WLY 10-Q Quarter ended Oct. 31, 2011

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]                    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT 1934

For the quarterly period ended October 31, 2011                                                                                                                     Commission File No. 1-11507

OR

[  ]                       TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES ACT OF 1934

For the transition period from_____  to _____

JOHN WILEY & SONS, INC.

(Exact name of Registrant as specified in its charter)

NEW YORK		13-5593032
(State of other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
111 RIVER STREET, HOBOKEN NJ		07030
(Address of principal executive offices)		Zip Code
Registrant’s telephone number, including area code		(201) 748-6000

NOT APPLICABLE

Former name, former address, and former fiscal year, if changed since last report

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 [x]   No [  ]

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

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

Large accelerated filer [X]                                         Accelerated filer [  ]                                      Non-accelerated filer [  ] Smaller reporting company  [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES [  ]     NO [X]

The number of shares outstanding of each of the Registrant’s classes of Common Stock as of November 30, 2011 were:

Class A, par value $1.00 – 50,822,431

Class B, par value $1.00 – 9,537,216

This is the first page of a 35 page document

PART I	-	FINANCIAL INFORMATION		PAGE NO.
Item 1.		Financial Statements.
		Condensed Consolidated Statements of Financial Position - Unaudited as of October 31, 2011 and 2010, and April 30, 2011		3
		Condensed Consolidated Statements of Income - Unaudited for the three and six months ended October 31, 2011 and 2010		4
		Condensed Consolidated Statements of Cash Flows – Unaudited for the six months ended October 31, 2011 and 2010		5
		Notes to Unaudited Condensed Consolidated Financial Statements		6-13
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		14-26
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		27-28
Item 4.		Controls and Procedures		29
PART II	-	OTHER INFORMATION
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 6.		Exhibits and Reports on Form 8-K		30
SIGNATURES AND CERTIFICATIONS				31
EXHIBITS				32-35

JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - UNAUDITED
(In thousands)
		October 31,								April 30,
		2011				2010				2011
Assets:
Current Assets
Cash and cash equivalents		$	82,294			$	112,311			$	201,853
Accounts receivable			202,434				201,571				168,310
Inventories			104,858				110,600				106,423
Prepaid and other			33,147				28,858				50,904
Total Current Assets			422,733				453,340				527,490
Product Development Assets			98,491				102,734				109,554
Technology, Property & Equipment			168,807				153,060				165,541
Intangible Assets			898,515				919,904				932,730
Goodwill			629,922				628,251				642,898
Other Assets			49,234				46,959				51,928
Total Assets		$	2,267,702			$	2,304,248			$	2,430,141
Liabilities & Shareholders' Equity:
Current Liabilities
Accounts and royalties payable		$	170,642			$	180,104			$	155,262
Deferred revenue			102,620				111,847				321,409
Accrued employment costs			48,104				50,291				87,770
Accrued income taxes			17,490				18,328				5,924
Accrued pension liability			4,390				2,291				4,447
Other accrued liabilities			50,210				50,301				57,853
Current portion of long-term debt			-				101,250				123,700
Total Current Liabilities			393,456				514,412				756,365
Long-Term Debt			510,000				555,750				330,500
Accrued Pension Liability			89,820				123,747				91,594
Deferred Income Tax Liabilities			182,689				172,467				192,909
Other Long-Term Liabilities			82,312				75,515				80,884
Shareholders’ Equity
Class A & Class B common stock			83,190				83,191				83,190
Additional paid-in-capital			261,695				226,834				247,046
Retained earnings			1,213,525				1,081,545				1,136,224
Accumulated other comprehensive loss			(157,411	)			(191,135	)			(127,741	)
Treasury stock			(391,574	)			(338,078	)			(360,830	)
Total Shareholders’ Equity			1,009,425				862,357				977,889
Total Liabilities & Shareholders' Equity		$	2,267,702			$	2,304,248			$	2,430,141
The accompanying notes are an integral part of the condensed consolidated financial statements.

JOHN WILEY & SONS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED
(In thousands except per share information)
		For The Three Months								For The Six Months
		Ended October 31,								Ended October 31,
		2011				2010				2011				2010
Revenue		$	446,985			$	441,844			$	877,054			$	849,782
Costs and Expenses
Cost of sales			132,667				139,539				262,341				264,808
Operating and administrative expenses			233,315				215,863				464,484				426,891
Amortization of intangibles			9,016				8,712				18,090				17,294
Total Costs and Expenses			374,998				364,114				744,915				708,993
Operating Income			71,987				77,730				132,139				140,789
Interest Expense			(1,765	)			(4,823	)			(3,502	)			(10,531	)
Foreign Exchange Transaction Losses			(746	)			(76	)			(965	)			(759	)
Interest Income and Other			1,289				463				1,873				883
Income Before Taxes			70,765				73,294				129,545				130,382
Provision For Income Taxes			19,989				19,636				27,973				32,679
Net Income		$	50,776			$	53,658			$	101,572			$	97,703
Earnings Per Share
Diluted		$	0.83			$	0.88			$	1.65			$	1.60
Basic		$	0.84			$	0.89			$	1.68			$	1.63
Cash Dividends Per Share
Class A Common		$	0.20			$	0.16			$	0.40			$	0.32
Class B Common		$	0.20			$	0.16			$	0.40			$	0.32
Average Shares
Diluted			61,432				61,005				61,572				60,934
Basic			60,516				59,995				60,592				59,934
The accompanying notes are an integral part of the condensed consolidated financial statements.

JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW – UNAUDITED
(In thousands)
		For The Six Months
		Ended October 31,
		2011				2010
Operating Activities
Net income		$	101,572			$	97,703
Adjustments to reconcile net income to cash (used for) provided by operating activities:
Amortization of intangibles			18,090				17,294
Amortization of composition costs			23,764				24,284
Depreciation of technology, property and equipment			24,651				22,356
Non-cash deferred tax benefits			(8,769	)			(4,155	)
Stock-based compensation			7,732				8,314
Excess tax benefits from stock-based compensation			(1,637	)			(1,827	)
Pension expense, net of contributions			3,144				6,365
Royalty advances			(49,206	)			(44,585	)
Earned royalty advances			54,285				46,543
Other non-cash charges			18,387				15,279
Change in deferred revenue			(214,511	)			(167,102	)
Net change in operating assets and liabilities, excluding acquisitions			(12,006	)			(729	)
Cash (Used for) Provided by Operating Activities			(34,504	)			19,740
Investing Activities
Composition spending			(23,236	)			(24,064	)
Additions to technology, property and equipment			(30,267	)			(20,805	)
Acquisitions, net of cash acquired			(5,636	)			(4,322	)
Cash Used for Investing Activities			(59,139	)			(49,191	)
Financing Activities
Repayment of long-term debt			(212,973	)			(174,700	)
Borrowings of long-term debt			268,773				182,700
Change in book overdrafts			(28,370	)			(19,595	)
Cash dividends			(24,271	)			(19,257	)
Purchase of treasury stock			(37,480	)			(313	)
Proceeds from exercise of stock options and other			11,776				15,137
Excess tax benefits from stock-based compensation			1,637				1,827
Cash Used for Financing Activities			(20,908	)			(14,201	)
Effects of Exchange Rate Changes on Cash			(5,008	)			2,450
Cash and Cash Equivalents
Decrease for the Period			(119,559	)			(41,202	)
Balance at Beginning of Period			201,853				153,513
Balance at End of Period		$	82,294			$	112,311
Cash Paid During the Period for:
Interest		$	2,311			$	10,783
Income taxes, net		$	12,464			$	5,088
The accompanying notes are an integral part of the condensed consolidated financial statements.

JOHN WILEY & SONS, INC., AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.

Basis of Presentation

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 financial condition, results of operations 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.  These financial statements should be read in conjunction with the most recent audited financial statements included in the Company’s Form 10-K for the fiscal year ended April 30, 2011.

The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The Company has historically reported sales return reserves, net of an inventory and royalty recovery, as a component of Accounts Receivable in the Condensed Consolidated Statements of Financial Position. In the fourth quarter of fiscal year 2011, the Company changed the presentation of the net sales return reserve to reflect each respective balance sheet account. As such, the Company has reclassified approximately $11.1 million to increase inventory and $9.4 million to reduce Accounts and Royalties Payable from the previously reported October 31, 2010 Accounts Receivable balance.

The Company has historically presented author advance payments as a component of Investing Activities in the Condensed Consolidated Statements of Cash Flows. In the fourth quarter of fiscal year 2011, the Company changed the presentation of royalty advance payments from an Investing Activity to an Operating Activity. To be consistent with current year presentation, the Company reclassified approximately $44.6 million of royalty advance payments for the six months ended October 31, 2010 from Investing Activities to Operating Activities.

Certain other prior year amounts have been reclassified to conform to the current year’s presentation.

2.

Recent Accounting Standards

In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-13 “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”).  ASU 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products and services separately rather than as a combined unit. Specifically, this guidance amends the existing criteria for separating consideration received in multiple-deliverable arrangements, eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method.  The guidance also establishes a hierarchy for determining the selling price of a deliverable, which is based on vendor-specific objective evidence; third-party evidence; or management estimates.  Expanded disclosures related to the Company’s multiple-deliverable revenue arrangements are also required.  The new guidance was adopted by the Company for all revenue arrangements entered into or materially modified on and after May 1, 2011 and did not have a significant impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”).  ASU 2010-06 requires new disclosures for transfers in and out of Levels 1 and 2 of the fair value measurement hierarchy, and expands disclosures related to activity in Level 3 fair value measurements.  ASU 2010-06 also clarifies existing disclosures on the level of detail required for assets and liabilities measured at fair value from their respective line items on the statement of financial position, and the valuation techniques and inputs used in fair value measurements that fall within Level 2 or Level 3 of the fair value hierarchy. Except for the disclosures related to the activity in Level 3 fair value measurements, the Company adopted ASU 2010-06 as of May 1, 2010. The requirement to provide detailed disclosures about the activity for Level 3 fair value measurements was adopted by the Company as of May 1, 2011. Since the revised guidance only required additional disclosures about the Company’s fair value measurements, its adoption did not affect the Company’s financial position or results of operations.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”) which amends U.S. GAAP to provide common fair value measurement and disclosure requirements with International Financial Reporting Standards. The Company does not expect ASU 2011-04 to have a significant effect on its current fair value measurements within the consolidated financial statements, however, the new guidance will result in additional disclosures which will include quantitative information about the unobservable inputs used in all Level 3 fair value measurements. ASU 2011-04 will be effective for the Company as of May 1, 2012.

There have been no other new accounting pronouncements issued that have had, or are expected to have a material impact on the Company’s consolidated financial statements.

3.

Share-Based Compensation

The Company has share-based compensation plans under which employees may be granted options to purchase shares of Company common stock at the fair market value at the time of grant.  In addition to stock options, the Company grants performance-based stock awards and other restricted stock awards to certain management level employees. The Company recognizes the grant date fair value of share-based compensation in net income on a straight-line basis 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 October 31, 2011 and 2010, the Company recognized share-based compensation expense, on a pre-tax basis, of $4.2 million and $4.4 million, respectively. For the six months ended October 31, 2011 and 2010, the Company recognized share-based compensation expense, on a pre-tax basis, of $7.7 million and $8.3 million, respectively.

The following table provides share-based compensation data for awards granted by the Company:

	For the Six Months Ended October 31,
	2011		2010
Restricted Stock:
Awards granted (in thousands)	256		256
Weighted average fair value of grant	$49.55		$39.94
Stock Options:
Awards granted (in thousands)	411		413
Weighted average fair value of grant	$14.11		$11.97

The weighted average Black-Scholes fair value assumptions for stock option grants are as follows:

	For the Six Months Ended October 31,
	2011		2010
Expected life of options (years)	7.3		7.7
Risk-free interest rate	2.3%		2.7%
Expected volatility	29.0%		28.9%
Expected dividend yield	1.6%		1.6%
Fair value of common stock on grant date	$49.55		$40.02

4. Comprehensive Income (Loss)

Comprehensive income (loss) was as follows (in thousands):

	For the Three Months Ended October 31,				For the Six Months Ended October 31,
	2011		2010		2011		2010
Net income	$50,776		$53,658		$101,572		$97,703
Changes in other comprehensive income (loss):
Foreign currency translation adjustment	(28,069)		31,388		(31,950)		32,585
Unamortized retirement costs, net of tax	1,696		437		2,397		1,367
Unrealized gain (loss) on interest rate swaps, net of tax	5		454		(117)		2,559
Comprehensive income	$24,408		$85,937		$71,902		$134,214

A reconciliation of accumulated other comprehensive income (loss) follows (in thousands):

	For the Three Months
	July 31, 2011		Change for Period		October 31, 2011
Foreign currency translation adjustment	$(69,689)		$(28,069)		$(97,758)
Unamortized retirement costs, net of tax	(60,935)		1,696		(59,239)
Unrealized loss on interest rate swaps, net of tax	(419)		5		(414)
Total	$(131,043)		$(26,368)		$(157,411)

	For the Six Months
	April 30, 2011		Change for Period		October 31, 2011
Foreign currency translation adjustment	$(65,808)		$(31,950)		$(97,758)
Unamortized retirement costs, net of tax	(61,636)		2,397		(59,239)
Unrealized loss on interest rate swaps, net of tax	(297)		(117)		(414)
Total	$(127,741)		$(29,670)		$(157,411)

5.

Reconciliation of Weighted Average Shares Outstanding

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

	For the Three Months Ended October 31,				For the Six Months Ended October 31,
	2011		2010		2011		2010
Weighted average shares outstanding	60,721		60,357		60,789		60,266
Less: Unearned restricted shares	(205)		(362)		(197)		(332)
Shares used for basic earnings per share	60,516		59,995		60,592		59,934
Dilutive effect of stock options and other stock awards	916		1,010		980		1,000
Shares used for diluted earnings per share	61,432		61,005		61,572		60,934

For both the three and six months ended October 31, 2011, options to purchase 1,027,522 shares of Class A Common Stock and unearned restricted shares of 48,150 have been excluded from the shares used for diluted earnings per share, as their inclusion would have been antidilutive. For both the three and six months ended October 31, 2010, options to purchase 2,354,383 shares  of Class A Common Stock have been excluded as their inclusion would have been antidilutive. For the three and six months ended October 31, 2010, unearned restricted shares of 4,500 and 21,500, respectively, have been excluded as their inclusion would have been antidilutive.

6.

Inventories

Inventories were as follows (in thousands):

	As of October 31,				As of April 30,
	2011		2010		2011
Finished goods	$81,835		$82,403		$87,080
Work-in-process	7,779		8,258		7,850
Paper, cloth and other	11,612		12,498		7,940
	101,226		103,159		102,870
Inventory value from estimated returns	9,764		11,138		9,485
LIFO reserve	(6,132)		(3,697)		(5,932)
Total inventories	$104,858		$110,600		$106,423

7. Segment Information

The Company is a global publisher of print and electronic products, providing content and digital solutions to customers worldwide. Core businesses produce scientific, technical, medical and scholarly journals, encyclopedias, books, online products and services; professional and consumer books, subscription products, certification and training materials, online applications and websites; and educational materials in all media, including integrated online teaching and learning resources, for undergraduate, graduate and advanced placement students, educators and lifelong learners worldwide as well as secondary school students in Australia. The Company maintains publishing, marketing, and distribution centers in Asia, Australia, Canada, Germany, the United Kingdom and the United States. The Company’s reportable segments are based on the management reporting structure used to evaluate performance.

Segment information is as follows (in thousands):

	For the Three Months				For the Six Months
	Ended October 31,				Ended October 31,
	2011		2010		2011		2010
Revenue
Scientific, Technical, Medical and Scholarly	$251,070		$244,882		$503,785		$474,281
Professional/Trade	111,689		112,825		212,034		212,723
Global Education	84,226		84,137		161,235		162,778
Total	$446,985		$441,844		$877,054		$849,782
Direct Contribution to Profit
Scientific, Technical, Medical and Scholarly	$107,182		$103,151		$213,339		$196,894
Professional/Trade	31,017		29,152		53,785		50,837
Global Education	31,764		31,714		58,701		64,015
Total	$169,963		$164,017		$325,825		$311,746
Shared Services and Administration Costs
Distribution	$(27,845)		$(27,201)		$(55,401)		$(54,221)
Technology Services	(35,422)		(28,025)		(69,036)		(55,575)
Finance	(11,023)		(10,364)		(21,934)		(20,382)
Other Administration	(23,686)		(20,697)		(47,315)		(40,779)
Total	$(97,976)		$(86,287)		$(193,686)		$(170,957)
Operating Income	$71,987		$77,730		$132,139		$140,789

8. Intangible Assets

Intangible assets consisted of the following (in thousands):

	As of October 31,				As of April 30,
	2011		2010		2011
Intangible assets with indefinite lives:
Brands and trademarks	$171,633		$173,145		$175,193
Acquired publishing rights	107,455		106,631		111,908
	$279,088		$279,776		$287,101
Net intangible assets with determinable lives:
Acquired publishing rights	$560,257		$579,631		$583,549
Customer relationships	47,711		50,624		50,157
Brands and trademarks	11,154		9,768		11,870
Covenants not to compete	305		105		53
	$619,427		$640,128		$645,629
Total	$898,515		$919,904		$932,730

The changes in intangible assets at October 31, 2011 compared to October 31, 2010 and April 30, 2011 are primarily due to foreign exchange translation and amortization expense.

9. Income Taxes

The effective tax rate for the first six months of fiscal year 2012 was 21.6% compared to 25.1% in the prior year.  During the first quarters of fiscal years 2012 and 2011, the Company recorded non-cash deferred tax benefits of $8.8 million ($0.14 per share) and $4.2 million ($0.07 per share), respectively, principally associated with new tax legislation enacted in the United Kingdom (“U.K.”) that reduced the U.K. statutory income tax rates by 2% and 1%, respectively. The benefits recognized by the Company reflect the remeasurement of all applicable U.K. deferred tax balances to the new income tax rates as of April 1, 2012 and 2011, respectively.  Excluding the tax benefits described above, the Company’s effective tax rate for the six month period ending October 31, 2011 was 28.4% compared to 28.3% in the prior year period.

10.

Defined Benefit Retirement Plans

The components of net pension expense for the defined benefit plans were as follows (in thousands):

	For the Three Months Ended October 31,				For the Six Months Ended October 31,
	2011		2010		2011		2010
Service Cost	$4,198		$4,004		$8,408		$7,932
Interest Cost	6,967		6,768		13,994		13,335
Expected Return on Plan Assets	(7,284)		(6,423)		(14,642)		(12,653)
Net Amortization of Prior Service Cost	230		222		454		442
Recognized Net Actuarial Loss	1,254		1,780		2,510		3,524
Net Pension Expense	$5,365		$6,351		$10,724		$12,580

Employer pension plan contributions were $7.6 million and $6.2 million for the six months ended October 31, 2011 and 2010, respectively.

11.

Derivative Instruments and Hedging Activities

The Company, from time-to-time, enters 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.  Derivatives that are not determined to be effective hedges are adjusted to fair value with a corresponding adjustment to earnings.  The Company does not use financial instruments for trading or speculative purposes.

The Company had approximately $510.0 million of variable rate loans outstanding at October 31, 2011, which approximated fair value. As of October 31, 2011, the Company has an interest rate swap agreement that is designated as a fully effective cash flow hedge as defined under Accounting Standards Codification (“ASC”) 815. During the first six months of fiscal year 2011, the Company maintained two interest rate swap agreements which were also designated as fully effective cash flow hedges.  As a result, there was no impact on the Company’s Condensed Consolidated Statements of Income for changes in the fair value of the interest rate swaps.  Under ASC 815, fully effective derivative instruments that are designated as cash flow hedges have changes in their fair value recorded initially within Accumulated Other Comprehensive Loss on the Condensed Consolidated Statements of Financial Position. As interest expense is recognized based on the variable rate loan agreements, the corresponding deferred gain or loss on the interest rate swaps is reclassified from Accumulated Other Comprehensive Loss to Interest Expense in the Condensed Consolidated Statements of Income. 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.

On February 16, 2007, the Company entered into an interest rate swap agreement which fixed variable interest due on a portion of its term loan (“Term Loan”). Under the terms of the agreement, the Company paid a fixed rate of 5.076% and received a variable rate of interest based on three month LIBOR (as defined) from the counterparty which was reset every three months for a four-year period ending February 8, 2011, the date that the swap expired.  As of October 31, 2010, the notional amount of the interest rate swap was $200.0 million.

On October 19, 2007, the Company entered into an interest rate swap agreement which fixed a portion of the variable interest due on its revolving credit facility (“Revolving Credit Facility”).  Under the terms of this interest rate swap, the Company paid a fixed rate of 4.60% and received a variable rate of interest based on three month LIBOR (as defined) from the counterparty which was reset every three months for a three-year period. This interest rate swap expired on August 8, 2010.

On August 19, 2010, the Company entered into an interest rate swap agreement which fixed a portion of the variable interest due on its variable rate loans outstanding.  Under the terms of the agreement, the Company pays a fixed rate of 0.8% and receives a variable rate of interest based on one-month LIBOR (as defined) from the counterparty which is reset every month for a twenty-nine month period ending January 19, 2013.  As of October 31, 2011, the notional amount of the interest rate swap was $125.0 million.

The Company records the fair value of its 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 October 31, 2011 and 2010 and April 30, 2011 was a net deferred loss of $0.7 million, $5.8 million and $0.5 million, respectively. As of October 31, 2011 and April 30, 2011, the deferred losses were recorded in Other Long-Term Liabilities on the Condensed Consolidated Statements of Financial Position. As of October 31, 2010, $4.8 million of the deferred loss was recorded in Other Accrued Liabilities on the Condensed Consolidated Statements of Financial Position with the balance recorded in Other Long-Term Liabilities, based on the maturity dates of the contracts.  Net losses that have been reclassified from Accumulated Other Comprehensive Loss into Interest Expense for the three months ended October 31, 2011 and 2010 were $0.2 million and $2.5 million, respectively.  Net losses that have been reclassified from Accumulated Other Comprehensive Loss into Interest Expense for the six months ended October 31, 2011 and 2010 were $0.4 million and $6.1 million, respectively.

During fiscal years 2012 and 2011, the Company entered into forward exchange contracts to manage the Company’s exposure on certain foreign currency denominated assets and liabilities. 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 on the Condensed Consolidated Statements of Income.  The Company did not designate these forward exchange contracts as hedges under current accounting standards as the benefits of doing so were not material due to the short-term nature of the contracts. Therefore, the forward exchange contracts were marked to market through Foreign Exchange Transaction Losses, and carried at their fair value on the Condensed Consolidated Statements of Financial Position. Accordingly, the fair value changes in the forward exchange contracts substantially mitigated the changes in the value of the remeasured foreign currency denominated assets and liabilities attributable to changes in foreign currency exchange rates. As of October 31, 2011 and 2010, the fair values of the open forward exchange contracts were (losses) gains of approximately $(0.2) million and $1.4 million, respectively, and were recorded within the Other Accrued Liabilities and Prepaid and Other, respectively, on the Condensed Consolidated Statements of Financial Position. The fair values of the contracts were measured on a recurring basis using Level 2 inputs. For the three and six months ended October 31, 2011, the losses recognized on the forward contracts were $0.5 million and $0.2 million, respectively.  For the three and six months ended October 31, 2010, the gains recognized on the forward contracts were $1.6 million and $1.4 million, respectively. As of April 30, 2011, there were no open forward exchange contracts.

12.

Subsequent Events

Refinancing:

On November 2, 2011, the Company amended and restated its existing credit facility, previously described in the Company’s Form 10-K filed on June 24, 2011, with Bank of America - Merrill Lynch and The Royal Bank of Scotland plc as joint lead arrangers and Bank of America as administrative agent.  The new agreement consists of a $700 million five-year senior revolving credit facility, which can be drawn in multiple currencies. The proceeds of the new revolving credit facility will be used to pay down the Company’s prior credit facility and meet future seasonal operating cash requirements.  The Company has 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 1.05% to 1.65%, depending on the Company’s consolidated leverage ratio, as defined, or (ii) for U.S. dollar-denominated loans only, at the lender’s base rate plus an applicable margin ranging from zero to 0.65%, depending on the Company’s consolidated 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, the Company will pay a facility fee ranging from 0.20% to 0.35% depending on the Company’s consolidated leverage ratio.  The Company also has the option to request a credit limit increase of up to $250 million in minimum increments of $50 million.  The new agreement contains certain restrictive covenants related to the Company’s consolidated leverage ratio and interest coverage ratio.  As of November 2, 2011, the prior credit facility was extinguished and approximately $510 million was outstanding under the new credit agreement.  Due to the fact that there are no principal payments due until the end of the new agreement, the Company has classified its entire debt obligation as of October 31, 2011 as long-term.  As disclosed in Note 11, the Company has an existing interest rate swap agreement that fixes the interest rate on a notional value of $125 million of otherwise variable rate debt. Under the terms of the swap agreement, the Company pays a fixed rate of 0.8% and receives a variable rate of interest based on one-month LIBOR (as defined) from the counterparty which is reset every month for a twenty-nine month period ending January 19, 2013.

Sanctions:

The United Kingdom, the United States and Canada have imposed new sanctions following a November 8 th United Nations report targeting Iran, including restrictions on financial transactions; business relationships; and prohibitions on direct and indirect trading with listed “designated persons”. The European Union has also signaled further extension of its existing sanctions regime.  The Company is currently assessing its business relationship and transactions with Iran to ensure compliance with the regulations. As of October 31, 2011 the Company had outstanding trade receivables of approximately $5 million related to prior journal and book sales before the imposition of new sanctions.  It is unclear at present whether these latest sanctions will have an effect on the recovery of this outstanding receivable.