BOSTON, Nov. 3, 2016 /PRNewswire/ -- Global learning
company Houghton Mifflin Harcourt ("HMH" or the "Company") (NASDAQ:
HMHC) today announced its financial results for the third quarter
ended September 30, 2016.
Third Quarter 2016 Highlights:
- Net sales for the three months ended September 30, 2016, were $533 million, a 7% decrease compared with
$576 million in the same period in
2015.
- Billings for the three months ended September 30, 2016, were $620 million, a 9% decrease compared with
$682 million in the third quarter of
2015.
- Net income for the third quarter of 2016 was $90 million, a 31% decrease compared with
$131 million for the same period in
2015.
- Adjusted EBITDA was $168 million
for the three months ended September 30,
2016, a 12% decrease compared with $192 million for the same period in 2015.
- Pre-publication or content development costs for the third
quarter were $29 million, a 12%
decrease compared with $33 million
for the same period in 2015.
- The Company has lowered its full year 2016 outlook for net
sales and billings in light of weaker-than-expected results in the
domestic education market. 2016 net sales are now expected to be
between $1,320 and $1,380 million,
and billings are now expected to be between $1,370 and $1,430 million.
- HMH launched its new science curriculum, HMH Science
Dimensions, the first comprehensive K-12 science curriculum in
the education market created specifically to meet the new Next
Generation Science Standards (NGSS). The Company continues to
innovate and develop leading core products for upcoming large new
adoption market opportunities.
"While we are disappointed with the Company's performance year
to date, especially in the domestic education market, we are
squarely focused on restoring growth to the business," said
Gordon Crovitz, Interim Chief
Executive Officer of HMH. "We are taking necessary steps to remedy
issues which resulted in loss of market share in California this year, as well as to accelerate
growth in our adjacent markets in order to create greater value for
shareholders and improve our financial performance."
Joe Abbott, Chief Financial
Officer of HMH added, "We believe the factors contributing to our
weak performance in the California English Language Arts adoption
will result in lower than expected market share for the full year.
We have revised our full year 2016 outlook to reflect year to date
results and our expectations for fourth quarter performance. As we
look forward, we see robust domestic education market opportunities
and are focused on capturing market share as we continue to invest
in our core business and adjacencies."
Full Year 2016 Outlook:
In light of weaker-than-expected year to date financial results
and a forecasted lower fourth quarter compared with the fourth
quarter of 2015, the Company has revised its 2016 net sales and
billings guidance. Net sales are now expected to be in the range of
$1,320 to $1,380 million. Billings
are now expected to be in the range of $1,370 to $1,430 million.
Pre-publication or content development costs for 2016 are still
expected to remain in the range of approximately $120 to $140 million.
Third Quarter 2016 Business Update:
Education Segment: Outside of the California
English Language Arts adoption, HMH continued its solid performance
in other adoption opportunities including California Math and
Florida Literature.
HMH is committed to investing in its core curriculum programs to
improve its future competitive position in the domestic education
market. The Company intends to offer new, state-of-the-art
instructional programs in upcoming adoptions in Florida secondary Social Studies with
opportunity beginning in 2017, California Social Studies and
Florida Science beginning in 2018, and Texas Reading, California
Science and Florida Mathematics beginning in 2019. HMH plans to
further monetize these core curriculum program investments in other
adoption and open territory markets. The Company's new technology
platform, which provides an intuitive and modern user experience
leveraging digital functionality to engage students and enhance the
learning experience, supports the recently launched next generation
science programs, and will serve as the basis for HMH's
soon-to-be-announced social studies programs as well as new reading
and mathematics curriculums.
HMH's recently launched science program, HMH Science
Dimensions, is the first K-12 program in the market built from
the ground up to meet NGSS adopted by states nationwide. The
program represents an entirely new approach to teaching science,
focusing on investigative activities and three-dimensional learning
while leveraging technology to provide new opportunities for
engagement. The program includes integrated engineering content,
new interactive learning components including HMH Field
Trips, a virtual reality learning tool powered by Google
Expeditions, and unparalleled teacher support.
Adjacent Markets: HMH plans to continue investing
in its adjacencies, including intervention, assessment,
professional services, international and consumer to achieve higher
growth in these markets.
The Company continues to integrate the EdTech1
business during its first full year of ownership. While HMH
anticipates higher growth in this business, the Company's sales
integration efforts are ongoing and it now expects single digit
growth rate for the EdTech business for full year 2016 compared to
the more rapid realization of revenue synergies expected at the
start of the year.
HMH's Heinemann business had another strong quarter of
performance due to many bestselling products such as the new
edition of Benchmark Assessments I and the continuing strength of
Reading Strategies, which is close to becoming Heinemann's best
all-time selling professional development title.
In the consumer space, HMH launched GO Math! GO, a
playful learning app that offers kids 3-7 a fun, engaging math
experience rooted in its popular GO Math! classroom
curriculum. Curious World, HMH's curated digital collection
of licensed and original short-form video, games and books for
young learners, continued to grow, topping over 1,000 pieces of
content and adding films from known and beloved IP such as They
Might Be Giants from Disney Sound and StoryBots® from
JibJab Bros. Studios.
Trade Publishing Segment: HMH's Trade Publishing
segment performed well largely due to strong sales of frontlist
titles such as The Whole 30, Little Blue Truck
Halloween, Steve Young's QB and How to Bake
Everything. The Whole 30 has been on the New York Times bestseller list for over 52 weeks,
with over half a million copies sold.
In December, HMH plans to publish a new title by #1 bestselling
author of the 4-Hour Workweek, Tim
Ferriss. On the cusp of 100 million downloads, The Tim
Ferriss Show is consistently ranked as one of the most popular
podcasts in the world. Ferriss has been included in Fast
Company's "Most Innovative Business People" and Forbes magazine's
"Names You Need to Know."
Integration and Corporate Highlights: 2016 is
an investment year for the Company. The Company continues to
integrate the EdTech business, implement upgrades to its technology
infrastructure and relocate to more efficient new office locations.
These investments will increase operational efficiencies to allow
for HMH's continued growth.
Third Quarter 2016 Financial Results:
Net Sales and Billings: Net sales for the three
months ended September 30, 2016 were
$533 million, a decrease of 7%, or
$42 million, from the same period in
2015. The net sales decrease was primarily driven by a decline in
domestic education net sales of $48
million due to a smaller new adoption market in 2016 versus
2015, coupled with lower market share, $6
million of lower delivered professional services and
$6 million of lower net sales from
the assessment business, primarily clinical, due to the natural
decline of sales over time following the initial release of a new
product version in 2014. Partially offsetting the decrease was a
$3 million increase in net sales of
the international business and $3
million of higher Trade Publishing net sales.
Billings, an operating measure, which is calculated as net sales
taking into account the change in deferred revenue, for the three
months ended September 30, 2016 were
$620 million compared with
$682 million for the same period in
2015. This 9%, or $62 million,
decrease in billings was largely driven by the aforementioned
drivers for net sales.
Net Income: Net income in the third quarter of
2016 was $90 million, a decrease of
31% or $41 million, compared with net
income of $131 million in the third
quarter of 2015. The decrease was primarily due to lower net sales
as well as a lower income tax benefit due to a large reversal of
uncertain tax positions in the prior year, partially offset by
lower operating costs and lower interest expense.
Adjusted EBITDA: Adjusted EBITDA for the third
quarter was $168 million, a decrease
of 12% or $23 million, compared with
$192 million, in the third quarter of
2015. The decline is primarily due to lower net sales partially
offset by lower operating costs.
Cost of Sales: Cost of sales decreased by 6% or
$18 million, year-over-year from
$272 million to $255 million, due to lower net sales volume and
lower amortization costs.
Selling and Administrative Costs: Selling and
administrative costs for the three months ended September 30, 2016, decreased 3% or $7 million, year-over-year to $185 million, compared with $192 million for the same period in 2015,
primarily due to lower sales commissions attributed to lower sales
performance partially offset by higher labor costs.
Pre-Publication Costs: Content development or
pre-publication expenditures decreased 12% or $4 million, from $33
million to $29 million in the
third quarter of 2016, primarily due to timing.
Cash Flow: Net cash provided by operating
activities was $9 million for the
nine months ended September 30, 2016,
a $154 million decrease from the
$163 million provided by operating
activities for the nine months ended September 30, 2015. The decrease in cash provided
by operating activities from 2015 to 2016 was primarily driven by
less profitable operations and the impact of changes in working
capital.
HMH's free cash flow, defined as net cash from operating
activities minus capital expenditures, for the nine months ended
September 30, 2016, was a usage of
$176 million compared with favorable
free cash flow generation of $35
million for the same period in 2015. The increased usage of
$210 million is primarily due to
drivers impacting reduced operating cash and higher capital
expenditures.
As of September 30, 2016, HMH had
$217 million of cash and cash
equivalents and short-term investments compared with $432 million at December
31, 2015. Our cash position for the quarter was impacted by
the inherent seasonality of the academic calendar. Consequently,
the performance of the business is difficult to compare by
consecutive quarters and should be considered on the basis of
results for the whole year.
Share Repurchase Program: During the third
quarter, HMH repurchased 271,648 shares of its common stock for
approximately $4 million under its
share repurchase program. As of the end of the third quarter 2016,
approximately $482 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, November 3, 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: 95775913
Moderator: Rima Hyder, Vice President, Investor Relations
Webcast Link: http://edge.media-server.com/m/p/bsnnawcg
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 November 10,
2016 via the following telephone numbers: (855) 859-2056 in
the United States and (404) 537-3406 internationally using
passcode 95775913.
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 and net sales; financial
condition; pre-publication or content development costs; liquidity;
EdTech integration timing and impact; products, including for
new adoptions; our outlook for the fourth quarter and full year
2016; prospects; growth; markets and market share; strategies,
including with respect to investing in our core products and,
including opportunities 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.
Houghton Mifflin
Harcourt Company
Consolidated
Balance Sheets
|
|
(in thousands of
dollars, except share information)
|
Unaudited
September 30,
2016
|
|
Audited
December 31,
2015
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
150,098
|
|
$
234,257
|
Short-term
investments
|
66,403
|
|
198,146
|
Accounts receivable,
net
|
438,596
|
|
256,099
|
Inventories
|
169,662
|
|
171,446
|
Prepaid expenses and
other assets
|
25,589
|
|
22,877
|
Total current
assets
|
850,348
|
|
882,825
|
Property, plant, and
equipment, net
|
179,170
|
|
149,680
|
Pre-publication
costs, net
|
320,536
|
|
321,931
|
Royalty advances to
authors, net
|
46,630
|
|
44,736
|
Goodwill
|
783,073
|
|
783,073
|
Other intangible
assets, net
|
848,052
|
|
912,955
|
Deferred income
taxes
|
3,540
|
|
3,540
|
Other
assets
|
20,723
|
|
23,210
|
Total
assets
|
$
3,052,072
|
|
$
3,121,950
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities
|
|
|
|
Current portion of
long-term debt
|
$
8,000
|
|
$
8,000
|
Accounts
payable
|
86,811
|
|
94,483
|
Royalties
payable
|
83,517
|
|
85,766
|
Salaries, wages, and
commissions payable
|
39,796
|
|
45,340
|
Deferred
revenue
|
277,498
|
|
231,172
|
Interest
payable
|
106
|
|
106
|
Severance and other
charges
|
7,145
|
|
4,894
|
Accrued postretirement
benefits
|
1,910
|
|
1,910
|
Other
liabilities
|
31,445
|
|
34,937
|
Total current
liabilities
|
536,228
|
|
506,608
|
Long-term debt, net
of discount and issuance costs
|
765,874
|
|
769,283
|
Long-term deferred
revenue
|
464,052
|
|
440,625
|
Accrued pension
benefits
|
20,757
|
|
23,726
|
Accrued
postretirement benefits
|
22,275
|
|
23,657
|
Deferred income
taxes
|
153,098
|
|
139,810
|
Other
liabilities
|
27,116
|
|
19,920
|
Total
liabilities
|
1,989,400
|
|
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 September 30, 2016 and December 31,
2015
|
—
|
|
—
|
Common stock, $0.01
par value: 380,000,000 shares authorized; 147,397,039 and
145,613,978 shares issued at September 30, 2016 and
December 31, 2015, respectively; 122,820,005 and 123,940,510
shares outstanding at September 30, 2016 and December 31,
2015, respectively
|
1,474
|
|
1,456
|
Treasury stock,
24,577,034 and 21,673,468 shares as of September 30, 2016 and
December 31, 2015, respectively, at cost (related parties of
$193,493 in 2016 and 2015)
|
(518,030)
|
|
(463,013)
|
Capital in excess of
par value
|
4,865,615
|
|
4,833,388
|
Accumulated
deficit
|
(3,237,299)
|
|
(3,133,782)
|
Accumulated other
comprehensive loss
|
(49,088)
|
|
(39,728)
|
Total stockholders'
equity
|
1,062,672
|
|
1,198,321
|
Total liabilities and
stockholders' equity
|
$
3,052,072
|
|
$
3,121,950
|
|
|
|
|
Houghton Mifflin
Harcourt Company
Consolidated Statements of Operations
(Unaudited)
|
|
(in thousands of
dollars, except share and per share information)
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net
sales
|
$
533,021
|
|
$
575,507
|
|
$
1,130,879
|
|
$
1,118,059
|
Costs and
expenses
|
|
|
|
|
|
|
|
Cost of sales,
excluding publishing rights and
pre-publication
amortization
|
206,177
|
|
220,492
|
|
485,161
|
|
485,137
|
Publishing rights
amortization
|
14,573
|
|
19,358
|
|
46,779
|
|
61,649
|
Pre-publication
amortization
|
33,903
|
|
32,437
|
|
93,499
|
|
86,809
|
Cost of
sales
|
254,653
|
|
272,287
|
|
625,439
|
|
633,595
|
Selling and
administrative
|
185,252
|
|
191,843
|
|
538,406
|
|
505,539
|
Other intangible
asset amortization
|
5,980
|
|
7,255
|
|
18,124
|
|
14,734
|
Severance and other
charges
|
3,765
|
|
1,563
|
|
8,895
|
|
3,605
|
Operating income
(loss)
|
83,371
|
|
102,559
|
|
(59,985)
|
|
(39,414)
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
Interest
expense
|
(9,493)
|
|
(10,196)
|
|
(28,228)
|
|
(22,310)
|
Change in fair value
of derivative instruments
|
257
|
|
(42)
|
|
422
|
|
(1,893)
|
Loss on
extinguishment of debt
|
—
|
|
(878)
|
|
—
|
|
(3,051)
|
Income (loss) before
taxes
|
74,135
|
|
91,443
|
|
(87,791)
|
|
(66,668)
|
Income tax expense
(benefit)
|
(15,887)
|
|
(39,638)
|
|
15,726
|
|
(30,066)
|
Net income
(loss)
|
$
90,022
|
|
$
131,081
|
|
$
(103,517)
|
|
$
(36,602)
|
Net income (loss) per
share attributable to common
stockholders
|
|
|
|
|
|
|
|
Basic
|
$
0.74
|
|
$
0.97
|
|
$
(0.85)
|
|
$
(0.26)
|
Diluted
|
$
0.73
|
|
$
0.94
|
|
$
(0.85)
|
|
$
(0.26)
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
Basic
|
122,011,716
|
|
135,169,318
|
|
122,349,857
|
|
138,978,746
|
Diluted
|
123,017,854
|
|
139,813,309
|
|
122,349,857
|
|
138,978,746
|
|
|
|
|
|
|
|
|
Houghton Mifflin
Harcourt Company
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Nine Months
Ended
September 30,
|
(in thousands of
dollars)
|
2016
|
|
2015
|
Cash flows from
operating activities
|
|
|
|
Net loss
|
$
(103,517)
|
|
$
(36,602)
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
Depreciation and
amortization expense
|
217,361
|
|
216,542
|
Amortization of debt
discount and deferred financing costs
|
3,134
|
|
5,807
|
Deferred income
taxes
|
13,288
|
|
42,193
|
Stock
compensation
|
8,754
|
|
9,928
|
Loss on extinguishment
of debt
|
—
|
|
3,051
|
Change in fair value
of derivative instruments
|
(422)
|
|
1,893
|
Changes in operating
assets and liabilities, net of acquisitions
|
|
|
|
Accounts
receivable
|
(182,496)
|
|
(191,826)
|
Inventories
|
1,784
|
|
12,074
|
Other
assets
|
1,490
|
|
(8,772)
|
Accounts payable and
accrued expenses
|
(9,774)
|
|
25,693
|
Royalties payable and
author advances, net
|
(3,918)
|
|
15,718
|
Deferred
revenue
|
69,753
|
|
147,583
|
Interest
payable
|
—
|
|
59
|
Severance and other
charges
|
1,480
|
|
(2,670)
|
Accrued pension and
postretirement benefits
|
(4,351)
|
|
(4,053)
|
Other
liabilities
|
(3,111)
|
|
(73,240)
|
Net cash provided by
operating activities
|
9,455
|
|
163,378
|
Cash flows from
investing activities
|
|
|
|
Proceeds from sales
and maturities of short-term investments
|
197,724
|
|
286,732
|
Purchases of
short-term investments
|
(66,437)
|
|
(146,518)
|
Additions to
pre-publication costs
|
(94,659)
|
|
(78,978)
|
Additions to
property, plant, and equipment
|
(90,496)
|
|
(49,642)
|
Acquisition of
business, net of cash acquired
|
—
|
|
(578,190)
|
Investment in
preferred stock
|
(1,000)
|
|
—
|
Net cash used in
investing activities
|
(54,868)
|
|
(566,596)
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Proceeds from term
loan, net of discount
|
—
|
|
796,000
|
Payments of long-term
debt
|
(6,000)
|
|
(245,125)
|
Payments of deferred
financing fees
|
—
|
|
(15,255)
|
Repurchases of common
stock (related parties of $193,493 in 2015)
|
(55,017)
|
|
(239,408)
|
Tax withholding
payments related to net share settlements of restricted stock
units
|
(1,410)
|
|
(658)
|
Proceeds from stock
option exercises
|
21,484
|
|
28,126
|
Issuance of common
stock under employee stock purchase plan
|
2,197
|
|
—
|
|
|
|
|
Net cash (used in)
provided by financing activities
|
(38,746)
|
|
323,680
|
|
|
|
|
Net decrease in cash
and cash equivalents
|
(84,159)
|
|
(79,538)
|
Cash and cash
equivalent at the beginning of the period
|
234,257
|
|
456,581
|
|
|
|
|
Cash and cash
equivalent at the end of the period
|
$
150,098
|
|
$
377,043
|
Houghton Mifflin
Harcourt Company
Non-GAAP Reconciliations (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated (in thousands of
dollars)
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income
(loss)
|
$
90,022
|
|
$
131,081
|
|
$
(103,517)
|
|
$
(36,602)
|
Interest
expense
|
9,493
|
|
10,196
|
|
28,228
|
|
22,310
|
Provision (benefit)
for income taxes
|
(15,887)
|
|
(39,638)
|
|
15,726
|
|
(30,066)
|
Depreciation
expense
|
21,225
|
|
17,165
|
|
58,959
|
|
53,350
|
Amortization
expense
|
54,456
|
|
59,050
|
|
158,402
|
|
163,192
|
Non-cash
charges—stock compensation
|
2,081
|
|
3,116
|
|
8,754
|
|
9,928
|
Non-cash
charges—(gain) loss on derivative instrument
|
(257)
|
|
42
|
|
(422)
|
|
1,893
|
Purchase accounting
adjustments
|
1,197
|
|
4,046
|
|
4,285
|
|
5,120
|
Fees, expenses or
charges for equity offerings, debt or
acquisitions
|
92
|
|
—
|
|
1,071
|
|
18,791
|
Restructuring/Integration
|
2,184
|
|
4,043
|
|
12,198
|
|
4,805
|
Severance, separation
costs and facility closures
|
3,765
|
|
1,563
|
|
8,895
|
|
3,605
|
Loss on
extinguishment of debt
|
—
|
|
878
|
|
—
|
|
3,051
|
Legal
settlement
|
—
|
|
—
|
|
10,000
|
|
—
|
Adjusted
EBITDA
|
$
168,371
|
|
$
191,542
|
|
$
202,579
|
|
$
219,377
|
|
|
|
|
|
|
|
|
Free Cash
Flow
|
|
|
Nine Months Ended
September 30,
|
(in thousands of
dollars)
|
2016
|
|
2015
|
Cash flows from
operating activities
Net cash provided by
operating activities
|
$
9,455
|
|
$
163,378
|
Cash flows from
investing activities
|
|
|
|
Additions to
pre-publication costs
|
(94,659)
|
|
(78,978)
|
Additions to
property, plant, and equipment
|
(90,496)
|
|
(49,642)
|
Free Cash
Flow
|
$
(175,700)
|
|
$
34,758
|
|
|
|
|
Houghton Mifflin
Harcourt Company
Billings (Unaudited)
|
|
|
|
|
|
|
|
|
Billings
(in thousands of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net sales
|
$
533,021
|
|
$
575,507
|
|
$
1,130,879
|
|
$
1,118,059
|
Change in deferred
revenue
|
87,118
|
|
106,186
|
|
69,753
|
|
147,583
|
|
|
|
|
|
|
|
|
Billings
|
$
620,139
|
|
$
681,693
|
|
$
1,200,632
|
|
$
1,265,642
|
|
|
|
|
|
|
|
|
Billings is an
operating measure utilized by the company derived as shown
above.
|
1 The EdTech business was acquired on May 29, 2015 from Scholastic Corporation.
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SOURCE Houghton Mifflin Harcourt