BOSTON, Aug. 4, 2016 /PRNewswire/ --Global learning
company Houghton Mifflin Harcourt ("HMH" or the "Company") (NASDAQ:
HMHC) today announced its financial results for the second quarter
ended June 30, 2016.
Second Quarter 2016 Highlights:
- Net Sales for the three months ended June 30, 2016 were $392
million, an increase of $12
million compared with $380
million in the same period in 2015.
- Billings were $413 million, a
decrease of $23 million compared with
$436 million in the second quarter of
2015.
- Net loss increased to $28
million, an unfavorable change of $20
million compared with $8
million in the second quarter of 2015.
- Adjusted EBITDA was $75 million,
a decrease of $5 million compared
with $80 million for the second
quarter of 2015.
- Content development or pre-publication costs were $32 million, an increase of $5 million compared with $27 million for the second quarter of 2015.
- The Company repurchased over 1 million shares for approximately
$20 million under its share
repurchase program during the second quarter of 2016.
- HMH continues to deepen its core and adjacent markets offerings
including continued investment toward the development of next
generation reading, science and social studies programs and the
release of READ 180 Universal, HMH's flagship reading
intervention program.
- The Company lowered its full year 2016 outlook for net sales
and billings to reflect an updated expectation for its core
domestic education market. 2016 net sales are now expected to be
between $1,485 and $1,555 million and
billings are now expected to be between $1,525 and $1,595 million.
"We are confident in the power of our best-in-class K-12
content, and we continue to leverage our solid core business to
expand into key growth areas," said Linda
K. Zecher, President and Chief Executive Officer of HMH.
"Despite the revision in guidance, we are seeing continued strength
in the fundamentals of our business, and we remain confident about
our growth strategy as we move into 2017 and beyond."
"Given the robust backlog of orders in the second quarter as
well as our strong pipeline of opportunities for the remainder of
the year, we are confident in our revised outlook for 2016," said
Joe Abbott, Chief Financial Officer
of HMH. "As we look toward additional opportunities for 2017 and
beyond, we are making strategic investments in our core products
and upgrades to our technology infrastructure, which we believe
will strengthen our market leadership and further position us for
long term growth."
Full Year 2016 Outlook:
The Company is revising its outlook for full year 2016. HMH now
expects its net sales to be in the range of $1,485 to $1,555 million and billings to be in
the range of $1,525 to $1,595
million. The lower ranges are primarily due to a reduction
in the expected 2016 new adoption market opportunity and lower than
expected growth in the first full year of ownership of the acquired
EdTech1 business.
Pre-publication or content development costs for 2016 are
expected to remain at approximately $120 to
$140 million.
Second Quarter 2016 Business Highlights:
Education Segment: In the second quarter, HMH
continued to see strong demand for its core K-12 offerings despite
an overall decline in the new adoption market opportunity in 2016.
In the California English Language Arts adoption, several districts
postponed their purchases to subsequent years which impact 2016,
but HMH expects to increase sales opportunities in 2017 and
beyond.
HMH continues to develop innovative, new core curriculum
programs that leverage technology to increase engagement and
student achievement. The Company recently launched READ 180
Universal, the next generation of HMH's intensive reading
intervention program. The new offering allows HMH to
effectively leverage its core classroom curriculum to grow into
adjacent markets and demonstrate the crossover capabilities of the
Company's product portfolio. The new program, planned for a third
quarter 2016 sale, is being sold nationwide including into the
English Language Arts adoption in California.
Over the next few years, the Company plans to roll out new
programs for reading, science and social studies with new and
enhanced digital features and functionalities. HMH's reading
program will incorporate more interactive and digital delivery
student materials, and include a highly flexible instruction
program to fit a wide variety of teacher needs. The science
program, mapped to the National Research
Council's three dimensional framework for Next Generation
Science Standards, will include engaging features that allow for
easier relatability of STEM topics and HMH's social studies
curriculum will feature interactive digital experiences. The new
science and social studies programs will include HMH Field
Trips for Google Expeditions, launched during the second
quarter.
Based on a content partnership with Google, HMH Field
Trips use Google Expeditions, a smartphone-based virtual
reality platform built for the classroom, to provide an engaging
experience for students while seamlessly integrating with HMH's
existing curriculum. The Company has also seen strong momentum from
HMH Marketplace—its online platform for buying and selling
educational resources and technology—since its launch in the first
quarter of 2016. HMH continues to onboard additional sellers and
has seen the total number of listings nearly double since
launch.
Consumer and Early Learning: Curious
World™, HMH's subscription-based early learning platform,
recently reached the one million download milestone and continues
to gain popularity with millennial parents and children.
Trade Publishing Segment: HMH's Trade segment
continues to perform well largely due to front list culinary titles
such as The Whole 30, Weber's New American Barbecue,
Meathead and Ted Talks. Looking forward in 2016, HMH
has a strong pipeline of titles in General Interest, Culinary and
Young Readers.
Integration and Corporate Highlights: As
announced in the first quarter of 2016, HMH is implementing
upgrades to its technology infrastructure, allowing the Company's
operations to scale as it continues to grow, as well as fully
integrate the EdTech business. With the migration of the EdTech
business to the upgraded SAP platform, HMH expects to realize
integration savings from the acquisition in the second half of
2016.
Second Quarter 2016 Financial Results:
Net Sales and Billings: Net sales for the three
months ended June 30, 2016 were
$392 million, an increase of
$12 million, or 3%, from the same
period in 2015. The primary driver of the net sales increase was a
$19 million incremental contribution
from the EdTech business, an $11
million increase in net sales of the international business
primarily due to Department of Defense school sales, and to a
lesser extent, greater sales in the Asia
Pacific region and Canada
and $1 million in higher Trade
Publishing net sales due to the strength of its bestselling
culinary titles. Partially offsetting this increase was a decline
in domestic education net sales of $13
million due to a smaller new adoption market in 2016 versus
2015, as well as $6 million lower net
sales of clinical and formative assessment products.
Billings, an operating measure, which is derived from net sales
taking into account the change in deferred revenue, for the three
months ended June 30, 2016 were
$413 million compared with
$436 million for the same period in
2015. This $23 million, or 5%,
decrease in billings was largely as a result of lower domestic
sales due to the aforementioned smaller new adoption market
partially offset by incremental contribution from the EdTech
business and higher international sales.
Net Loss: Net loss in the second quarter of 2016
was $28 million, an unfavorable
change of $20 million, compared with
a net loss of $8 million in the same
quarter of 2015, primarily due to the higher costs discussed below
and a $3 million increase in interest
expense, due to the increase in the Company's term loan in
conjunction with the EdTech acquisition in May 2015. Additionally, HMH's income tax benefit
decreased $8 million to $3 million, from a benefit of $11 million for the same period in 2015 due to a
higher deferred tax liability generated from indefinite-lived
intangible assets. These unfavorable impacts were partially offset
by the $12 million increase in net
sales.
Adjusted EBITDA: Adjusted EBITDA was $75 million, 5% or $5
million lower, compared with $80
million for the second quarter of 2015 driven in part by
$14 million in higher selling and
administrative expenses and higher cost of sales, excluding
amortization, of $5 million.
These higher costs were partially offset by an increase of
$12 million in net sales.
Cost of Sales: Cost of sales grew by 2%, or
$4 million, year-over-year from
$215 million to $219 million due to higher net sales volume
partially offset by lower amortization costs.
Selling and Administrative costs: Selling and
administrative costs for the three months ended June 30, 2016 increased $14 million, or 8%, year-over-year to
$184 million, compared with
$171 million for the same period in
2015, primarily due to incremental fixed and discretionary expenses
attributed to the EdTech business of approximately $15 million coupled with an increase in legal
settlements and integration expenses largely offset by lower
transactional expenses due to prior year equity and acquisition
activities.
Pre-publication costs: Content development or
pre-publication expenditures increased $5
million to $32 million in the
second quarter of 2016, primarily due to increased spending on
product development to prepare for the upcoming larger new adoption
market in 2017 and beyond and the addition of the EdTech
business.
Cash Flow: Net cash used in operating activities
for the six months ended June 30,
2016 was $169 million compared
with $135 million for the same period
in 2015. The increase in cash used in operating activities from
2015 to 2016 was primarily driven by unfavorable changes in working
capital and the EdTech acquisition. The six months ended
June 30, 2016 include operating cash
used by the EdTech business whereas the prior year included one
month as the business was acquired on May
29, 2015.
HMH's free cash flow, defined as net cash from operating
activities minus capital expenditures, for the six months ended
June 30, 2016 was a usage of
$290 million compared with a usage of
$212 million for the same period in
2015. The increased usage of $78
million is primarily due to drivers impacting increased
usage of operating cash and higher capital expenditures.
As of June 30, 2016, HMH had
$98 million of cash and cash
equivalents and short term investments compared with $432 million at December
31, 2015. Operating cash flow is impacted by the inherent
seasonality of the academic calendar. Consequently, the performance
of the business is difficult to compare quarter to consecutive
quarter and should be considered on the basis of results for the
whole year.
Share Repurchase Program: During the second
quarter, HMH repurchased over 1 million shares of its common stock
for approximately $20 million under
its share repurchase program. As of the end of the second quarter
in 2016, approximately $486 million
was available for share repurchases under the aggregate
$1 billion share repurchase program.
The aggregate $1 billion share
repurchase program may be executed through the end of 2018.
Repurchases under the program may be made from time to time in open
market, including under trading plans, or privately negotiated
transactions. The extent and timing of any such repurchases would
be at the Company's discretion and subject to market conditions,
applicable legal requirements and other considerations.
Conference Call:
At 8:30 a.m. EDT on Thursday, August 4, 2016, HMH
will also host a conference call to discuss the results with its
investors. The call will be webcast live at ir.hmhco.com. The
following information is provided for investors who would like to
participate:
Toll Free: (844) 835-6565
International: (484) 653-6719
Passcode: 40590529
Moderator: Rima Hyder, Vice President, Investor Relations
Webcast Link: http://edge.media-server.com/m/p/jjf6xcwq
An archived webcast with the accompanying slides will be
available at ir.hmhco.com for one year for those unable
to participate in the live event. An audio replay of this
conference will also be available until August 11,
2016 via the following telephone numbers: (855) 859-2056 in
the United States and (404) 537-3406 internationally using
passcode 40590529.
Use of Non-GAAP Financial Measures:
To supplement our financial statements presented in accordance
with Generally Accepted Accounting Principles (GAAP), we have
presented adjusted EBITDA and free cash flow. These measures are
not prepared in accordance with GAAP. This information should
be considered as supplemental in nature and should not be
considered in isolation or as a substitute for the related
financial information prepared in accordance with GAAP. Management
believes that the presentation of these non-GAAP measures provides
useful information to investors regarding our results of operations
because it assists both investors and management in analyzing and
benchmarking the performance and value of our business.
Management believes that the presentation of adjusted EBITDA
provides useful information to our investors and management as an
indicator of our performance that is not affected by debt
restructurings, fluctuations in interest rates or effective tax
rates, non-cash charges, or levels of depreciation or amortization
along with costs such as severance, separation and facility closure
costs, acquisition-related activity costs; and
restructuring/integration costs. Accordingly, management believes
that this measurement is useful for comparing our performance from
period to period. In addition, targets in
adjusted EBITDA (further adjusted to include the change in deferred
revenue and to exclude pre-publication costs) are used as
performance measures to determine certain compensation of
management. Management also believes that the presentation of free
cash flow provides useful information to our investors because
management regularly reviews free cash flow as an important
indicator of how much cash is generated by general business
operations, excluding capital expenditures, and makes decisions
based on it.
Other companies may define these non-GAAP measures differently
and, as a result, our use of these non-GAAP measures may not be
directly comparable to adjusted EBITDA and free cash flow used by
other companies. Although we use these non-GAAP measures as
financial measures to assess the performance of our business, the
use of non-GAAP measures is limited as they include and/ or do not
include certain items not included and/or included in the most
directly comparable GAAP measure. Adjusted EBITDA should be
considered in addition to, and not as a substitute for, net income
or loss prepared in accordance with GAAP as a measure of
performance; and free cash flow should be considered in addition
to, and not as a substitute for, net cash provided by operating
activities prepared in accordance with GAAP as a measure of
performance. Adjusted EBITDA is not intended to be a measure of
liquidity nor is free cash flow intended to be a measure for
discretionary use. You are cautioned not to place undue reliance on
these non-GAAP measures. A reconciliation of these non-GAAP
financial measures to the most directly comparable GAAP financial
measures is provided in the appendix to this news release.
About Houghton Mifflin Harcourt
Houghton Mifflin Harcourt
(NASDAQ:HMHC) is a global learning company dedicated to changing
people's lives by fostering passionate, curious learners. As a
leading provider of pre-K–12 education content, services, and
cutting-edge technology solutions across a variety of media, HMH
enables learning in a changing landscape. HMH is uniquely
positioned to create engaging and effective educational content and
experiences from early childhood to beyond the classroom. HMH
serves more than 50 million students in over 150 countries
worldwide, while its award-winning children's books, novels,
non-fiction, and reference titles are enjoyed by readers throughout
the world. For more information, visit www.hmhco.com.
Follow HMH on Twitter, Facebook and YouTube.
Contact:
Investor Relations
Rima
Hyder
Vice President, Investor Relations
(617) 351-3309
rima.hyder@hmhco.com
Media Relations
Bianca
Olson
Senior Vice President, Corporate Affairs
(617) 351-3841 | (646) 932-1241
bianca.olson@hmhco.com
Forward-Looking Statements
The statements contained herein include forward-looking
statements, which involve risks and uncertainties. These
forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes,"
"estimates," "projects," "anticipates," "expects," "could,"
"intends," "may," "will" or "should," "forecast," "intend," "plan,"
"potential," "project," "target" or, in each case, their negative,
or other variations or comparable terminology. These
forward-looking statements include all matters that are not
historical facts. They include statements regarding our intentions,
beliefs or current expectations concerning, among other things, our
results of operations, including billings, net sales, deferred
revenue; financial condition; pre-publication or content
development costs; liquidity; EdTech integration impact; systems
integrations; products, including product pipeline; our outlook for
2016; prospects; growth; markets and market share; strategies,
including with respect to leveraging our core product portfolio and
expanding into new and adjacent markets; the industry in which we
operate and potential business decisions. We derive many of our
forward-looking statements from our operating budgets and
forecasts, which are based upon many detailed assumptions. While we
believe that our assumptions are reasonable, we caution that it is
very difficult to predict the impact of known factors, and, of
course, it is impossible for us to anticipate all factors that
could affect our actual results. All forward-looking statements are
based upon information available to us on the date of this
report.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. We caution
you that forward-looking statements are not guarantees of future
performance and that our actual results may differ materially from
those made in or suggested by the forward-looking statements
contained herein. In addition, even if our results are consistent
with the forward looking statements contained herein, those results
or developments may not be indicative of results or developments in
subsequent periods.
Important factors that could cause our results to vary from
expectations include, but are not limited to: changes in state and
local education funding and/or related programs, legislation and
procurement processes; industry cycles and trends; the rate and
state of technological change; changes in product distribution
channels and concentration of retailer power; changes in our
competitive environment; periods of operating and net losses; our
ability to enforce our intellectual property and proprietary
rights; risks based on information technology systems; dependence
on a small number of print and paper vendors; third-party software
and technology development; our ability to identify, complete, or
achieve the expected benefits of, acquisitions; increases in our
operating costs; exposure to litigation; major disasters or other
external threats; contingent liabilities; risks related to our
indebtedness; future impairment charges; changes in school district
payment practices; a potential increase in the portion of our sales
coming from digital sales; risks related to doing business abroad;
and other factors discussed in the "Risk Factors" section of our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
other news releases we issue and filings we make with the SEC. In
light of these risks, uncertainties and assumptions, the
forward-looking events described herein may not occur.
We undertake no obligation, and do not expect, to publicly
update or publicly revise any forward-looking statement, whether as
a result of new information, future events or otherwise, except as
required by law. All subsequent written and oral forward-looking
statements attributable to us or to persons acting on our behalf
are expressly qualified in their entirety by the cautionary
statements contained herein.
_________________________
1 The EdTech business was acquired on May 29, 2015 from Scholastic Corporation.
Houghton Mifflin
Harcourt Company
Consolidated
Balance Sheets
|
|
|
Unaudited
|
Audited
|
|
(in thousands of
dollars, except share information)
|
June 30,
2016
|
December 31,
2015
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
98,010
|
$
234,257
|
|
Short-term
investments
|
—
|
198,146
|
|
Accounts receivable,
net of allowance for bad debts and book returns of $28.6 million
and $32.7 million,
respectively
|
347,173
|
256,099
|
|
Inventories
|
218,924
|
171,446
|
|
Prepaid expenses and
other assets
|
30,193
|
22,877
|
|
|
|
|
|
Total current
assets
|
694,300
|
882,825
|
|
Property, plant, and
equipment, net
|
175,469
|
149,680
|
|
Pre-publication
costs, net
|
324,995
|
321,931
|
|
Royalty advances to
authors, net
|
47,398
|
44,736
|
|
Goodwill
|
783,073
|
783,073
|
|
Other intangible
assets, net
|
868,605
|
912,955
|
|
Deferred income
taxes
|
3,540
|
3,540
|
|
Other
assets
|
24,667
|
23,210
|
|
|
|
|
|
Total
assets
|
$
2,922,047
|
$
3,121,950
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities
|
|
|
|
Current portion of
long-term debt
|
$
8,000
|
$
8,000
|
|
Accounts
payable
|
124,183
|
94,483
|
|
Royalties
payable
|
85,006
|
85,766
|
|
Salaries, wages, and
commissions payable
|
33,537
|
45,340
|
|
Deferred
revenue
|
209,717
|
231,172
|
|
Interest
payable
|
106
|
106
|
|
Severance and other
charges
|
5,797
|
4,894
|
|
Accrued postretirement
benefits
|
1,910
|
1,910
|
|
Other
liabilities
|
38,796
|
34,937
|
|
|
|
|
|
Total current
liabilities
|
507,052
|
506,608
|
|
Long-term debt, net
of discount and issuance costs
|
767,011
|
769,283
|
|
Long-term deferred
revenue
|
444,715
|
440,625
|
|
Accrued pension
benefits
|
21,748
|
23,726
|
|
Accrued
postretirement benefits
|
22,621
|
23,657
|
|
Deferred income
taxes
|
169,062
|
139,810
|
|
Other
liabilities
|
27,944
|
19,920
|
|
|
|
|
|
Total
liabilities
|
1,960,153
|
1,923,629
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
Stockholders'
equity
|
|
|
|
Preferred stock, $0.01
par value: 20,000,000 shares authorized; no shares issued and
outstanding at June
30, 2016 and December 31, 2015
|
—
|
—
|
|
Common stock, $0.01
par value: 380,000,000 shares authorized; 146,507,175 and
145,613,978 shares
issued at June 30, 2016 and December 31, 2015,
respectively; 122,201,789 and 123,940,510 shares
outstanding at June 30, 2016 and December 31,
2015, respectively
|
1,466
|
1,456
|
|
Treasury stock,
24,305,386 and 21,673,468 shares as of June 30, 2016 and
December 31, 2015,
respectively, at cost (related parties of $193,493 in
2016 and 2015)
|
(514,031 )
|
(463,013 )
|
|
Capital in excess of
par value
|
4,850,537
|
4,833,388
|
|
Accumulated
deficit
|
(3,327,321
)
|
(3,133,782
)
|
|
Accumulated other
comprehensive loss
|
(48,757 )
|
(39,728 )
|
|
|
|
|
|
Total stockholders'
equity
|
961,894
|
1,198,321
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
2,922,047
|
$
3,121,950
|
|
Houghton Mifflin
Harcourt Company
Consolidated
Statements of Operations (Unaudited)
|
|
|
Three Months
Ended
June 30,
|
Six Months
Ended
June 30,
|
(in thousands of
dollars, except share and per share information)
|
2016
|
2015
|
2016
|
2015
|
Net
sales
|
$
392,042
|
$
379,883
|
$
597,858
|
$
542,552
|
Costs and
expenses
|
|
|
|
|
Cost of sales,
excluding publishing rights and pre-publication
amortization
|
173,466
|
168,076
|
278,984
|
264,645
|
Publishing rights
amortization
|
14,413
|
19,148
|
32,206
|
42,291
|
Pre-publication
amortization
|
31,315
|
27,909
|
59,596
|
54,372
|
|
|
|
|
|
Cost of
sales
|
219,194
|
215,133
|
370,786
|
361,308
|
Selling and
administrative
|
184,479
|
170,687
|
353,154
|
313,696
|
Other intangible
asset amortization
|
5,968
|
4,261
|
12,144
|
7,479
|
Severance and other
charges
|
3,553
|
985
|
5,130
|
2,042
|
|
|
|
|
|
Operating
loss
|
(21,152 )
|
(11,183 )
|
(143,356 )
|
(141,973 )
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
Interest expense,
net
|
(9,402 )
|
(6,160 )
|
(18,735 )
|
(12,114 )
|
Change in fair value
of derivative instruments
|
(619)
|
369
|
165
|
(1,851 )
|
Loss on
extinguishment of debt
|
—
|
(2,173 )
|
—
|
(2,173 )
|
|
|
|
|
|
Loss before
taxes
|
(31,173 )
|
(19,147 )
|
(161,926 )
|
(158,111 )
|
Income tax expense
(benefit)
|
(2,782 )
|
(11,404 )
|
31,613
|
9,572
|
|
|
|
|
|
Net loss
|
$
(28,391 )
|
$
(7,743 )
|
$
(193,539 )
|
$
(167,683 )
|
|
|
|
|
|
Net loss per share
attributable to common stockholders
|
|
|
|
|
Basic
|
$
(0.23)
|
$
(0.06 )
|
$
(1.58)
|
$
(1.19 )
|
|
|
|
|
|
Diluted
|
$
(0.23)
|
$
(0.06 )
|
$
(1.58)
|
$
(1.19 )
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
Basic
|
122,143,971
|
139,961,856
|
122,520,786
|
141,090,469
|
|
|
|
|
|
Diluted
|
122,143,971
|
139,961,856
|
122,520,786
|
141,090,469
|
Houghton Mifflin
Harcourt Company
Consolidated
Statements of Cash Flows (Unaudited)
|
|
|
Six Months
Ended
June 30,
|
(in thousands of
dollars)
|
2016
|
2015
|
Cash flows from
operating activities
|
|
|
Net loss
|
$
(193,539 )
|
$
(167,683 )
|
Adjustments to
reconcile net loss to net cash used in operating
activities
|
|
|
Depreciation and
amortization expense
|
141,680
|
140,327
|
Amortization of debt
discount and deferred financing costs
|
2,090
|
4,369
|
Deferred income
taxes
|
29,252
|
6,272
|
Stock-based
compensation expense
|
6,673
|
6,812
|
Loss on extinguishment
of debt
|
—
|
2,173
|
Change in fair value
of derivative instruments
|
(165)
|
1,851
|
Changes in operating
assets and liabilities, net of acquisitions
|
|
|
Accounts
receivable
|
(91,073 )
|
(137,770 )
|
Inventories
|
(47,478 )
|
(32,050 )
|
Other
assets
|
(9,800)
|
(4,349 )
|
Accounts payable and
accrued expenses
|
12,137
|
(6,606 )
|
Royalties,
net
|
(3,422)
|
9,974
|
Deferred
revenue
|
(17,365)
|
41,397
|
Interest
payable
|
—
|
154
|
Severance and other
charges
|
328
|
(2,208 )
|
Accrued pension and
postretirement benefits
|
(3,014 )
|
(2,699 )
|
Other
liabilities
|
4,919
|
5,259
|
|
|
|
Net cash used in
operating activities
|
(168,777 )
|
(134,777 )
|
|
|
|
Cash flows from
investing activities
|
|
|
Proceeds from sales
and maturities of short-term investments
|
197,724
|
286,732
|
Additions to
pre-publication costs
|
(65,232 )
|
(45,484 )
|
Additions to
property, plant, and equipment
|
(56,238 )
|
(31,356 )
|
Acquisition of
business, net of cash acquired
|
—
|
(577,717 )
|
|
|
|
Net cash provided by
(used in) investing activities
|
76,254
|
(367,825 )
|
|
|
|
Cash flows from
financing activities
|
|
|
Proceeds from term
loan, net of discount
|
—
|
796,000
|
Payments of long-term
debt
|
(4,000 )
|
(243,125 )
|
Payments of deferred
financing fees
|
—
|
(13,670 )
|
Repurchases of common
stock (related parties of $183,537 in 2015)
|
(51,018 )
|
(191,238 )
|
Tax withholding
payments related to net share settlements of restricted stock
units
|
(1,039)
|
(124 )
|
Proceeds from stock
option exercises
|
11,220
|
17,588
|
Issuance of common
stock under employee stock purchase plan
|
1,113
|
—
|
|
|
|
Net cash (used in)
provided by financing activities
|
(43,724)
|
365,431
|
|
|
|
Net decrease in cash
and cash equivalents
|
(136,247)
|
(137,171)
|
Cash and cash
equivalent at the beginning of the period
|
234,257
|
456,581
|
|
|
|
Cash and cash
equivalent at the end of the period
|
$
98,010
|
$
319,410
|
Houghton Mifflin
Harcourt Company
Non-GAAP
Reconciliations (Unaudited)
|
|
Consolidated
(in thousands of
dollars)
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
2016
|
2015
|
2016
|
2015
|
Net loss
|
$ (28,391)
|
$ (7,743
)
|
$
(193,539)
|
$
(167,683)
|
Interest
expense
|
9,402
|
6,160
|
18,735
|
12,114
|
Provision (benefit)
for income taxes
|
(2,782 )
|
(11,404 )
|
31,613
|
9,572
|
Depreciation
expense
|
19,390
|
17,776
|
37,734
|
36,185
|
Amortization
expense
|
51,696
|
51,318
|
103,946
|
104,142
|
Non-cash
charges—stock compensation
|
3,670
|
3,717
|
6,673
|
6,812
|
Non-cash
charges—(gain) loss on derivative instrument
|
619
|
(369 )
|
(165 )
|
1,851
|
Purchase accounting
adjustments
|
1,236
|
877
|
3,088
|
1,074
|
Fees, expenses or
charges for equity offerings, debt or
acquisitions
|
812
|
15,515
|
979
|
18,892
|
Restructuring/Integration
|
6,198
|
651
|
10,014
|
661
|
Severance, separation
costs and facility closures
|
3,553
|
985
|
5,130
|
2,042
|
Loss on
extinguishment of debt
|
—
|
2,173
|
—
|
2,173
|
Legal
settlement
|
10,000
|
—
|
10,000
|
—
|
|
|
|
|
|
Adjusted
EBITDA
|
$ 75,403
|
$ 79,656
|
$ 34,208
|
$
27,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free
Cash Flow
(in
thousands of dollars)
|
|
|
|
Six Months Ended
June 30,
|
|
2016
|
2015
|
Cash flows from
operating activities
|
|
|
|
|
|
Net cash used in
operating activities
|
$ (168,777
)
|
$ (134,777
)
|
|
|
|
Cash flows from
investing activities
|
|
|
Additions to
pre-publication costs
|
(65,232 )
|
(45,484 )
|
Additions to
property, plant, and equipment
|
(56,238 )
|
(31,356 )
|
|
|
|
Free Cash
Flow
|
$
(290,247)
|
$
(211,617)
|
|
|
|
|
|
|
|
|
Houghton Mifflin
Harcourt Company Billings (Unaudited)
|
|
|
|
|
|
Billings
(in thousands
of dollars)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
Six Months
Ended
June 30,
|
|
2016
|
2015
|
2016
|
2015
|
Net sales
|
$
392,042
|
$
379,883
|
$
597,858
|
$
542,552
|
Change in deferred
revenue
|
20,616
|
56,140
|
(17,365)
|
41,397
|
|
|
|
|
|
Billings
|
$
412,658
|
$
436,023
|
$
580,493
|
$
583,949
|
|
|
|
|
|
Billings is an
operating measure utilized by the company derived as shown
above.
|
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SOURCE Houghton Mifflin Harcourt