Sadlier WH 2011 Annual Report

7/27/2019 Sadlier WH 2011 Annual Report

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William H. Sadlier, Inc,and SubsidiaryAnnual ReportDecember 31, 2011


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WILLIAM H. SADLIER, INC. AND SUBSIDIARY

To Our Shareholders :

In 2011 net income ofWilliam H. Sadlier, Inc. was $4,012,000, an increase of $500,000 from 2010. Net salesfor 2011 were $54,277,000, compared to $52,817,000 for 2010, an increase of $1,460,000.In the future, Sadlier plans to have robust sales in print as well as digital products. This growth will come aswe invest in new programs and explore new channels of distribution to assure this growth.We are pleased that the Company's Board ofDirectors has declared a dividend of $1.35 per share, payable onJune 22,2012 to shareholders of record as ofMay 16, 2012.Your continued trust and support are appreciated.Sincerely,

William Sadlier DingerPresident

Frank Sadlier DingerChairmanofthe Board andChiefOperating Officer


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WILLIAM H. SADLIER, INC. AND SUBSIDIARYSelec ted Financial Data

(Dollars in thousands execept per share data)2011 2010 2009 2008 2007 2006

Net sales $ 54,277 $ 52,817 $ 53,358 $ 54,588 $ 55,338 $ 55,052Net income 4,012 3,512 4,030 2,311 2,291 3,303Net income per share:

Bas icDiluted

Total asse t s

Cash dividends pe r share ** Dividends were declared and paid during th e second quarter for all years presented.Common S t o c k Pr ices

The Company's common stock is listed in Pink Sheets, LLC's "Pink Sheets." The prices below represent thehigh and low closing as quoted on the Pink Sheets. As of March 7, 2012, there were 95 shareholders ofrecord.

2011 2010

5.13 4.41 4.87 2 .79 2.81 4.075.11 4.40 4 .85 2.76 2.72 3.94

48,522 46,229 44,146 41,185 45,771 42,690

1.10 1.25 .7 0 .7 5 1 .00 .90

High Low High Low

First Quar ter $ 38.00 $ 34.70 $ 31.50 $ 30.00Second Quarter 40 .05 38.00 35.05 30.01Third Quar ter 42 .00 40 .00 34 .00 32 .00Fourth Quarter 40 .00 38.00 35.00 34 .70


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McGladrey & Pullen, LLP

McGladrey

Independent Auditor's Report

T o th e Sh a re h o ld e r s a n d Boa rd of DirectorsWilliam H. Sadlier, Inc.New York, New York

We have audited the accompanying consolidated balance sheets of William H. Sadlier, Inc. and Subsidiary(the "Company") as of December 31, 2011 and 2010, and the related consolidated statements of income,shareholders' equity and cash flows for each of t he t hree years in the period ended December 31, 2011.These consolidated financial statements ar e the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial s ta tements a re free of material misstatement. An audi t includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentat ion. We believe that our audits provide a reasonable basisfor ou r opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,the financial position of William H. Sadlier, Inc. and Subsidiary as of December 31, 2011 and 2010, and theresults of their operations and their cash flows for each of the three years in the period ended December 31,2011 in conformity with accounting principles generally accepted in the United States of America.

New York, New YorkMarch 30, 2012

Memberof th e RSMInternationalnetwork of independent accounting, tax and consulting firms.


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William H. Sadlier, Inc. and SubsidiaryConsol idated Balance Shee t sDecember 31, 2011 an d 2010

ASSETSCurrent Asse t s :Cash and cash equivalentsAccounts receivable, less allowance for doubtful accounts and returns of$230,000 and $278,931 in 2011 and 2010Inventories:Bound books and merchandi se, ne tWork-in-process, ne tPaper, ne t

Prepaid expensesRefundab l e i ncome taxesDefer r ed income t axes

Tota l cur ren t a s s e t sFixed Assets an d Software, at cost:Furniture, fixtures and equipmentSof twareLeasehold improvements

Less accumulated depreciation and amortizationTo ta l f ix ed asse t s a n d s o ft w a re

Other Asse t s :Deferred prepubfication costs , ne t of amortization expenseDeferred writing fees, net of amortization expenseDeferred income taxesOther

To ta l a s s e t sLIABILITIES AND SHAREHOLDERS' EQUITYCurrent Liabilities:Accounts payableAccrued liabilities:RoyaltiesPayrollRetirement benefits and deferred compensation

OtherTota l cur ren t l iab i l i t ie s

Deferred RentDeferred CompensationTota l l iab i l i t ie s

CommitmentsShareholders' Equity:Common shares - $.25 par value; authorized 1,200,000 shares, issued 900,000 sharesAdditional paid-in capitalRetained earnings

Less cost of 143,647 and 104,766 treasury shares in2011 and 2010, respectivelyAccumulated other comprehensive loss

Total shareholders' equityTotal liabilities and shareholders' equity

See Notes to Consolidated Financial Statements .

2011 2010

$ 30.488,720 $ 28,058,8022,639,750 2,221,385

3,984,089524,153123,518

3,509,456138,11759,120

4,631,760358,673486,941899,000

3,706,693269,744897,466

1,135,00039,504,844 36,289,090

2,559,5393,419,163361,911

2,684,6593,002,211420,845

6,340,6135,085,378

6,107,7154,789.562

1,255,235 1,318,153

5,304,4421,493,666599,000364,740

6,287,3211,410,638528,000396,004

$ 48,521,927 $ 46,229,206

$ 1,140,541 $ 602,2201,713,7992,863,518

36.935272.956

1,760,4912,718,618

31,142429,291

6,027,749 5,541,7621,104,5131,574,806

1,169,0581,331,532

8,707,068 8,042,352

225,000114,852

43,716,817

225,000112,189

40,574,15344,056,669(4,240,238)

(1.572)

40,911,342(2,722,882)

(1,606)39,814,859 38.186,854

$ 48,521,927 $ 46,229,206


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William H. Sadlier, Inc. and SubsidiaryConsol idated S t a t emen t s o f I ncomeYea rs Ended December 31, 2011, 2010 and 2009

Net Sa les

Operating Costs and Expenses:Manufacturing, royalty and amortizationEditorial and distr ibutionSelling, general and administrative

Operating profit

Other Income (Expense):Interest incomeOther income, ne tInterest expense

I n come Befo r e I ncome Taxe s

Provis ion for Income Taxe s

Net i n c ome

Net Income per Common Share:BasicDiluted

Average Shares Outstanding:Basic

Diluted

See Notes to Consolidated Financial Statements .

2011 2010 2009

$ 54,277,172 $ 52,816,744 $ 53,357,519

15,512,035 15,053,306 15,237,8866,172,674 7,509,364 7,575,73526,280,452 24,732,168 24,266,060

47,965,161 47,294,838 47,079,681

6,312,011 5,521,906 6,277,838

231,640 243,224 202,18994,730 107,711 172,721(78,058) (75,681) (31,594)248,312 275,254 343,316

6,560,323 5,797,160 6,621,154

2,548,000 2,285,000 2,591,000$ 4,012,323 $ 3,512,160 $ 4,030,154

$ 5.13 $ 4.41 $ 4.87$ 5.11 $ 4.40 $ 4.85

781,960 795,858 827,505

785,055 798,179 831,213


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William H. Sadlier, Inc. and SubsidiaryConsolidated Statements of Shareholders' EquityYears Ended December 31, 2011, 2010 and 2009

Balance, January 1,2009Net income

Foreign CurrencyTranslationTotal comprehensive Income

Cash dividends, $0.70 per share59,663 shares purchased for treasury2,400 shares granted to Board members2,000 stock options exercisedNoncash compensation expense

Balance, December 31 , 2009Net incomeForeign CurrencyTranslation

Total comprehensive incomeCash dividends, $1.25 pe r share5,100 shares purchased for treasury2,100 shares granted to Board members1,000 stock options exercisedNoncash compensation expense

Balance, December 31, 2010

Ne t income

Foreign Currency TranslationTotal comprehensive income

Cash dividends, $1.10 per share

43,281 shares purchased for treasury2,400 shares granted to Board members2,000 stock options exercisedNoncash compensation expense

Balance, December 31,2011See Notes to Consolidated Financial Statements

Accumu l a t e dAddit ional Other

Common Paid-En Re ta ined Comprehensive TreasuryShare s Capital Earnings Income (Loss)

$ (2,945)Share s

$ (1.091,982)Total

$ 225,000 $ 136,207 $ 34,607,963 $ 33,874,243- - 4.030,154 - - 4.030.154

- - - 1,728 - 1.728

4,031,882

- - (581,207) - - (581,207)

- - - - (1.658,559) (1.658.559)- (13,014) - - 58.980 45,966- (10,224) - - 48.723 38.499. 1,661

114,630

. . . 1.661

225,000 38,056,910 (1,217) (2.642,838) 35,752,485

- - 3,512,160 - - 3,512,160

- - (389) (389)3.511.771

- - (994,917) - - (994.917)- - - - (160,115) (160.115)- (2,915) - - 54,313 51,398- (758) - - 25,758 25.000. 1,232

112,189

. . . 1.232

225,000 40,574,153 (1,606) (2,722,882) 38,186.854

- - 4,012,323 - - 4,012.323

- - - 34 - 34

4.012.357

- - (869,659) - - (869.659)- - - - (1.639.008) (1.639.008)- 2,488 - - 66,962 69.450- (690) - - 54,690 54.000. 865

$ 114,852. . . 86 5

$ 225,000 $ 43,716,817 $ (1.572) $ (4,240,238) $ 39,814,859


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William H. Sadlier, Inc. an d SubsidiaryConso l ida ted S ta t emen t s o f C a sh F lo wsYears Ended December 31 , 2011,2010 an d 2009

Cash Flows From Operating Activities:Net incomeAdjustments to reconcile ne t income to ne t cash providedby operating activities:Depreciation and amortization of fixed assetsAmortization of computer software costsAmortization of prepublication costs, deferred writingfees and license agreement costsAllowance fo r doubtful accountsStock compensationLoss on disposal of furniture, fixtures and equipmentDeferred income taxes (benefit)Deferred rentChanges in operating assets and liabilities:(Increase) decrease in accounts receivable(Increase) decrease in inventories(Increase) decrease in prepaid expensesIncrease in deferred writing feesDecrease (increase) in other assetsIncrease (decrease) in accounts payable(Decrease) Increase in accrued liabilitiesIncrease in deferred compensationIncrease (decrease) in taxes on income

Total adjustmentsNet cash provided by operating activities

Cash Flows From Investing Activities:Capital expendituresPrepublication cost expendituresComputer software costs

Net cash used in investing activitiesCash Flows From Financing Activities:Dividends paidPurchase of shares for treasuryProceeds from exercise of stock options

Net cash used in financing activitiesIncrease in cash and cash equivalents

Cash and Cash Equivalents:BeginningEnding

Supplemental Disclosures of Cash Flow Information:Interest paidIncome taxes paid

See Notes to Consol ida ted Financial Statements.

2011 2010 2009

$ 4,012,323 $ 3,512,160 $ 4,030,154

187,938 192,212 206,851481,878 532,019 426,550

3,611,850 3,905,613 3,979,183(48,931) (110,321) 68,24170,315 52,629 47,62732,897 - -165,000 236.000 (597,000)(64,545) (17,773) 47,707

(369,434) (494,012) 991,554(925,067) 1,149,052 385,351(88,929) 135,732 10,252

(1,028,169) (627,350) (384,817)22,664 (39,214) 61,148

538,355 (320,800) (486,133)(58,127) 29,926 1,039,489249,067 234,013 206,261410,525 (1,174,285) 487,541

3,187,2877,199,610

(206,199)(1,675,230)(433,596)

(2,315,025)

(869,659)(1,639,008)54,000

(2,454,667)2,429,918

28,058,802$ 30,488,720

$ 70,400

3,683,4417,195,601

(132,754)(2,131,622)(394,748)

(2,659,124)

(994,917)(160,115)25,000

(1,130,032)3,406,445

24,652,357

6,489,80510,519,959

(59,926)(1,564,055)(418,394)(2,042,375)

(581,207)(1,658,560)

38,500(2,201,267)6,276,317

18,376,040$ 28,058,802 $ 24,652,357

$ 68,264 $ 137,014$ 1,972,477 $ 3,223,283 $ 2,700,459


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William H. Sadlier, Inc. and SubsidiaryNote s to Consol ida ted Financial S ta t emen t s

Note 1. Nature of Operations and Accounting PoliciesNature of Operations: William H. Sadlier, Inc. (the "Company") publishes textbooks and related workbooks,teachers' guides and other supplementary materials principally in the subject areas of religion, mathematics,language arts and reading. The Company's major markets are inCatholic schools, parish schools of religion,and public and private elementary and high schools, primarily in the United States.Est imates Used in Financial Statements: The preparation of financial statements in conformity withaccounting principles generally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities, and the reported amounts of revenue and expenses during the reportingper iod. Actual results could differ from those estimates.Concentrations of Credit Risk: The Company maintains cash in bank deposit accounts which, at times,exceed federally insured limits. The Company has not experienced any losses on these accounts.Principles of Consolidation: The consolidated financial statements include the accounts of th e Company andits subsidiary. All material intercompany transactions and balances have been eliminated. The subsidiarymerged into the Company on November 19, 2009.Accounts Receivable: Accounts receivable are reported at their outstanding unpaid principal balancesreduced by an allowance for doubtful accounts. The Company estimates doubtful accounts based onhistorical bad debts , factors related to specific customers' ability to pay and current economic trends. TheCompany writes off accounts receivable aga inst the allowance when a balance is determined to beuncollect ible.Inventories: Inventories, consisting mostly of bound books, are stated at the lower of cost (first-in, first-out) ormarket and are ne t of allowances for obsolete and slow-moving goods.Depreciation and Related Policies: Depreciation of furniture, fixtures and equipment is provided by thestraight-line method over the estimated useful lives of the assets which range from three to t en year s.Amortization of computer software costs is provided by the straight-line method and is amortized over three tofive years. Amortization of the cost of improvements to leased premises is based on the terms of the lease orthe estimated useful lives of the improvements, whichever period is shorter. Expenditures for maintenanceand repairs are charged to operations and expenditures for additions and improvements are capitalized.Gains or losses from asset disposals are reflected in other income.Deferred Prepublication Costs: Prepublication costs of new books and audiovisual material consist primarilyof design, layout, art and photo services, composition, and film and plate preparation charges. These costsare amortized over five years, by the straight-line method, from t he dat e of publicat ion or the estimatedremaining life, if shorter. Costs applicable to revised editions of standard texts ar e included in prepublicationcosts and costs applicable to reprints are expensed as incurred. It is the Company's policy to periodicallyreview and evaluate whether the benefits associated with these costs are expected to be realized andwhether, therefore, deferral and amortization are justified.Deferred Writing Fees: Writing fees paid to outside authors are capitalized as deferred writing fees andamortized over three years by th e straight-line method from the date of publication. It is the Company's policyto periodically review and evaluate whether the benefits associated with these fees are expected to berealized and whether, therefore, deferral and amortization are justified. Pursuant to agreements with authors,certain writing fees paid to others may be deducted from royalties paid. Such fees will be transferred fromdeferred writing fees and included in other assets as advances until they are deducted and, therefore, theywill not be amortized.


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William H. Sadlier, Inc. and SubsidiaryNote s to Consol ida ted Financial S ta t emen t s

Note 1. Nature of Operations and Accounting Policies (Continued)Revenue Recognition: Sales of textbooks and related workbooks, teachers' guides and other supplementarymaterials, less provisions for returns, are recorded at the t ime of shipment when title and risk of loss ar etransferred and persuasive evidence of an arrangement exists. In order to recognize revenue, the Companymust not have any continuing obligations and it a lso mus t be probable that the Company will collect theaccounts receivable. Shipping costs are included in manufacturing, royalty and amortization costs.Stock-Based Compensation: The Company records the fair value recognition provisions of AccountingStandards Codification ("ASC") Topic 718, Compensation-Stock Compensation ("Topic 718"). The Companyincludes stock-based compensation expense for all share-based payment awards granted based on thegrant-date fair value estimated in accordance with the provisions of Topic 718.Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributableto differences between the financial statement carrying amounts of existing assets and liabilities and theirrespective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected toapply to taxable income in the years in which those temporary differences are expected to be recovered orsettled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in theperiod that includes the enactment date.The Company adopted the provisions of ASC Topic 740, Accounting for Uncertainty in Income Taxes ('Topic740"), which provides criteria for the recognition, measurement, presentation and disclosure of uncertain taxpositions. A tax benefit from an uncertain position may be recognized only if it is "more likely than not" that theposition is sustainable based on its technical merit. Upon the adoption of Topic 740, the Company had nounrecognized tax benefits. The application of Topic 740 did not have any impact on the Company'sconsolidated balance sheet , consolidated statement of income or consolidated statement of cash flows for th eyear ended December 31, 2011. The Company is no longer subject to income tax examinations by U.S.federal, state or local tax authorities for the years 2006 and before.Net Income per Common Share: Basic income per share is computed by dividing net income by theweighted-average number of common shares outstanding during th e year. Diluted income per share iscomputed by dividing net income by the weighted-average number of common shares outstanding and thedilutive effects of options.The following table reflects the calculation of basic and diluted earnings per share:

2011 2010 2009Earnings per share - basic:Earnings available to common shareholdersWeighted-average shares outstanding

Earnings per share - basicEarnings per share - diluted:Earnings available to common shareholdersWeighted-average shares outstandingDilutive impact of options outstandingWeighted-average shares and potential dilutiveshares outstanding

Earnings pe r share - diluted

$$

4,012,323781,960

5.13

$$3,512,160795,858

4.41

$$4,030,154827,505

4.87

$ 4,012,323781,9603,095

$ 3,512,160795,8582,321

$ 4,030,154827,5053,708

$785,055

5.11 $798,179

4 .40 $831,213

4.85


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William H. Sadlier, Inc. and SubsidiaryNote s t o Conso l i da t e d Financial S t a t emen t s

Note 1. Nature of Operations and Accounting Policies (Continued)Advertising: Costs incurred for producing and communicating advertising are expensed as incurred and areincluded in selling, general and administrative expenses in the accompanying consolidated statements ofincome. Advertising expenses approximated $1,107,000, $509,000, and $697,000 for the years endedDecember 31, 2011, 2010 and 2009, respectively.Subseouent Events: The Company has evaluated subsequent events through March 30, 2011, the date onwhich the financial s ta temen ts were ava i lab le to be issued.Recent Accounting Pronouncements: The Company does not believe that any recently issued, but not yeteffective, accounting standards if currently adopted would have a material effect on the accompanyingconsolidated financial s ta tements .Note 2. Short-Term Borrowings and Compensating Balance ArrangementsAt December 31, 2011, the Company had unsecured lines of credit from banks totaling $15,000,000, whichare available for loans. The lines are subject to review annually. One of the arrangements restricts the use ofsuch balances for general corporate purposes, limits the amount of other debt and requires that shareholders'equity be at least $35,000,000, and working capital be at least $15,000,000 at December 31, 2011. Noamounts were outstanding under these lines at December 31, 2011 or 2010.No t e 3. I ncome Taxe s

Income tax expense (benefit) consists of:

Year ended December 31 , 2011:FederalSta te and local

Year ended December 31, 2010:Federa lSta te and local

Year ended December 31, 2009:Federa lSta t e and local

Curren t Deferred Total

$ 1,935,000 $ 134,000 $ 2,069,000448,000 31,000 479,000

$ 2,383,000 $ 165,000 $ 2,548,000

$ 1,640,000 $ 189,000 $ 1,829,000409,000 47,000 456,000

$ 2,049,000 $ 236,000 $ 2,285,000

$ 2,546,000 $ (477,000) $ 2,069,000642,000 (120,000) 522,000

$ 3,188,000 $ (597,000) $ 2,591,000


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William H. Sadlier, Inc. and SubsidiaryNote s to Conso l i da t e d Financial S t a t emen t s

Note 3. Income Taxes (Continued)A reconciliation of the federal statutory tax rate with the effective rate is as follows as of December 31:

2011 2010 2009

Federal statutory rate 34.0 % 34.0 % 34.0 %Increase (decrease) resulting from:State and local income tax expense, ne t offederal tax effect 4.8 5.3 5 .3Nondeductible expenses 1.1 1.1 0 .8Other (1.0) (1.0) (1.0)

Ef fec t i ve rate 38.9 % 39.4 % 39.1 %

The tax effects of temporary differences that give rise to signif icant portions of the deferred tax assets anddeferred tax liabilities at December 31, 2011 and 2010 ar e presented below:

Net cur ren t defe r red tax asse t s :Accounts receivab le a l lowancesInventory allowances and tax costingadjustmentsPrepaid expenses

Net current de f e rred ta x a s s e t s

Net noncu r ren t defe r red tax assets :Retirement agreement costsFixed assets, due to differences indepreciationDefer red ren t

Ne t nonc u r re n t d e fe rr e d ta x as s e t s

2011 2010

$ 22,000 $ 41,000986,000 1,187,000(109,000) (93,000)

$ 899,000 $ 1,135,000

$ 628,000 $ 527,000(456,000) (457,000)427,000 458,000

$ 599,000 $ 528,000Management has determined that a valuation allowance for deferred tax assets is not required as ofDecember 31, 2011 and 2010. In assessing the realizability of deferred tax assets, management considerswhether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Theultimate realization of deferred tax assets is dependent upon the generation of future taxable income duringthe periods in which those temporary differences become deductible.Note 4 . Re t i r emen t Plans

Substantially all of the Company's employees are eligible to participate in its 401(k) plan. The plan providesfor a matching contribution of 50% of employee contributions limited to 3% of salaries. In addition, each year,the Company's Board of Directors (the "Board") determines the amount of any additional contribution basedupon the Company's profitability. Expenses under the 401(k) plan for the years ended December 31, 2011,2010 and 2009 were $324,000, $384,000 and $360,000, respectively.


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William H. Sadlier, Inc. and SubsidiaryNote s to Conso l i da t e d Financial S t a t emen t s

Note 4. Retirement Plans (Continued)The Company ha s entered into supplemental retirement agreements with certain key employees calling forperiodic payments to be made when the employees reach age 65. The Company has purchased lifeinsurance policies in conjunction with these obligations. At December 31, 2011 and 2010, the value of thesepolicies included in other assets was $316,000 and $299,000, respectively. In 2011, 2010 and 2009, therewere increases (decreases) related to these agreements of $41,200, $16,900 and $(22,000), respectively.Note 5. Employee CompensationThe Company maintains a deferred compensation program, which permits certain key employees to electannually to defer a portion of their compensation, on a pretax basis. The deferred compensation earns aspecified rate of interest and is payable upon the employee's death, retirement or other termination ofemployment or a determinat ion of hardship . The Company may invest amounts equal to th e deferrals inaccounts, which are recorded as assets of the Company. The investments are valued at market and anyaccumulated loss or gain is shown as a component of shareholders' equity. The Company's liability underthis deferred compensation program as of December 31, 2011 and 2010 amounted to approximately$1,575,000 and $1,332,000, respectively. In 2011, 2010 and 2009, approximately $200,000 was deferred ineach of these years in accordance with this program. No amounts were paid under this program in 2010 and2011 .

In 2010, 2009, and 2008, the Board approved a bonus pool for employees, including executives. The amountof the bonus pool, $2,367,000 in 2011, $2,032,000 in 2010, and $2,373,000 in 2009, was based upon apercentage of profits up to a specified level with the allocation of the bonus being determined at the discretionof senior management.Note 6. Common S t o c k

The Board approved the issuance of 100 shares, per meeting, of the Company's common s tock to eachmember of the Board. Pursuant to this authorization, 2,400 treasury shares were issued in 2011 with 2,100treasury shares issued in 2010 and 2,400 treasury shares issued in 2009 at fair market value as of the date ofissuance. This resulted in a compensation expense of $69,450, $51,398 and $45,966 in 2011, 2010 and2009, respectively.Note 7. Stock Option PlansThe William H.Sadlier, Inc. 1998 Stock Option Plan (the "1998 Plan") allowed grants through June 25, 2003and provided for the award of up to 100 ,000 shares of the Company's common stock. Under the 1998 Plan,incentive stock options were granted at an exercise price equal to the market price of the Company's stock onthe date of grant with a maximum term of 10 years . These options generally vest ratably in equal installmentsextending through the fifth year after grant.In June 2003, the Company's shareholders voted in favor of the approval and adoption of the William H.Sadlier, Inc. 2003 Incentive Stock Plan (the "2003 Plan"). The purpose of the 2003 Plan is to promote theinterests of the Company and its shareholders by (i) attracting and retaining key employees and non-employee directors to the Company; (ii) motivating such employees by means of performance-relatedincentives to achieve longer-range performance goals; and (iii) enabling such employees to participate in thelong-term growth and financial success of the Company. The 2003 Plan provides for awards of up to 200,000shares of the Company's stock and may be in the form of stock options, stock appreciation rights, restrictedstock or other stock-based awards. Under the 2003 Plan, incentive stock options may be granted at anexercise price equal to the market price of the Company's stock on the date of grant with a maximum term of10 years . The vesting provisions of these options shall be established at the discretion of the Board at thet ime of grant.

10


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William H. Sadlier, Inc. and SubsidiaryNotes to Consol ida ted Financial S ta t emen t s

Note 7. Stock Option Plans (Continued)The total compensation expense before taxes related to these plans was $865, $1,232, and $1,661 in 2011,2010 and 2009, respectively.Stock option activity during the periods indicated is as follows:

Outstanding, January 1, 2009Exerc isedCanceled

ExpiredOutstanding, December 31, 2009Exerc isedExpiredOutstanding, December 31, 2010Exerc isedExpiredOutstanding, December 31, 2011Vested and exercisable, December 31, 2011

Options available for grant, December 31, 2011

Weighted-AverageRemaining Aggregate

Exercise Contractual IntrinsicOptions Price Term Value

26,000 $ 25 .13(2,000) 19.25(5,000) 25 .75(4,000) 24.9515,000 25 .75(1,000) 25.00(2,000) 25.00

12,000 $ 25 .94 2 .0 $105,090(2,000) 27.00(1,000) 27 .00

9,000 $ 25 .59 1 .4 $120,6907,200 $ 25 .47 1 .4 $ 97,443

196,000

No stock options were granted in any of the years 2011, 2010 or 2009. The total intrinsic value of optionsexercised during the years ended 2011, 2010 and 2009 was $26,000, $9,000 and $14,000, respectively.A summary of the Company's nonvested shares as of December 31, 2011 and changes during the yearended December 31, 2011 is presented below:

Nonves ted Sha r e s

Nonvested at Janaury 1, 2011Vested

Nonvested at December 31 , 2011

11

Sha r e s

3,000(1,200)

1,800

Weighted-AverageGran t Da teFair Value

$ 7.349 .83

5 .82


15/17

William H. Sadlier, Inc. and SubsidiaryNotes to Consolidated Financial Sta tements

Note 7. Stock Option Plans (Continued)As of December 31, 2011, there was $1,000 of total unrecognized compensation cost related to nonvestedshare-based compensation arrangements granted under the plans. The cost is expected to be recognizedover a weighted-average period of 0.6 years. The fair value of shares vested during the years endedDecember 31 , 2011, 2010 and 2009 was $12,000, $14,000 and $22,000, respectively.Note 8. Commi tmen t s

Lease Agreements: The Company has noncancelable operating lease agreements for office space in NewYork and Iowa. The New York office lease contains provisions for future rent increases and rent-free periods.The total amount of rental payments due over the lease term is being charged to rent expense on the straight-line method over the term of the l ea se. The difference between rent expense recorded and the amount paidis recorded as defer red rent on th e consolidated balance sheets. Rental expense for th e years endedDecember 31, 2011, 2010 and 2009 was approximately $1,613,000, $1,996,000, and $1,947,000,respectively.At December 31, 2011, future minimum payments under these noncancelable operating leases for officespace ar e as follows:Year Ending December 31.

2012 $ 1,601,0002013 1,629,0002014 1,658,0002015 1,746,0002016 1,788,000Thereafter through 2020 6,345,000Total minimum lease payments $ 14,767,000

At December 31, 2011, future minimum rental payments under noncancelable operating leases for equipmenta re a s follows:

Year Ending December 31.2012 $ 271,0002013 266,0002014 223,000

Total minimum lease payments $ 760,000Letter of Credit: The Company was committed under a letter of credit by a bank on its behalf of approximately$339,000.

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William H. Sadlier, Inc. and Subsidiary

Corporate Offices:9 Pine Stree tNew York, NY 10005-1002Registrar and Transfer Agent:Amer ican S tock Tr an sf e r &Trust CompanyAudi tor s :McGladrey & Pullen, LLPCounse l :Satterlee StephensBurke & Burke LLPThe Annual Meeting:The Annual Meeting ofShareholders will be held a tthe offices of :William H. Sadlier, Inc.9 Pine S tree t, 6 th FloorNew York, NY 10005June 21 , 2012

Directors

Frank Sadlier DingerChairman o f th e Board andChiefOperating OfficerWilliam H. Sadlier, Inc.William Sadlier DingerPresidentWilliam H. Sadlier, Inc.Most Rev. Gregory M.AymondArchbishop ofNew OrleansMichael J . GibbonsFormer Managing DirectorJ.P. Morgan Chase &Co., Inc.Maurice H. Hartigan IILimited PartnerGarnet CapitalAdvisorsArthur McCauleyChairman of the Board,President andChiefExecut ive OfficerNorwalk Compressor CompanyWilliam H. McKenna IIIPrincipal Scientist,Pharmaceutical DevelopmentPurdue Pharma LP .

Rev. Dona ld Senior,CP , STL, STDPresidentCatholic Theological UnionChicago

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Officers

Frank Sadlier DingerChairman o f th e Board andChief Operating OfficerWilliam Sadlier DingerPresident

John BonenbergerVice Pres ident

Rosemary K. CalicchioExecutive Vice President

Kennedy D. PaulChief Financial Officerand Treasurer

Angela B. DingerSecretary and GeneralCounsel

Carole M. EipersVice President

Kevin O'DonnellVice President

Alexandra Rivas-SmithVice PresidentCaro le UettwillerVice President


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NOTICE OF ANNUAL MEETING OF SHAREHOLDERSOF

WILLIAM H. SADLIER, INC.

To the Shareholders ofWilliam H. Sadlier, Inc.:NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of William H.Sadlier, Inc. will be held at the off ices ofWilliam H. Sadlier, Inc., 9 Pine St reet (ent rance on 14Wall Street), 6th Floor, New York, New York, on Thursday, June 21, 2012, at 2:00 P.M., localtime, for the following purposes:1. The election of directors for the ensuing year; and2. The transaction of such other business as may properly come before the meeting or anyadjournment thereof.The Board of Directors has fixed the close of business on Wednesday, May 16, 2012, as therecord date for t he de te rmina tion of t he s ha re ho ld er s e nt it le d t o notice o f and to vo te at suchmeeting or any adjournment or postponement thereof. Only those shareholders of record at theclose of business on such date will be entitled to vote at the meeting or any adjournment orpostponement thereof. A list of the shareholders entitled to vote at the meeting will be availablefor inspection at the meeting.Your prompt action in sending in your proxy will be greatly appreciated. An envelope isprovided for your use which requires no postage ifmailed in the United States. If you have morethan one shareholder account, you are receiving a proxy for each account. Please vote, date, signand mail all proxies you receive.

BY ORDER OF THE BOARD OF D IRECTORS

Angela B. DingerSecretary

New York, New YorkMay 21, 2012

Sadlier WH 2011 Annual Report

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