clause (ii) below, your acceptance of this Award constitutes your instruction and authorization to the Company and UBS to withhold a whole number of Shares from those Shares issuable to you as the Company and UBS determine to be appropriate to satisfy your tax withholding obligation on each vesting date.       
ii.
By Check (U.S. participants only), Wire Transfer or Other Means.  You may elect to satisfy your tax withholding obligation by remitting to UBS as instructed an amount that the Company and UBS determine is sufficient to satisfy the minimum tax withholding obligation.
6.
Plan Information.    You agree to receive stockholder information, including copies of any annual report, proxy statement and other periodic reports, from the Investor Relations section of http://www.wiley.com.  You acknowledge that copies of the Plan and stockholder information are available upon written or telephonic request to the Corporate Secretary.
7.
Limitation on Rights; No Right to Future Grants; Extraordinary Item. By entering into this Agreement and accepting the Award, you acknowledge that: (a) the Plan is discretionary and may be modified, suspended or terminated by the Company at any time as provided in the Plan; (b) the grant of the Award is a one-time benefit and does not create any contractual or other right to receive future grants of awards or benefits in lieu of awards; (c) all determinations with respect to any such future grants, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the award price, if any, and the time or times when each award shall be settled, shall be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of this Award on an ongoing basis is an extraordinary item which is outside the scope of your terms of employment or your employment contract, if any; (f) except as otherwise provided for in any Employment Agreement you may participate in, the Award is not part of normal or expected compensation for any purpose, including without limitation for calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) the future value of the Common Stock subject to the Award is unknown and cannot be predicted with certainty, (h) neither the Plan, the Award nor the issuance of the Shares confers upon you any right to continue in the employ of (or any other relationship with) the Company or any Subsidiary, nor do they limit in any respect the right of the Company or any Subsidiary to terminate your employment or other relationship with the Company or any Subsidiary, as the case may be, at any time.
8.
Acceptance and Acknowledgment.   I accept and agree to the terms of the restricted share unit Award described in this Agreement and in the Plan, acknowledge receipt of a copy of this Agreement and the Plan, and acknowledge that I have read them carefully and that I fully understand their contents.




RESTRICTED SHARE UNIT GRANT AGREEMENT
UNDER THE EXECUTIVE LONG-TERM INCENTIVE PLAN,
UNDER THE BUSINESS OFFICER EQUITY PROGRAM,
PURSUANT TO THE 2014 KEY EMPLOYEE STOCK PLAN

TO: <<Participant>>
To recognize and reward your contribution toward the long-term success of John Wiley & Sons, Inc. (Company), you have been granted this restricted share unit award (Award) under the Executive Long-Term Incentive Plan or the Business Officer Equity Program (together herein defined as Program), pursuant to the Company’s 2014 Key Employee Stock Plan (Plan). The Award represents the right to receive shares of the Company’s Class A Common Stock (Shares) that are subject to the vesting conditions set forth in this agreement (Agreement).
The details of your Award are summarized below:
Grant ID: <<Grant ID>>
Grant Date: <<Grant Date>>
Number of Restricted Share Units: <<Number of RSUs>> 
Vesting Schedule: One-third on April 30, 2021, one-third on April 30, 2022, and one-third on April 30, 2023, as otherwise provided in Section 2. 
The terms of the Award are as set forth in this Agreement and in the Plan, a copy of which is available on the UBS One Source Website. The Plan is incorporated into this Agreement by reference, which means that this Agreement is limited by and subject to the express terms and provisions of the Plan. In the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern.
1.
Issuance of Shares and Shareholder Rights. You shall not have any right in, to, or with respect to any of the Shares (including any voting rights or rights with respect to dividends paid on the Common Stock) issuable under the Award until the Award is settled by the issuance of such Shares to you.  The restricted share units shall vest in accordance with the above Vesting Schedule.  One Share shall be issuable for each restricted share unit that vests on such vesting date subject to the terms and provisions of the Plan and this Agreement.  On or promptly following those dates, the Company shall transfer such Shares to you upon satisfaction of any required tax withholding obligations.  Following settlement of the Award, and upon satisfaction of all tax withholding obligations, you become a shareholder of record, and shall receive voting rights and rights with respect to dividends paid thereafter on the Shares awarded.

2.
Termination of Employment.
a.
Retirement, Resignation or Termination with or without Cause or Constructive Discharge.  Except as otherwise provided in this Section or in a written agreement approved by the Executive Compensation and Development Committee (Committee), if you retire, or if you resign, or if your employment is terminated by the Company with or without Cause or Constructive Discharge before the Award vests, you shall forfeit the right to receive an Award.
b.
Death or Disability.  In the event of your death or Disability while in employment prior to the vesting of the Shares, all unvested Shares shall immediately become fully vested and payable to you (or, in the event of your death, your estate).  “Disability” for this purpose shall be determined by the Committee pursuant to Section 22(e) (3) of the Code.
c.
Change in Control.  In the event of a Change in Control, as that term is defined in the Plan, in cases where:
i.
the acquiring company is not publicly traded, or
ii.
where the acquiring company is publicly traded and the company does not assume or replace the outstanding equity, or
iii.
your employment is terminated due to a without Cause termination or Constructive Discharge within twenty-four months following a Change in Control where the awards were assumed or replaced. 
all unvested Shares granted pursuant to this Agreement shall immediately become fully vested and settled through the issuance of Shares promptly following such event.
Cause is defined as:  (A) your refusal or willful and continued failure to substantially perform your material duties to the best of your ability (for reasons other than death or disability), in any such case after written notice thereof and your failure to remedy such refusal or failure; (B) your gross negligence in the performance of your material duties; (C) any act of fraud, misappropriation, material dishonesty, embezzlement, willful misconduct or similar conduct; (D) your conviction of or plea of guilty or nolo contendere to a felony or any crime involving moral turpitude; or (E) your material and willful violation of any of the Company’s reasonable rules, regulations, policies, directions and restrictions.
Constructive Discharge is defined as:  (A) any material reduction of your base salary or total compensation opportunity other than a general reduction in base salary and/or total compensation opportunity that affects all substantially similar executives in substantially the same proportion; (B) a material and adverse change to, or a material reduction of, your duties and responsibilities to the Company (other than temporarily while you are physically or mentally incapacitated, or as required by applicable law); or (C) the relocation of your primary office to any location more than fifty (50) miles from the Company’s principal executive offices, resulting in a materially longer commute for you.
3.
Restrictions.  Except as otherwise provided for in this Agreement or in the Plan, the restricted share units or rights granted hereunder may not be sold, pledged or otherwise transferred.

4.
Non-Compete, Non-Solicitation
a.
During your employment with the Company, you have and will become familiar with the Company’s trade secrets, information related to the operations, products and services of the Company, and with other Confidential Information concerning the Company, its subsidiaries, affiliates, and companies acquired by the Company. Therefore, during your employment period and for a period of one year thereafter, you agree that you shall not directly or indirectly own any interest in, manage, control, participate in, consult with, or render services for any Competing Business.
A “Competing Business” is any person or entity that (i) conducts or is planning to conduct a business similar to and/or in competition with any Company business unit to which you rendered services during the two year period prior to the date at issue or (ii) creates, develops, distributes, produces, offers for sale or sells a product or service that can be used as a substitute for, or is generally intended to satisfy the same customer needs for, any one or more products or services created, developed, distributed, produced or offered for sale or sold by the Company business unit to which you rendered services during the two year period prior to the date at issue.  In the event that you have an enterprise role at the Company, you will be deemed to render services to all Company business units.
b.
During your employment and for a period of one year thereafter, you agree that you shall not directly, or indirectly through another entity, (i) induce or attempt to induce any employee of the Company or any affiliate to leave the employ of the Company or such affiliate, or in any way interfere with the relationship between the Company or any affiliate and any employee thereof, (ii) hire any person who was an employee of the Company or any affiliate at any time during the last twelve (12) months, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any affiliate to cease doing business with the Company or such affiliate, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee or business relation and the Company or any affiliate (including, without limitation, making any negative statements or communications about the Company or its affiliates).
c.
Forfeiture of Awards.  By accepting the Award, you expressly agree and acknowledge that the forfeiture provisions will apply if the Committee determines, in its sole judgment, that you have engaged in an act that violates paragraph (a) and/or (b).  In such a determination, your outstanding Restricted Share Units will immediately be rescinded, and you will forfeit any rights you have with respect to these Restricted Share Units as of the date of the Committee’s determination.  In addition, you hereby agree and promise immediately to deliver to the Company, an amount equal to the value of any Restricted Share Units you received under this Award during the period beginning twelve (12) months prior to your Termination of Employment and ending on the date of the Committee’s determination.
5.
Taxes.
a.
Generally.  You are ultimately liable and responsible for all taxes owed in connection with the Award, regardless of any action the Company or UBS takes with respect to any tax withholding obligations that arise in connection with the Award.  Neither the Company nor UBS makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or vesting of the Award or the subsequent sale of Shares issuable pursuant to the Award.  The Company does not commit and is under no obligation to structure the Award to reduce or eliminate your tax liability.  The Company may refuse to issue any Shares to you until you satisfy the tax withholding obligation.   For purposes hereof, “UBS” includes the Plan third party administrator and any successor thereto.
b.
Payment of Withholding Taxes.  Prior to each vesting date in connection with the Award that results in any domestic or foreign tax withholding obligation, whether national, federal, state or local, including any social tax obligation, you must arrange for the satisfaction of the minimum amount of such tax withholding obligation, as required, in a manner acceptable to the Company.  You are responsible for obtaining professional advice as appropriate.  Prior to the vesting dates in connection with the Award, you shall be notified by UBS of any tax withholding obligation.  You have the option of satisfying your tax withholding obligation in one of two ways:
i.
By Surrendering Shares.  Unless you choose to satisfy the tax withholding obligation by some other means in accordance with clause (ii) below, your acceptance of this Award constitutes your instruction and authorization to the Company and UBS to withhold a whole number of Shares from those Shares issuable to you as the Company and UBS determine to be appropriate to satisfy your tax withholding obligation on each vesting date.       
ii.
By Check (U.S. participants only), Wire Transfer or Other Means.  You may elect to satisfy your tax withholding obligation by remitting to UBS as instructed an amount that the Company and UBS determine is sufficient to satisfy the minimum tax withholding obligation.
6.
Plan Information.    You agree to receive stockholder information, including copies of any annual report, proxy statement and other periodic reports, from the Investor Relations section of http://www.wiley.com.  You acknowledge that copies of the Plan and stockholder information are available upon written or telephonic request to the Corporate Secretary.
7.
Limitation on Rights; No Right to Future Grants; Extraordinary Item. By entering into this Agreement and accepting the Award, you acknowledge that: (a) the Plan is discretionary and may be modified, suspended or terminated by the Company at any time as provided in the Plan; (b) the grant of the Award is a one-time benefit and does not create any contractual or other right to receive future grants of awards or benefits in lieu of awards; (c) all determinations with respect to any such future grants, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the award price, if any, and the time or times when each award shall be settled, shall be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of this Award on an ongoing basis is an extraordinary item which is outside the scope of your terms of employment or your employment contract, if any; (f) except as otherwise provided for in any Employment Agreement you may participate in, the Award is not part of normal or expected compensation for any purpose, including without limitation for calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) the future value of the Common Stock subject to the Award is unknown and cannot be predicted with certainty, (h) neither the Plan, the Award nor the issuance of the Shares confers upon you any right to continue in the employ of (or any other relationship with) the Company or any Subsidiary, nor do they limit in any respect the right of the Company or any Subsidiary to terminate your employment or other relationship with the Company or any Subsidiary, as the case may be, at any time.
8.
Acceptance and Acknowledgment.   I accept and agree to the terms of the restricted share unit Award described in this Agreement and in the Plan, acknowledge receipt of a copy of this Agreement and the Plan, and acknowledge that I have read them carefully and that I fully understand their contents.



April 20, 2018

Mr. Aref Matin

Dear Aref:

I am very pleased to confirm our offer of employment with John Wiley & Sons, Inc. as EVP and Chief Technology Officer, reporting to the President and CEO, contingent upon a satisfactory background check.

As discussed, your employment date will be on or about May 20, 2018.  Your salary will be $18,333 semi-monthly, equivalent to $440,000 annually.  You will be eligible for an annual salary reviews, with any increase in base salary subject to approval by the Executive Compensation and Development Committee of the Board of Directors.

Beginning in fiscal year 2019 (“FY19”), you will be eligible to participate in the Executive Annual Incentive Plan (“EAIP”), with a target incentive equal to 100% of your base salary, or $440,000.  If you join Wiley before June 30, 2018, your FY19 incentive will not be prorated.  If your employment date with Wiley is after June 30, 2018, you FY19 incentive will be prorated.  Payout will be based on achievement of corporate financial goals and strategic milestones.  All payouts under the EAIP are in accordance with plan provisions.

Beginning with the FY2019-21 performance cycle, which begins on May 1, 2018, you will be eligible to participate in annual grants under the Company’s Executive Long-Term Incentive Program (“ELTIP”).  Your targeted long-term incentive for this cycle is equal to 175% of your base salary, or $770,000.  Currently, the ELTIP delivers sixty percent of the long-term value in the form of target performance share units and forty percent in restricted share units using the ten-day average stock price at time of grant.  Payout of performance share units under the Plan is based on achievement of corporate financial metrics for the cycle, currently three-year cumulative EBITDA and three-year cumulative free cash flow.  The payout range is 50% for threshold level financial achievement and 150% for outstanding level financial achievement.  There is no payout of the performance share units if financial performance is below the threshold level.  All payouts under the ELTIP are subject to and in accordance with plan provisions, which are subject to change for FY2019.



111 River Street, Hoboken, NJ 07030-5774, U.S.
T +1 201 748 6000
F +1 201 748 6088
www.wiley.com


To assist you in the move to the NJ metropolitan area, you will receive a $30,000 allowance, payable within 30 days of hire, subject to taxes and other withholding.       

You will receive a sign-on bonus of $200,000 payable within 30 days of hire, subject to taxes and other withholding.  You will be required to pay back the sign-on bonus if you leave the Company voluntarily within one year of your hire date.

You are eligible to receive a supplemental bonus equal to $800,000, payable in equal installments with the annual incentives after your first and second year of employment, based on achievement of agreed, quantifiable goals and objectives.  As performance-based compensation, this bonus would be eligible for deferral under the Deferred Compensation Program.  You will make your deferral elections during Deferred Compensation annual enrollment period in October-November 2018.

You will receive a sign-on grant of restricted share units, with a grant value of $2,000,000, converted to shares using the Wiley Class A closing stock price as of your employment date.  The restricted share units will be payable as Class A shares of Wiley stock in equal tranches, on the third, fourth and fifth anniversaries of your employment date. The grant is subject to forfeiture in the case of voluntary termination prior to vesting and accelerated vesting in the case of earlier termination of your employment without Cause, due to death or Disability or Constructive Discharge, or upon a Change in Control.

As an executive officer, your compensation is based upon the recommendation of the President and CEO, and subject to approval by the Executive Compensation and Development Committee of the Board of Directors.

All compensation is subject to withholding and payroll taxes to the extent required by applicable law.

You will be eligible to participate in all of Wiley's benefits plans in which any Wiley senior executive is eligible to participate.  Paid time off accrual and scheduling will be in accordance with Company policy.

While we look forward to a mutually beneficial relationship, your employment is "at-will."  This offer letter does not guarantee any employment duration.  Should your employment be involuntarily terminated without Cause or due to Constructive Discharge, you will receive as severance (in addition to any unpaid base salary earned at the date of termination, and prorated annual incentive paid at the regular time based on actual performance if active for 9 months or more of the fiscal year):

•
Absent a Change in Control:  One month of base salary for each year of employment, subject to a minimum of 12 months and a maximum of 18 months. Continued health insurance for the number of months of the cash severance period.  If such termination occurs on or before the first anniversary of your employment date, you will be eligible for an accrued benefit as of the following April 30 under the Executive Long-Term Incentive Plan.


111 River Street, Hoboken, NJ 07030-5774, U.S.
T +1 201 748 6000
F +1 201 748 6088
www.wiley.com


•
Within Twenty-Four Months of a Change in Control:  Eighteen months of base salary and eighteen months of “target” annual incentive to be paid in a lump sum, full acceleration of all unvested equity awards (with performance share units vested at “target”) and Benefit Continuation for eighteen months.

All severance is payable under the Executive Severance Plan, and is subject to your signing a release and waiver of claims and compliance with the restrictive covenants included in the attached document, which apply as material terms of your employment in any event.  For the avoidance of doubt, you will be entitled to any applicable benefits under the Executive Severance Plan, the relevant equity plan or grant agreement to the extent not covered in or greater than the benefits set forth in this letter.

Aref, I know that you will contribute significantly to the success of the Company.  I am sure you will find this position challenging and rewarding, and I look forward to working with you.

Please sign and return this letter, and the Agreements and Restrictive Covenants document, to me at the address noted.

Sincerely,                                          Acknowledged and Agreed:


Archana Singh /s/ Aref Matin
EVP and CHRO                                       Aref Matin


                April 26, 2018
                Date

111 River Street, Hoboken, NJ 07030-5774, U.S.
T +1 201 748 6000
F +1 201 748 6088
www.wiley.com


Agreements and Restrictive Covenants

Definitions

For purposes of the attached letter, the following definitions shall apply:
 
“Benefit Continuation” means coverage for eighteen months under the medical, dental, prescription and vision plans at the coverage elections in place just prior to termination of employment, but only to the extent comparable coverage is not provided by any new employer.  Any increase in premium cost resulting from a change in your coverage election shall be borne by you.  In order to receive such continued health benefits coverage, you must be eligible for and elect continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) under the terms of the applicable program for the eighteen months of such coverage, and such coverage shall be “alternative coverage” for purposes of COBRA.

“Cause” means (A) your refusal or willful and continued failure to substantially perform your material duties to the best of your ability under this letter (for reasons other than death or disability), in any such case after written notice thereof; (B) your  gross negligence in the performance of your material duties under this letter; (C) any act of fraud, misappropriation, material dishonesty, embezzlement, willful misconduct or similar conduct; (D) your conviction of or plea of guilty or nolo contendere to a felony or any crime involving moral turpitude; or (E) your material and willful violation of any of the Company’s reasonable rules, regulations, policies, directions and restrictions.

“Change in Control” shall mean an event which shall occur if there is: (i) a change in the ownership of the Corporation; (ii) a change in the effective control of the Corporation; or (iii) a change in the ownership of a substantial portion of the assets of the Corporation.

For purposes of this Section, a change in the ownership occurs on the date on which any one person, or more than one person acting as a group (as defined in Treasury regulations 1.409A-2(i)(5)(v)(B)), acquires ownership of stock that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Corporation.

A change in the effective control occurs on the date on which either (i) a person, or more than one person acting as a group (as defined in Treasury regulations 1.409A-2(i)(5)(v)(B)), acquires ownership of stock possessing 30% or more of the total voting power of the stock of the Corporation, taking into account all such stock acquired during the 12-month period ending on the date of the most recent acquisition, or (ii) a majority of the members of the Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of such Board of Directors prior to the date of the appointment or election, but only if no other corporation is a majority shareholder.


111 River Street, Hoboken, NJ 07030-5774, U.S.
T +1 201 748 6000
F +1 201 748 6088
www.wiley.com

A change in the ownership of a substantial portion of assets occurs on the date on which any one person, or more than one person acting as a group (as defined in Treasury regulations 1.409A-2(i)(5)(v)(B)), other than a person or group of persons that is related to the Corporation, acquires assets that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Corporation immediately prior to such acquisition or acquisitions, taking into account all such assets acquired during the 12-month period ending on the date of the most recent acquisition.

The determination as to the occurrence of a Change in Control shall be based on objective facts and in accordance with the requirements of Code Section 409A and the regulations promulgated thereunder.

“Constructive Discharge” means: (A) any material failure by the Company to fulfill its obligations under this letter (including, without limitation, any reduction of base salary, as the same may be increased during your employment, or other material element of compensation); (B) a material and adverse change to, or a material reduction of, your duties and responsibilities to the Company; or (C) the relocation of your primary office to any location more than fifty (50) miles from the Company’s principal executive offices, resulting in a materially longer commute for you.  You will provide the Company a written notice which describes the circumstances being relied upon for all terminations of employment by you resulting from any circumstances claimed to be a constructive discharge within thirty (30) days after the event giving rise to the notice.  The Company will have thirty (30) days after receipt of such notice to remedy the situation prior to your termination of employment due to a constructive discharge, and you must resign no later than thirty (30) days after the end of such 30-day period.

“Disability” means your inability, because of mental or physical illness or incapacity, whether total or partial, to perform one or more of the primary duties of your employment, with or without reasonable accommodation, for a length of time that the Company determines is sufficient to satisfy such obligations as it may have under the Family and Medical Leave Act (“FMLA”) and such “reasonable accommodation” obligations it may have under federal, state or local disability laws.

111 River Street, Hoboken, NJ 07030-5774, U.S.
T +1 201 748 6000
F +1 201 748 6088
www.wiley.com


 
Timing of Severance Payments and Compliance with Code Section 409A.

Payments of earned but unpaid base salary and vesting acceleration in connection with termination of employment shall be made as of the next regular payroll date following your termination of employment.

Payments of severance pay shall be made within ten business days following the later of the date the Company receives the release of claims properly executed by you, and the expiration of any period permitted for you to revoke the release  after its execution; provided, however, that in no event may you return the executed release of claims later than sixty days after termination of employment (or, if earlier, the end of the second month following the later of the end of the Company’s taxable year or your  taxable year).

The reimbursement of an eligible expense hereunder shall be made promptly upon your submission of request for reimbursement, accompanied by evidence of such expense reasonably acceptable to the Company, but in any event on or before the last day of your taxable year following the taxable year in which the expense was incurred.

Each of the payments and benefits above are designated as separate payments for purposes of the short-term deferral rules under Treasury Regulation Section 1.409A-1(b)(4)(i)(F), the exemption for involuntary terminations under separation pay plans under Treasury Regulation Section 1.409A-1(b)(9)(iii), and the exemption for medical expense reimbursements under Treasury Regulation Section 1.409A-1(b)(9)(v)(B).  As a result, (1) any payments that become vested as a result of a qualifying termination that are made on or before the fifteenth day of the third month following the later of the end of the Company’s taxable year or the end of your  taxable year in which occurs your termination of employment, (2) any additional payments that are made on or before the last day of the second calendar year following the year of your termination and do not exceed the lesser of two times base salary or two times the limit under Code Section 401(a)(17) then in effect, and (3) the payment of medical expenses within the applicable COBRA period, are exempt from the requirements of Code Section 409A.  If you are designated as a “specified employee” within the meaning of Code Section 409A, to the extent that any deferred compensation payments to be made during the first six month period following your termination of employment exceed such exempt amounts, the payments shall be withheld and the amount of the payments withheld will be paid in a lump sum (with interest at the rate paid on twelve-month Treasury bills as of the date of your  termination of employment), during the seventh month after your termination.



111 River Street, Hoboken, NJ 07030-5774, U.S.
T +1 201 748 6000
F +1 201 748 6088
www.wiley.com


Business Expenses

The Company will reimburse you for all reasonable travel and other expenses incurred by you in connection with the performance of your duties and obligations under this letter, including attendance at industry and other relevant conferences.  You will comply with such limitations and reporting requirements with respect to expenses as may be established by Company from time to time and will promptly provide all appropriate and requested documentation in connection with such expenses.

Indemnification

The Company will indemnify you to the fullest extent permitted by the laws of the state of the Company’s incorporation in effect at that time, or the certificate of incorporation and by-laws of the Company, whichever affords you the greater protection.

Intellectual Property Rights

You hereby confirm that inventions, trade secrets and other work product produced by you or with your participation during the term of your employment with Wiley, in any form other than those (if any) in connection with your permitted outside activities (collectively the “Work Product”) shall be deemed work for hire on behalf of Wiley and you agree that Wiley shall be the sole owner of the Work Product, and all underlying rights therein, in all media now known or hereinafter devised, throughout the universe and in perpetuity without any further obligations to you.  If the Work Product, or any portion thereof, is deemed not to be Work for Hire, you hereby irrevocably convey, transfer and assign to Wiley, all rights, in all media now known or hereinafter devised, throughout the universe and in perpetuity, in and to the Work Product, including without limitation, all of your right, title and interest in the copyrights and patents thereto, free and clear of all liens and other encumbrances.  You shall make such applications, sign such papers (including without limitation assignments), take all rightful oaths, and perform all acts as may be reasonably requested, during or after the term of your employment, with respect to evidencing ownership of the Work Product.  You shall assist Wiley to obtain any registrations covering Work Product assigned hereunder to Wiley and you hereby irrevocably designate and appoint Wiley and its duly authorized officers and agents as your attorney in fact, to act for and in your behalf and stead, to execute and further the prosecution and issuance of registrations thereon with the same legal force and effect as if executed by you.

Protection of Confidential Information

You acknowledge that during the course of employment with Wiley, you may be privy to certain confidential information which may be communicated to you verbally or in writing in your capacity as an officer or director of Wiley, its subsidiaries or affiliates, relating to Wiley, its businesses, its customers, trade secrets, know-how, inventions, techniques, processes, algorithms, software programs, hardware designs, schematics, designs, contracts, customer lists, financial information, sales and marketing plans, business plans and information, products, current and potential business partners, customers or other third parties (collectively, “Third Parties”), or other information which is not known to the public, and which may include material developed by you.  You acknowledge that all such information is and shall be deemed to be “Confidential Information” belonging to Wiley or Third Parties.  You agree to protect such Confidential Information from disclosure with the same degree of care that you normally use to protect your own confidential information, but not less than reasonable care, shall not divulge any such Confidential Information to anyone and shall not make use of the same without prior written consent of Wiley.  All Confidential Information is and shall remain the property of Wiley (or the applicable Third Party), and you shall not acquire any rights therein.  At the conclusion of your employment by Wiley, you shall promptly return all Wiley materials, including Confidential Information, in your possession and shall not retain any copies of any such material.  In addition, both parties agree that this agreement is confidential and that neither of us shall disclose its contents to others without the other’s prior approval.



111 River Street, Hoboken, NJ 07030-5774, U.S.
T +1 201 748 6000
F +1 201 748 6088
www.wiley.com

Business Opportunities

Should your role with Wiley expose you to business opportunities that might be attractive to Wiley as well as to others (including yourself), you agree to give Wiley consideration of any opportunity before you allow others to consider the opportunity.

Non-Compete, Non-Solicitation

During your employment with Wiley, you have and shall become familiar with Wiley’s trade secrets, information related to the operations, products and services of the Wiley, and with other Confidential Information concerning Wiley, its affiliates and companies acquired by Wiley.  Therefore, during your employment period and for a period of one year thereafter, you agree that you shall not directly or indirectly own any interest in, manage, control, participate in, consult with, or render services for any company or individual that materially competes with Wiley, provided, however, that it shall not be a violation hereof for you to own and manage the interests held by you prior to your employment with Wiley as separately previously disclosed to Wiley or to have beneficial ownership of less than 1% of the outstanding amount of any class of securities listed on a national or foreign securities exchange or an inter-dealer quotation system.

During your employment and for a period of one year thereafter, you agree that you shall not directly, or indirectly through another entity, (i) induce or attempt to induce any employee of Wiley or any affiliate to leave the employ of Wiley or such affiliate, or in any way interfere with the relationship between Wiley or any affiliate and any employee thereof, (ii) hire any person who was an employee of Wiley or any affiliate at any time during the one year period prior to termination of your employment with Wiley or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of Wiley or any affiliate to cease doing business with Wiley or such affiliate, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee or business relation and Wiley or any affiliate (including, without limitation, making any negative statements or communications about Wiley or its affiliates).


111 River Street, Hoboken, NJ 07030-5774, U.S.
T +1 201 748 6000
F +1 201 748 6088
www.wiley.com


You agree that during the term of your employment with Wiley, you will devote full time to the business of Wiley and will not engage in any activity that conflicts with your obligations to Wiley.  Nothing in this letter shall preclude you from engaging, consistent with your duties and responsibilities hereunder, in charitable and community affairs or from maintaining (after a short transition period for you to exit the balance of your director positions) your directorship in one of the private companies on whose board you presently sit, provided that (a) such company directorship is made known to Wiley and approved prior to the execution of this Offer Letter and (b) such service does not include a material time commitment that impacts on your time and duties at Wiley.

Representations

You hereby represent and warrant that: (a) you have the right to enter into this Agreement, to grant the rights granted in this Agreement and to perform fully all their obligations under this Agreement. No consent of any other person or entity is necessary for you to enter into and fully perform this Agreement and you have not done and shall not do any act and have not made and shall not make any grant, assignment or agreement which shall or would likely conflict or interfere with the complete enjoyment of all of Wiley’s rights under this Agreement; (b) the material contributed by you, including without limitation, any Work Product, (i) shall not violate or infringe in any way upon the rights of others, including, without limitation, any copyright, patent, trademark or other proprietary right or the right of privacy or publicity, (ii) shall not contain any libelous, obscene or other unlawful matter, and (iii) shall not violate any applicable law.

Modification

It is the intention of the parties to make these restrictive covenants and agreements binding to the fullest extent permitted under existing applicable laws. In the event that any part of any of these restrictive covenants and agreements is determined by a court of law of competent jurisdiction to be overly broad or too long in duration or otherwise objectionable, thereby making the covenants unenforceable, the parties hereto agree, and it is their desire, that such a court shall substitute a reasonable judicial enforceable limitation in place of the offensive part of the covenant, and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form.


111 River Street, Hoboken, NJ 07030-5774, U.S.
T +1 201 748 6000
F +1 201 748 6088
www.wiley.com


Miscellaneous

This Offer Letter and any and all related issues – including but not limited to interpretation, enforcement, and performance – shall be governed by the laws of the State of New York, without reference to the conflicts of law provisions thereof.

General

This document, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.  This document may be signed in one or more counterparts, each of which once signed shall be deemed to be an original.  All such counterparts together shall constitute one and the same instrument.

For Wiley


By: /s/ Archana Singh                         /s/Aref Matin
  
 Archana Singh                                 Aref Matin
 EVP and CHRO


April 20, 2018                            April 26, 2018
Date       Date