Sadlier WH 2009 Annual Report

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William H. Sadlier, Inc. and Subsidiary

Annual Report

December 31, 2009



WILLIAM H. SADLIER, INC. AND SUBSIDIARY

To Our Shareholders:

In 2009 net income of William H. Sadlier, Inc. was $4,030,000, an increase of $1,719,000 from

2008, although we were faced with a $1,230,000 decrease in net sales. Despite the economic problems associated with the year, for ourselves as well as our competitors, 2009 was a profitableyear.

In 2010 our major focus will be the launching of We Believe with Project Disciple, in addition tocontrolling our costs since there is still a long road ahead to stabilizing the economy . We look forward to the future as we continue to study how print and technology will coexist in theeducational environment.

We are pleased that the Company's Board of Directors has declared a dividend of $1.25 per share, payable on June 18, 2010 to shareholders of record as of May 17, 2010.

Your continued trust and support are appreciated.

Sincerely,

William Sadlier Dinger Frank Sadlier Dinger President Chairman of the Board and

Chief Operating Officer



(Dollars in thousands execept per share data)

2009 2008 2007 2006 2005

Net sales 53,358$ 54,588$ 55,338$ 55,052$ 52,488$

Net income 4,030 2,311 2,291 3,303 2,663

Net income per share:Basic 4.87 2.79 2.81 4.07 3.29

Diluted 4.85 2.76 2.72 3.94 3.20

Total assets 44,146 41,185 45,771 42,690 37,845

Cash dividends per share * .70 .75 1.00 .90 .75

* Dividends were declared and paid during the second quarter for all years presented.

WILLIAM H. SADLIER, INC. AND SUBSIDIARY

Selected Financial Data

Common Stock Prices

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 3, 2010, there were 96 shareholders of record.

High Low High Low

First Quarter 27.45$ 21.22$ 44.25$ 44.25$

Second Quarter 26.00 21.22 45.00 41.75

Third Quarter 34.00 26.00 42.95 40.65 Fourth Quarter 35.00 28.00 42.95 27.45

2009 2008



McGladrey & Pullen, LLP is a member firm of RSM International – an affiliation of separate and independent legal entities.

3

Independent Auditor's Report

To the Shareholders and Board 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, 2009 and 2008, and the related consolidated statements of income, shareholders'equity and cash flows for each of the three years ended December 31, 2009. These consolidated financial statementsare the responsibility of the Company's management. Our responsibility is to express an opinion on these financialstatements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financialposition of William H. Sadlier, Inc. and Subsidiary as of December 31, 2009 and 2008, and the results of their operationsand their cash flows for each of the three years ended December 31, 2009 in conformity with accounting principlesgenerally accepted in the United States of America.

New York, New YorkMarch 23, 2010




Consolidated Balance SheetsDecember 31, 2009 and 2008

4

2009 2008

Current Assets:Cash and cash equivalents 24,652,357 , ,

Accounts receivable, less allowance for doubtful accounts and returns of $389,252 and $321,011in and 1,617,052 , ,

Inventories:Bound books and merchandise, net 3,929,156 4,586,435 Work-in-process, net 213,237 , Paper, net 713,352 115,054

4,855,745 5,241,096 Prepaid expenses 405,476 , Refundable income taxes 210,722 Deferred income taxes 1,493,000 , ,

Total current assets 33,023,630 28,095,433

Fixed Assets and Software, at cost:Furniture, fixtures and equipment 2,551,905 2,495,114 Software 2,607,463 , , Leasehold improvements 420,845 ,

5,580,213 5,105,028 Less accumulated depreciation and amortization 4,065,333 , ,

Total fixed assets and software 1,514,880 1,673,096

Other Assets:Deferred prepublication costs, net of amortization expense 6,722,766 7,794,413 Deferred writing fees, net of amortization expense 2,101,742 , , Deferred income taxes 406,000 127,000 Other 376,882 441,170

Total assets 44,145,900$ 41,185,243$

Current Liabilities: Accounts payable 922,630 , , Accrued liabilities:

Royalties 1,870,887 , , Payroll 2,461,441 , , Retirement benefits and deferred compensation 32,747 54,686 Income Taxes 276,819 - Other 407,583 116,289

Total current liabilities 5,972,107 5,304,162

Deferred rent 1,186,831 1,139,124 Deferred compensation 1,095,914 867,714 Other 138,563 -

Total liabilities 8,393,415 7,311,000

Commitments

Shareholders' Equity:Common shares - . par value; authorized , , shares, issued , shares 225,000 ,

Additional paid-in capital 114,630 136,207 Retained earnings 38,056,910 , ,

38,396,540 34,969,170 Less cost of 102,766 and 47,503 treasury shares in 2009 and 2008, respectively (2,642,838) (1,091,982)

Accumulated other comprehensive loss, net of taxexpense of $11,000 in 2008 (1,217) (2,945)

Total shareholders' equity 35,752,485 33,874,243

Total liabilities and shareholders' equity 44,145,900$ 41,185,243$

See Notes to Consolidated Financial Statements.

LIABILITIES AND SHAREHOLDERS' EQUITY

ASSETS




Consolidated Statements of Income Years Ended December 31, 2009, 2008 and 2007

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2009 2008 2007

Net Sales 53,357,519$ 54,588,444$ 55,338,117$

Operating Costs and Expenses:

Manufacturing, royalty and amortization 15,237,886 16,878,503 16,944,061

Editorial and distribution 7,575,735 9,021,947 8,687,462

Selling, general and administrative 24,266,060 25,215,493 25,916,682

47,079,681 51,115,943 51,548,205

Operating profit 6,277,838 - 3,472,501 3,789,912

Other Income (Expense):Interest income 202,189 260,027 583,696

Other income, net 172,721 640,929 261,362

Interest expense (31,594) (208,447) (534,951)

343,316 692,509 310,107

Income Before Income Taxes 6,621,154 4,165,010 4,100,019

Provision for Income Taxes 2,591,000 1,854,000 1,809,000

Net income 4,030,154$ 2,311,010$ 2,291,019$

Net Income per Common Share:

Basic 4.87$ 2.79$ 2.81$

Diluted 4.85$ 2.76$ 2.72$

Average Shares Outstanding:

Basic 827,505 826,988 816,521

Diluted 831,213 836,648 841,230





Consolidated Statements of Shareholders' Equity Years Ended December 31, 2009, 2008 and 2007

6

AccumulatedAdditional Other

Common Paid-in Retained Comprehensive TreasuryShares Capital Earnings Income (Loss) Shares Total

Balance, January 1, 2007 225,000$ 100,016$ 31,440,554$ 263,900$ (1,963,328)$ 30,066,142$

Net income: - - 2,291,019 - - 2,291,019 Unrealized gains on investment securities,net of tax of $20,011 - - - - - 34,959 - 34,959

Total comprehensive income - - - - - 2,325,978

Cash dividends, $1.00 per share - - (815,197) - - (815,197)

250 shares purchased for treasury - - - - (10,000) (10,000)

2,600 shares granted to Board members - 20,767 - - 59,678 80,445

8,250 stock options exercised - 18,025 - - 189,525 207,550

Noncash compensation expense - 5,938 - - - 5,938

Balance, December 31, 2007 225,000 144,746 - 32,916,376 - 298,859 - (1,724,125) - 31,860,856

Net income: - - 2,311,010 - - 2,311,010 Unrealized loss on investment securities,net of tax benefit of $205,354 - - - - - - (298,859) - (298,859)

Foreign currency translation - - - (2,945) - (2,945)


Cash dividends, $0.75 per share - - (619,423) - - (619,423)

2,500 shares granted to Board members - 16,471 - - 57,458 73,929

25,000 stock options exercised - (27,875) - - 574,685 546,810


Balance, December 31, 2008 225,000 136,207 - 34,607,963 - (2,945) - (1,091,982) - 33,874,243

Net income: - - 4,030,154 - - 4,030,154

Foreign currency translation - - - 1,728 - 1,728


Cash dividends, $.70 per share - - (581,207) - - (581,207)

59,663 shares purchased for treasury - - - - (1,658,559) (1,658,559)

2,400 shares granted to Board members - (13,014) - - 58,980 45,966

2,000 stock options exercised - (10,224) - - 48,723 38,499


Balance, December 31, 2009 225,000$ 114,630$ # 38,056,910$ # (1,217)$ # (2,642,838)$ # 35,752,485$





Consolidated Statements of Cash Flows Years Ended December 31, 2009, 2008 and 2007

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2009 2008 2007

Cash Flows From Operating Activities:Net income 4,030,154$ 2,311,010$ 2,291,019$ Adjustments to reconcile net income to net cash

provided by operating activities:Depreciation and amortization of fixed assets 206,851 227,035 237,060 Amortization of computer software costs 426,550 265,340 145,540 Amortization of prepublication costs, deferred writingfees and license agreement costs 3,979,183 3,856,850 3,594,745

Allowance for doubtful accounts 68,241 (350) (114,471) Stock compensation 47,627 76,804 86,383 Gain on investment securities 1,728 (417,702) (80,246) Deferred income taxes (benefit) (597,000) 1,470,000 26,186 Deferred rent 47,707 47,707 47,707 Changes in operating assets and liabilities:

Decrease (increase) in accounts receivable 991,554 (155,812) (82,497) Decrease (increase) in inventories 385,351 685,084 (563,521) Decrease in prepaid expenses 10,252 13,745 83,236 Increase in deferred writing fees (384,817) (2,195,549) (1,219,238) Decrease (increase) in other assets 61,148 55,339 (105,019) (Decrease) increase in accounts payable (487,861) (1,023,961) 1,697,151 Increase (decrease) in accrued liabilities 1,039,489 (932,768) (369,514) Increase (decrease) in deferred compensation 206,261 (4,495,392) 757,334 Increase (decrease) in accrued taxes on income 487,541 366,686 (1,607,496)

Total adjustments 6,489,805 (2,156,944) 2,533,340

Net cash provided by operating activities 10,519,959 154,066 4,824,359

Cash Flows From Investing Activities:Sales of investment securities - 2,555,448 944,266 Purchases of investment securities - - (983,262) Capital expenditures (59,926) (89,110) (150,583) Prepublication cost expenditures (1,564,055) (3,759,311) (2,287,064)

Computer software costs (418,394) (650,897) (285,633)

Net cash used in investing activities (2,042,375) (1,943,870) (2,762,276)

Cash Flows From Financing Activities:Dividends paid (581,207) (619,423) (815,197) Purchase of shares for treasury (1,658,560) - (10,000) Proceeds from exercise of stock options 38,500 546,806 207,550

Net cash used in financing activities (2,201,267) (72,617) (617,647)

Increase (decrease) in cash and cash equivalents 6,276,317 (1,862,421) 1,444,436

Cash and Cash Equivalents:Beginning 18,376,040 20,238,461 18,794,025

Ending 24,652,357$ 18,376,040$ 20,238,461$

Supplemental Disclosures of Cash Flow Information:

Interest paid 137,014$ 574,405$ 35,373$

Income taxes paid 2,700,459$ 13,625$ 3,382,206$





Notes to Consolidated Financial Statements

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Note 1. Nature of Operations and Accounting Policies

Nature 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 andreading. The Company's major markets are in Catholic schools, parish schools of religion, and public and privateelementary and high schools, primarily in the United States.

Estimates Used in Financial Statements: The preparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, and the reported amountsof revenue and expenses during the reporting period. Actual results could differ from those estimates.

Concentrations of Credit Risk: The Company maintains cash in bank deposit accounts which, at times, exceed federallyinsured limits. The Company has not experienced any losses on these accounts.

Principles of Consolidation: The consolidated financial statements include the accounts of the Company and itssubsidiary. All material intercompany transactions and balances have been eliminated. The subsidiary merged intoWilliam H. Sadlier on November 19, 2009.

Accounts Receivable: Accounts receivable are reported at their outstanding unpaid principal balances reduced by anallowance for doubtful accounts. The Company estimates doubtful accounts based on historical bad debts, factorsrelated to specific customers' ability to pay and current economic trends. The Company writes off accounts receivableagainst the allowance when a balance is determined to be uncollectible.

Inventories: Inventories, consisting mostly of bound books, are stated at the lower of cost (first-in, first-out) or market andare net of allowances for obsolete and slow-moving goods.

Depreciation and Related Policies: Depreciation of furniture, fixtures and equipment is provided by the straight-linemethod over the estimated useful lives of the assets which range from three to ten years. Amortization of computer software costs is provided by the straight-line method and is amortized over three to five years. Amortization of the costof improvements to leased premises is based on the terms of the lease or the estimated useful lives of the improvements,whichever period is shorter. Expenditures for maintenance and 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 primarily of design,layout, art and photo services, composition, and film and plate preparation charges. These costs are amortized over fiveyears, by the straight-line method, from the date of publication or the estimated remaining life, if shorter. Costs applicableto revised editions of standard texts are included in prepublication costs and costs applicable to reprints are expensed asincurred. It is the Company's policy to periodically review and evaluate whether the benefits associated with these costsare expected to be realized and whether, therefore, deferral and amortization are justified.

Deferred Writing Fees: Writing fees paid to outside authors are capitalized as deferred writing fees and amortized over three years by the straight-line method from the date of publication. It is the Company's policy to periodically review andevaluate whether the benefits associated with these fees are expected to be realized and whether, therefore, deferral andamortization are justified. Pursuant to agreements with authors, certain writing fees paid to others may be deducted fromroyalties paid. Such fees will be transferred from deferred writing fees and included in other assets as advances until theyare deducted. They will not be amortized.





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Note 1. Nature of Operations and Accounting Policies (Continued)

Revenue Recognition: Sales of textbooks and related workbooks, teachers' guides and other supplementary materials,

less provisions for returns, are recorded at the time of shipment when title and risk of loss are transferred and persuasiveevidence of an arrangement exists. In order to recognize revenue, the Company must not have any continuingobligations and it also must be probable that the Company will collect the accounts receivable. Shipping costs areincluded in manufacturing, royalty and amortization costs.

Stock-Based Compensation: The Company adopted the fair value recognition provisions of Accounting StandardsCodification ("ASC") Topic 718, Compensation-Stock Compensation ("Topic 718"), using the modified prospectivetransition method. Under this transition method, stock-based compensation expense in 2006 included compensationexpense for all share-based payment awards granted prior to, but not yet vested as of January 1, 2006, based on thegrant-date fair value estimated in accordance with the original provisions of Topic 718. It also includes stock-basedcompensation expense for all share-based payment awards granted after December 31, 2005 based on the grant-datefair value estimated in accordance with the provisions of Topic 718.

Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable todifferences between the financial statement carrying amounts of existing assets and liabilities and their respective taxbases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income inthe years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assetsand liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Net Income per Common Share: Basic income per share is computed by dividing net income by the weighted-averagenumber of common shares outstanding during the year. Diluted income per share is computed by dividing net income bythe weighted-average number of common shares outstanding and the dilutive effects of options.

The following table reflects the calculation of basic and diluted earnings per share:

2009 2008 2007

Earnings per share - basic:

Earnings available to common shareholders 4,030,154$ 2,311,010$ 2,291,019$

Weighted-average shares outstanding 827,505 826,988 816,521

Earnings per share - basic 4.87$ 2.79$ 2.81$

Earnings per share - diluted:

Earnings available to common shareholders 4,030,154$ 2,311,010$ 2,291,019$

Weighted-average shares outstanding 827,505 826,988 816,521

Dilutive impact of options outstanding 3,708 9,660 24,709

Weighted-average shares and potential dilutive

shares outstanding 831,213 836,648 841,230

Earnings per share - diluted 4.85$ 2.76$ 2.72$

Advertising: Costs incurred for producing and communicating advertising are expensed as incurred and included inselling, general and administrative expenses in the accompanying consolidated statements of income. Advertisingexpenses approximated $697,000, $771,000, and $1,522,000 for the years ended December 31, 2009, 2008 and 2007,respectively.





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Note 1. Nature of Operations and Accounting Policies (Continued)

Recent Accounting Pronouncements: Effective January 1, 2009, the Company adopted the provisions of ASC Topic 740,

Accounting for Uncertainty in Income Taxes ("Topic 740"), which provides criteria for the recognition, measurement,presentation and disclosure of uncertain tax positions. A tax benefit from an uncertain position may be recognized only if itis "more likely than not" that the position is sustainable based on its technical merit. Upon the adoption of Topic 740, theCompany had no unrecognized 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 the year endedDecember 31, 2009. The Company is no longer subject to income tax examinations by U.S. federal, state or local taxauthorities for the years 2004 and before.

In May 2009, the Financial Accounting Standards Board (the "FASB") issued ASC Topic 855, Subsequent Events ("Topic855"), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Topic 855 also requiresentities to disclose the date through which subsequent events were evaluated as well as the rational as to why the date

was selected. Topic 855 is effective for interim and annual periods ended after June 15, 2009. The Company hasadopted the provisions of Topic 855. The Company has evaluated subsequent events through the date these financialstatements were available to be issued, March 23, 2010.

Note 2. Short-Term Borrowings and Compensating Balance Arrangements

At December 31, 2009, the Company had unsecured lines of credit from banks totaling $15,000,000, which are availablefor loans. The lines are subject to review annually. One of the arrangements restricts the use of such balances for general corporate purposes, limits the amount of other debt and requires that shareholders' equity be at least$22,500,000, and working capital be at least $7,500,000 at December 31, 2009. No amounts were outstanding under these lines at December 31, 2009 or 2008.





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Note 3. Income Taxes

Income tax expense (benefit) consists of:

Current Deferred Total

Year ended December 31, 2009:

Federal 2,546,000$ (477,000)$ 2,069,000$

State and local 642,000 (120,000) 522,000

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


Federal 271,000$ 1,037,000$ 1,308,000$

State and local 113,000 433,000 546,000

384,000$ 1,470,000$ 1,854,000$


Federal 1,804,000$ (378,000)$ 1,426,000$

State and local 485,000 (102,000) 383,000

2,289,000$ (480,000)$ 1,809,000$

A reconciliation of the federal statutory tax rate with the effective rate is as follows as of December 31:

2009 2008 2007

Federal statutory rate 34.0 % 34.0 % 34.0 %

Increase (decrease) resulting from:

State and local income tax expense, net of

federal tax effect 5.3 8.3 5.9

Nondeductible expenses 0.8 1.7 1.8

Other (1.0) 0.6 2.4

1.6

Effective rate 39.1 % 44.6 % 44.1 %





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Note 3. Income Taxes (Continued)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax

liabilities at December 31, 2009 and 2008 are presented below:

2009 2008

Net current deferred tax assets:

Accounts receivable allowances 84,000$ 61,000$

Inventory allowances and tax costing adjustments 1,558,000 1,228,000

Prepaid expenses (149,000) (155,000)

Retirement agreement costs - 41,000

Net current deferred tax assets 1,493,000$ 1,175,000$

Net noncurrent deferred tax assets:

Retirement agreement costs 443,000$ 386,000$

Fixed assets, due to differences in depreciation (502,000) (736,000)

Deferred rent 465,000 477,000

Net noncurrent deferred tax assets 406,000$ 127,000$

Management has determined that a valuation allowance for deferred tax assets is not required as of December 31, 2009and 2008. In assessing the realizability of deferred tax assets, management considers whether it is more likely than notthat some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is

dependent upon the generation of future taxable income during the periods in which those temporary differences becomedeductible.

Note 4. Retirement Plans

Substantially all of the Company's employees are eligible to participate in its 401(k) plan. The plan provides for amatching contribution of 50% of employee contributions limited to 3% of salaries. In addition, each year, the Company'sBoard of Directors (the "Board") determines the amount of any additional contribution based upon the Company'sprofitability. Expenses under the 401(k) plan for the years ended December 31, 2009, 2008 and 2007 were $360,000,$324,000 and $377,000, respectively.

The Company has entered into supplemental retirement agreements with certain key employees calling for periodic

payments to be made when the employees reach age 65. The Company has purchased life insurance policies inconjunction with these obligations. At December 31, 2009 and 2008, the value of these policies included in other assetswas $251,000 and $270,000, respectively. In 2009, 2008 and 2007, there were (decreases) increases related to theseagreements of $(22,000), $11,200 and $12,900, respectively.





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Note 5. Employee Compensation

The Company maintains a deferred compensation program, which permits key employees to elect annually to defer a

portion of their compensation, on a pretax basis. The deferred compensation earns a specified rate of interest and ispayable upon the employee's death, retirement or other termination of employment or a determination of hardship. TheCompany may invest amounts equal to the deferrals in accounts, which are recorded as assets of the Company. Theinvestments are valued at market and any accumulated loss or gain is shown as a component of shareholders' equity.The Company's liability under this deferred compensation program as of December 31, 2009 and 2008 amounted toapproximately $1,096,000 and $868,000, respectively. In 2009, 2008 and 2007, approximately $200,000 was deferred ineach of these years in accordance with this program. In March 2008, approximately $4,825,000 of deferredcompensation was paid to the key employees.

In 2009, 2008 and 2007, the Board approved a bonus pool for employees, including executives. The amount of thebonus pool, $2,373,000 in 2009, $1,363,000 in 2008, and $1,784,000 in 2007, was based upon a percentage of profits upto a specified level with the allocation of the bonus being determined at the discretion of senior management.

Note 6. Common Stock

In 1998, the Board approved the issuance of 100 shares, per meeting, of the Company's common stock to each member of the Board. Pursuant to this authorization, 2,400 treasury shares were issued in 2009 with 2,500 treasury shares issuedin 2008 and 2,600 treasury shares issued in 2007 at fair market value as of the date of issuance. This resulted in acompensation expense of $45,966, $73,929 and $80,445 in 2009, 2008 and 2007, respectively.

Note 7. Stock Option Plans

The William H. Sadlier, Inc. 1998 Stock Option Plan (the "1998 Plan") allowed grants through June 25, 2003 and providedfor 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 on the date of grant with a maximumterm of 10 years. These options generally vest ratably in equal installments extending 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 the interests of the Companyand its shareholders by (i) attracting and retaining key employees and non-employee directors to the Company; (ii)motivating such employees by means of performance-related incentives to achieve longer-range performance goals; and(iii) enabling such employees to participate in the long-term growth and financial success of the Company. The 2003 Planprovides for awards of up to 200,000 shares of the Company's stock and may be in the form of stock options, stockappreciation rights, restricted stock or other stock-based awards. Under the 2003 Plan, incentive stock options may begranted at an exercise price equal to the market price of the Company's stock on the date of grant with a maximum termof 10 years. The vesting provisions of these options shall be established at the discretion of the Board at the time of grant.

The total compensation expense before taxes related to these plans was $1,661, $2,865 and $5,938 in 2009, 2008 and2007, respectively.





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Note 7. Stock Option Plans (Continued)

Stock option activity during the periods indicated is as follows:

Remaining Aggregate

Exercise Contractual Intrinsic

Options Price Term Value

Outstanding, January 1, 2007 72,500 23.83$

Exercised (8,250) 25.16

Canceled (6,000) 24.67

Outstanding, December 31, 2007 58,250 23.55

Exercised (25,000) 21.87

Canceled (6,000) 24.67

Expired (1,250) 19.00

Outstanding, December 31, 2008 26,000 25.13

Exercised (2,000) 19.25

Canceled (5,000) 25.75

Expired (4,000) 24.95

Outstanding, December 31, 2009 15,000 25.75$ 2.5 35,190$

Vested and exercisable, December 31, 2009 10,500 25.68$ 2.2 25,455$

Options available for grant, December 31, 2009 196,000

Weighted-Average

No stock options were granted in any of the years 2009, 2008 or 2007. The total intrinsic value of options exercisedduring the years ended 2009, 2008 and 2007 was $14,000, $170,000, and $154,000, respectively.

A summary of the Company's nonvested shares as of December 31, 2009 and changes during the year endedDecember 31, 2009 is presented below:

Weighted-Average

Grant Date

Nonvested Shares Shares

Nonvested at Janaury 1, 2009 8,400 8.16$

Vested (2,400) 9.00

Cancelled (1,500) 8.07

Nonvested at December 31, 2009 4,500 8.07$

Fair Value





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Note 7. Stock Option Plans (Continued)

As of December 31, 2009, there was $3,000 of total unrecognized compensation cost related to nonvested share-based

compensation arrangements granted under the plans. The cost is expected to be recognized over a weighted-averageperiod of 1.9 years. The fair value of shares vested during the years ended December 31, 2009, 2008 and 2007 was$22,000, $21,000 and $56,000, respectively.

Note 8. Commitments

Lease Agreements: The Company has noncancelable operating lease agreements for office space in New York andIowa, and warehouse space in New Jersey. The New York office lease contains provisions for future rent increases andrent-free periods. The total amount of rental payments due over the lease term is being charged to rent expense on thestraight-line method over the term of the lease. The difference between rent expense recorded and the amount paid isrecorded as deferred rent on the consolidated balance sheets. Rental expense for the years ended December 31, 2009,2008 and 2007 was approximately $1,947,000, $1,897,000 and $1,786,000, respectively.

At December 31, 2009, future minimum payments under these noncancelable operating leases for office and warehousespace are as follows:

Year Ending December 31,

2010 1,971,000$

2011 1,575,000

2012 1,563,000

2013 1,590,000

2014 1,618,000

Thereafter through 2020 9,845,000

Total minimum lease payments 18,162,000$

At December 31, 2009, future minimum rental payments under noncancelable operating leases for equipment are asfollows:

Year Ending December 31,

2010 495,000$

2011 377,000

2012 248,000

2013 238,000 2014 205,000

Total minimum lease payments 1,563,000$

Letter 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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Directors Officers

Corporate Offices:9 Pine Street

New York, NY 10005-1002

Registrar and Transfer Agent: American Stock Transfer &Trust Company

Auditors:McGladrey & Pullen, LLP

General Counsel:Satterlee StephensBurke & Burke LLP

The Annual Meeting:The Annual Meeting of Shareholders will be held atthe offices of:William H. Sadlier, Inc.9 Pine Street, 6th Floor New York, NY 10005June 17, 2010

Frank Sadlier Dinger Chairman of the Board and

Chief Operating Officer William H. Sadlier, Inc.

William Sadlier Dinger President William H. Sadlier, Inc.

Michael J. GibbonsFormer Managing Director Morgan Guaranty Trust Company

Maurice H. Hartigan II

Limited Partner Gartner Capital Advisors

Arthur McCauley, Jr.Chairman of the Board ,President and Chief Executive Officer Norwalk Compressor Company

William H. McKenna IIIPrincipal Scientist,Pharmaceutical Development Purdue Pharma L.P.

Rev. Donald Senior,CP, STL, STDPresident Catholic Theological UnionChicago

Frank Sadlier Dinger Chairman of the Board and

Chief Operating Officer

William Sadlier Dinger President

John Bonenberger Vice President

Rosemary K. CalicchioVice President

Lawrence R. Danziger Treasurer

Angela B. Dinger Secretary

Carole M. EipersVice President

Deborah J. JonesVice President

Kevin O'Donnell Vice President

Robert A. RichardsVice President

Carole Uettwiller Vice President

Documents

Sadlier WH 2009 Annual Report