Waverly, Inc.

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Waverly, Inc.

351 West Camden Street

Baltimore, Maryland 21201-2436
U.S.A.
(410) 528-4000
Fax: (410) 528-4414
http://www.wwilkins.com

Public Company
Incorporated: 1892 as the Williams & Wilkins Co.
Sales: $156.07 million (1995)
Employees: 440
Stock Exchanges: NASDAQ
SICs: 2721 Periodicals Publishing; 2731 Book Publishing; 2741 Miscellaneous Publishing; 5192 Books, Periodicals and Newspapers

Waverly, Inc. is a leading worldwide publisher of books, periodicals, and electronic media in the fields of medicine, allied health, and related disciplines. In 1995 it was publishing, under the trade name Williams & Wilkins, 48 periodicals for medical and scientific societies, with which it shared certain editorial responsibilities, as well as 26 periodicals it owned directly. It was also publishing and distributing more than 1,300 book titles, principally under the Williams & Wilkins name in the United States. In addition, Waverly was turning out about 400 electronic-media products under various trade names. Its products were being sold in more than 50 countries, and its subsidiaries included a German-language publisher.

Under Private Ownership Until 1972

Waverly, Inc. owes its beginning to John Williams, who started a small printing press in his Baltimore attic in 1890 with $600 in funds. Shortly after, Harry Wilkins and John and Robert Garrett provided the fresh infusion of money needed to form the Williams & Wilkins Co. printing firm. One of its early employees was Edward B. Passano, who joined the firm in 1897 as a $75-a-month salesman. After a downtown fire in 1904 destroyed the company’s premises, Passano borrowed $12,000 from the Garretts to salvage the business. The plant was moved to the Waverly neighborhood, and the company was renamed Waverly Press. Passano became its sole owner in 1907.

Waverly Press, which specialized in printing medical and scientific material, began, in 1909, publishing its first scientific periodical, The Journal of Pharmacology and Experimental Therapeutics. By 1924 the company was publishing 18 journals and 50 books. It split the next year into two divisions: Waverly Press for printing scientific and technical literature, and Williams & Wilkins for publishing scientific and medical books and journals. In 1932 it made its first acquisition, Wm. Wood & Co., a New York City publisher and distributer of medical books. This immediately added 386 titles to the Williams & Wilkins list, and by 1940 book sales had increased fourfold since the acquisition.

Waverly probably never had a year in which it did not make money. During the Great Depression no employees were laid off, and no rates of pay were cut. Printing-plant employees worked six hours a day, six days a week, and there were four shifts a day. During World War II Waverly Press printed a large amount of classified material, especially for the Navy. Passano, who died in 1946, was succeeded as president by his elder son, William M. Passano. He became chief executive officer of Williams & Wilkins in 1963, when his brother Edward M. Passano succeeded him as president of Waverly Press.

Steady Growth in the 1970s

When Waverly Press went public in 1972, it owned four properties in Baltimore, including a printing plant, and also a larger printing plant in Easton, Maryland, that opened in late 1949. Net sales totaled $16.7 million in 1971, up from $12.5 million in 1967, and net income rose from $827,000 to $1,128,000 in this period. Current assets came to $9.7 million in mid-1972, and there was no long-term debt. William M. Passano, Jr., became president and chief executive officer of Waverly Press in 1972. The initial public stock offering was held in April of that year. In 1996 members of the Passano family still held 59 percent of the company’s common stock.

Publishing and printing each accounted for roughly half of company sales in 1972. In the publishing division, operating under the Williams & Wilkins trade name, periodicals contributed 55 percent of revenue in 1971, books, 38 percent, and services, 7 percent. About three-quarters of the revenue from its 31 periodicals came from journals owned either wholly by the company or jointly with a major scientific society. The company also was earning income from publishing services for 40 other periodicals. Two-thirds of book revenues came from the company’s own books, with almost all of the rest from sales of books imported from foreign publishers. About 1,700 titles were being offered, including staples like Stedman’s Medical Dictionary, which went through 25 editions between 1911 and 1989, and Grant’s Atlas of Anatomy, first published in 1943.

Waverly’s printing division was printing all of the material published by the company and also books and periodicals published by unaffiliated customers. About 130 periodicals were being printed for professional societies, commercial publishers, and academic institutions. Booklets, pamphlets, and promotional literature were also being printed. About 65 percent of all the books published by Waverly and a majority of those printed by Waverly were being sold to medical students. In 1972 the company produced an audiovisual tape cassette accompanied by an instructional medical manual, its first venture outside traditional publishing.

Net sales for Waverly Press continued to rise in the 1970s, reaching nearly $38 million in 1979. Net income grew at a slower pace, reaching nearly $1.9 million in 1979. By this time books had become as important to the publishing division in revenue as periodicals, with more than 669 titles published and offered for sale by the company.

Diversifying in the 1980s

Of 531,941 books sold by Waverly Press in 1980, about 84 percent were in the medical field, with the rest in related fields. Of the 39 periodicals, 12 were owned by the company and 27 published for major scientific societies and institutions. Printing operations changed little in the decade, except that there were significant increases in pamphlets, booklets, and direct-mail promotion material for other clients.

Partly because of a drop in medical school enrollment, Waverly Press became seriously engaged in diversifying by the mid-1980s. In 1983 it began selling software teaching programs run on personal computers and visual teaching aids on video-cassettes. Armed with $14 million in cash from periodical subscriptions paid in advance, the company also began making acquisitions, buying Nurseco Inc., a small nursing publishing firm, in 1985. The printing division also had been diversifying, turning out such nonscientific journals as Foreign Affairs and Wilson Quarterly.

Although earnings remained at a comfortable level, major efforts were made at Waverly Press to contain costs. When the labor-intensive, but nonunionized, printing division began lagging in profits, the company in 1986 changed medical carriers, eliminated automatic annual bonuses, cut back vacations, and raised the work week from 38 to 40 hours without an increase in pay. Waverly officers, many of them relatives, lost the right to buy company cars at after-tax cost because they were ordering Jaguars and BMWs. “We have an independent board of directors that passes on my salary and all major capital expenditures,” William Passano told a Barron’s reporter in 1987.

Among these expenditures was the purchase, in 1988, of Rynd Communications, Inc. for $1.6 million and MedDeck, Inc. for more than $2.2 million. Two years later Waverly Press acquired Urban & Schwarzenberg GmbH, a German publisher of medical books with a U.S. subsidiary publishing English-language medical books, for cash and stock valued at about $13 million. Later in 1990 it bought most of the assets of Harwal Publishing Co., a publisher of review books for medical students, from John Wiley & Sons Inc. for $8 million. In 1991 the company acquired Lea & Febiger, L.P., another medical publisher, for about $10 million.

Printing Division Sold in 1993

Waverly Press, Inc. changed its name to Waverly, Inc. in 1988. Interviewed in 1990 by Wall Street Transcript, Passano said that publishing now accounted for two-thirds of Waverly’s revenue and that the company increasingly saw its future in publishing rather than in its printing operations, which had suffered in morale, performance, and profits ever since the 1986 crackdown on labor costs. He called Waverly, with 35 software programs, a leader in electronic publishing. A greater effort also was being made in marketing abroad, since foreign customers were now accounting for 45 percent of publishing revenues. By 1992 the company had formed joint ventures with local partners to sell medical books in Australia, Hong Kong, and Japan, and to print them in Poland.

In 1990 Waverly’s net sales jumped to $121.7 million and its net income to almost $4 million. The following year Edward B. Hutton, president of the company since 1988, became its chief executive officer, the first from outside the Passano family. Sales that year rose to $147.3 million, but earnings per share fell from a record $1.01 to 78 cents because of the need to pay for the recent acquisitions, which had caused Waverly to take on long-term debt for the first time in history. In 1992 the company earned nearly $2.8 million from continuing operations but had a net loss of $108,000 after taking a $4.9-million charge to reflect the adoption of new rules covering the accounting treatment for post-retirement medical benefits.

Company Perspectives

We intend to be recognized by our customers (authors, editors, societies, companies, health care professionals, students, bookstores, libraries, etc.) as being the most reliable, efficient, effective, and fair source of information and education.

In October 1993 Waverly sold its printing division to Cadmus Communications Corp. for between $14.5 million and $20 million. Waverly Press had accounted for about 22 percent of the parent company’s revenues of $161 million in 1992. Waverly, Inc. ended the year with a net loss of $2 million, which it attributed to declining sales to the pharmaceutical industry and one-time charges related to its relocation within Baltimore. Just before Christmas 1993 Waverly agreed to become the first commercial tenant of the city’s Camden Yards warehouse, leasing 72,400 square feet of space. It moved its corporate headquarters to this location in June 1995.

Waverly responded to a drop of 11 percent in book sales during 1993 by cutting its workforce by about ten percent and eschewing bonuses for top executives. As part of the restructuring, the Harwal and Lea & Febiger imprints were consolidated under new management and principally put under the Williams & Wilkins name. The company made further acquisitions during the year, however, buying 235 computer programs from Medi-Sim for $1.9 million, Hearing Journal for $970,000, and Editions Pradel, a French medical- and science-book publisher, for $600,000.

The 1993 debacle, retrospectively attributed by Waverly to uncertainty in the health-care industry over President Clinton’s proposed program, was followed by record sales of $131.9 million and record income of $4.7 million in 1994. During the year the company made further acquisitions, purchasing Betz Publishing Co. for about $2.2 million and various electronic media, book, and periodical publishing properties for a total of about $1.4 million. Urban & Schwarzenberg acquired Muller and Steinicke, a Munich medical bookstore, for about $2 million, and certain medical-book titles for $1 million.

In 1995 Waverly had record sales of over $156 million and record net income of $5.3 million. The United States accounted for 58 percent of revenues and Europe for 36 percent, while the remaining sales were generated in the Far East and elsewhere. After six years of stagnant stock prices, Waverly shareholders were rewarded in 1995, when the price of a share nearly doubled in value. About 45 percent of the shares were owned by the Passano family, which was said to control another 15 percent held by insiders. Long-term debt had been reduced to $3.7 million at the end of the year, compared to $12.2 million at the end of 1991. Waverly’s total assets were valued at $128.2 million at the end of 1995.

In addition to its Williams & Wilkins imprint, Waverly was using among its book-publishing trade names Lea & Febiger, National Medical Series, and Stedman’s World Series in the United States and Urban & Schwarzenberg in Germany. About 400 of its approximately 1,300 book titles were in German rather than English. The English-language books were being marketed and distributed overseas by a separate division with offices in London, Paris, Buenos Aires, Hong Kong, and Bangkok, as well as Baltimore. Waverly also was a partner in distribution companies located in Tokyo and Sydney, Australia. A direct-mail-order firm in Munich was promoting and distributing the German-language books. Waverly also operated a publishing firm in Wroclaw, Poland, to translate its books into the local language and was participating in a number of joint ventures with foreign publishers to translate its English-language titles into local languages.

Waverly’s periodicals had a paid subscription base of about 385,000 at the end of 1995. Its electronic products were being sold in various formats, including computer software, interactive videodiscs, and CD-ROM, and were being marketed under various trade names, including Williams & Wilkins, Medi-Sim, Stedman Words, and de’MEDICI.

Principal Subsidiaries

Editions Pradel (France); Med-Pub, Inc.; Oscar Rothacker Verlagschuchandlung, GmbH (Germany); Urban & Partner (Poland); Urban & Schwarzenberg GmbH (Germany); Urban & Schwarzenberg Ges.m.b.H. (Austria); Urban & Schwarzenberg Verlag fur Medizin GmbH (Germany); Waverly Europe Ltd. (UK); Waverly Info-Med Ltd. (Hong Kong); Waverly Info-Med Ltd. (Thailand); Waverly Sales, Inc. (U.S. Virgin Islands); Williams & Wilkins Sales, Inc.

Principal Divisions

Professional Learning Systems Division; Waverly International; Waverly North America; Williams & Wilkins Book Publishing; Williams & Wilkins Periodical Publishing.