BOSTON, Feb. 27, 2020 /PRNewswire/ -- Learning company
Houghton Mifflin Harcourt ("HMH" or the "Company") (Nasdaq: HMHC)
today announced strong financial results for the year ended
December 31, 2019.
2019 Highlights:
- Net sales grew 5%
- Record Billings1 growth of 21%
-
- Core Solutions billings2 grew 44%
- Extensions billings2 grew 11%
- Net cash provided by operating activities of $255 million
- Strong free cash flow4 growth to $115 million
|
|
Three Months Ended
December 31,
|
|
|
Years Ended
December 31,
|
|
(in millions of
dollars)
|
|
2019
|
|
|
2018
(4)
|
|
|
Change
|
|
|
2019
|
|
|
2018
(4)
|
|
|
Change
|
|
Net sales
|
|
$
|
241
|
|
|
$
|
249
|
|
|
|
(3.0)
|
%
|
|
$
|
1,391
|
|
|
$
|
1,322
|
|
|
|
5.2
|
%
|
Change in deferred
revenue
|
|
|
(41)
|
|
|
|
(42)
|
|
|
|
3.4
|
%
|
|
|
201
|
|
|
|
(7)
|
|
|
NM
|
|
Billings
1
|
|
|
201
|
|
|
|
207
|
|
|
|
(3.0)
|
%
|
|
|
1,591
|
|
|
|
1,315
|
|
|
|
21.0
|
%
|
Loss from continuing
operations
|
|
|
(125)
|
|
|
|
(86)
|
|
|
|
(44.8)
|
%
|
|
|
(214)
|
|
|
|
(137)
|
|
|
|
(55.6)
|
%
|
Adjusted EBITDA from
continuing operations 4
|
|
|
(4)
|
|
|
|
2
|
|
|
NM
|
|
|
|
166
|
|
|
|
192
|
|
|
|
(13.7)
|
%
|
Pre-publication or
content development costs
|
|
|
(21)
|
|
|
|
(31)
|
|
|
|
32.6
|
%
|
|
|
(103)
|
|
|
|
(123)
|
|
|
|
16.9
|
%
|
Net cash provided by
operating activities
|
|
128
|
|
|
78
|
|
|
|
63.6
|
%
|
|
|
255
|
|
|
|
104
|
|
|
NM
|
|
Free cash flow
4
|
|
96
|
|
|
|
35
|
|
|
NM
|
|
|
|
115
|
|
|
|
(73)
|
|
|
NM
|
|
____________
1
|
An operating measure
which we derive from net sales taking into account the change in
deferred revenue.
|
2
|
Billings for Core
Solutions and Extensions is an operating measure based on invoiced
sales adjusted for returns, other publishing income and the change
in deferred revenue.
|
3
|
Non-GAAP measure,
please refer to Use of Non-GAAP measures for an explanation and
reconciliation.
|
4
|
All amounts have been
adjusted to eliminate the impact of the Riverside Standardized
Testing business which has been classified as discontinued
operations.
|
|
|
NM = not
meaningful
|
"This was a very strong year for execution and growth at HMH,
and our financial results indicate the progress we are making in
transforming our business. We raised our billings guidance twice
reflecting the strength we saw during the year. As we look forward
to 2020, we will continue to focus on our strategy to expand our
market leadership, create greater impact on student achievement and
deliver greater returns for our shareholders," said Jack Lynch, President and Chief Executive
Officer of Houghton Mifflin Harcourt.
Joe Abbott, Chief Financial
Officer of HMH added, "Strength in both Core Solutions and
Extensions were driven by our new core programs as well as growth
in Heinemann. HMH delivered free cash flow of $115 million, in the upper half of our recently
updated guidance range. Our strategy and the transformational
initiatives we accomplished in 2019 have dramatically improved our
financial model and set the stage for another strong year of free
cash flow in 2020."
2020 Outlook
HMH expects 2020 billings to be at or below the low end of the
'mid-cycle' range of $1.5 to
$1.65 billion described at our
October Investor Event. Unlevered free cash flow margin for 2020 is
expected to be approximately 9% of billings, the low end of our
'mid-cycle' range, with free cash flow after interest payments in
the range of $65 to
$90 million.
Full year 2019 Financial Results:
Net Sales: HMH reported net sales of
$1,391 million for the full year
of 2019, up 5% or $69 million compared to $1,322 million in 2018. The net sales
increase was driven by a $88 million increase in our Education
segment, offset by a $19 million decrease in our HMH
Books & Media segment. Within our Education segment, the
increase was due to higher net sales in Extensions, which increased
by $47 million from $585 million in 2018 to
$632 million primarily driven by sales of the
Fountas & Pinnell Classroom and Calkins
products. Net sales from Core Solutions increased by
$41 million from $538 million in 2018 to
$579 million. The primary driver of the increase in Core
Solutions were net sales of the Texas and national versions of the Into
Reading and Into Literature programs.
Billings1: Billings for 2019
increased $277 million, or 21%, from 2018. The billings
increase was driven by a $298 million increase in our
Education segment, offset by a $21 million decrease in our HMH
Books & Media segment. Within our Education segment,
the increase was primarily due to higher Core Solutions billings,
driven by billings of the Texas
and national versions of the Into Reading and Into
Literature programs. Extensions billings increased
$65 million, driven by continued growth of Heinemann's
Fountas & Pinnell Classroom and Calkins
products. The HMH Books & Media billings decrease was
primarily due to licensing income of $16
million in 2018, pertaining to our classic backlist titles
1984 and Animal Farm, which did not repeat in
2019.
Cost of Sales: Overall cost of sales
increased by $119 million to $844 million in 2019 from
$725 million in 2018, primarily due to product mix and an
increase in pre-publication amortization expense related to the
timing of 2019 major product releases.
Selling and Administrative Costs: Selling and
administrative costs increased by $13 million in 2019,
primarily due to increases in labor and variable costs due to
$277 million of higher billings
compared to 2018.
Operating Loss: Operating loss for 2019 was
$163 million, a $72 million unfavorable change from the
$91 million operating loss recorded in 2018. The unfavorable
change was primarily the result of higher cost of sales coupled
with the increase in selling and administrative expenses.
Net Loss: Net loss of $214 million for
2019 was $120 million more than the net loss of
$94 million in 2018. Net loss from continuing operations for
2019 was $214 million, a $77 million unfavorable change
from the $137 million net loss from continuing operations in
2018, due primarily to the same factors impacting operating
loss.
Adjusted EBITDA from Continuing
Operations: Adjusted EBITDA from continuing operations
for 2019 was $166 million, a $26 million unfavorable
change from $192 million in 2018. Certain variable costs such
as royalty, transportation and commissions were higher due to the
increase in billings over 2018.
Cash Flows: Net cash provided by operating
activities for 2019 was $255 million compared with
$115 million in 2018. Net cash provided by operating
activities from continuing operations was $255 million in
2019, an increase of $151 million compared to
$104 million in 2018. Net cash provided by operating
activities included $11 million of cash flow from discontinued
operations in 2018. HMH's free cash flow, defined as net cash from
operating activities minus capital expenditures, for 2019 was
$115 million, a $188 million
improvement compared to usage of $73 million in 2018. The
primary driver of the favorable change in free cash flow was an
increase in net working capital associated with the increased
billings in 2019 of $277 million
offset by reduction in accounts payable. As of December 31, 2019, no amounts were outstanding on
the revolving credit facility.
1 Education and HMH Books and Media segment billings
represent operating measure which we derive from net sales taking
into account the change in deferred revenue. Billings for
Core Solutions and Extensions is an operating measure based on
invoiced sales adjusted for returns, other publishing income and
change in deferred revenue.
Conference Call:
At 8:30 a.m. ET on Thursday, February 27,
2020, HMH will host a conference call to discuss the results
and management's outlook 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: 7846064
Moderator: Brian Shipman, Senior Vice President,
Investor Relations
Webcast Link:
https://edge.media-server.com/mmc/p/yr4fs8cy
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
call will also be available until March 8,
2020 via the following telephone numbers:
(855) 859-2056 in the United
States and (404) 537-3406 internationally using
passcode 7846064.
Use of Non-GAAP Financial Measures:
To supplement our financial statements presented in accordance
with Generally Accepted Accounting Principles (GAAP) and to provide
additional insights into our performance (for a completed period
and/or on a forward-looking basis), we have presented adjusted
EBITDA from continuing operations, free cash flow, unlevered free
cash flow and unlevered free cash flow margin. 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 and/or
our expected 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
from continuing operations provides useful information to our
investors and management as an indicator of our performance that is
not affected by: fluctuations in interest rates or effective tax
rates; levels of depreciation or amortization; non-cash charges;
fees, expenses or charges relating to acquisition-related
activities, including purchase accounting adjustments, integration
costs and transaction costs, expenses related to securities
offering- and debt refinancing-activities; charges associated with
restructuring and cost saving initiatives, including severance,
separation and facility closure costs; certain legal settlements
and awards; and non-routine costs and gains. Accordingly,
management believes that this measure is useful for comparing our
performance from period to period and makes decisions based on it.
In addition, targets in adjusted EBITDA (further adjusted to
include the change in deferred revenue) are used as performance
measures to determine certain incentive compensation of management.
Management also believes that the presentation of free cash flow,
unlevered free cash flow and unlevered free cash flow margin
provides useful information to our investors because management
regularly reviews these metrics 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, free cash flow, unlevered
free cash flow and unlevered free cash flow margin used by other
companies. Although we use these non-GAAP measures as financial
measures to assess 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 from continuing operations 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 and unlevered free cash flow should
be considered in addition to, and not as a substitute for, net cash
from operating activities prepared in accordance with GAAP.
Adjusted EBITDA from continuing operations is not intended to be a
measure of liquidity nor is free cash flow intended to be a measure
of residual cash flow available 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 (to the extent
available without unreasonable efforts in the case of
forward-looking measures) and related disclosure is provided in the
appendix to this news release.
About Houghton Mifflin Harcourt
Houghton Mifflin Harcourt
(Nasdaq: HMHC) is a learning company committed to delivering
connected solutions that engage learners, empower educators and
improve student outcomes. As a leading provider of K–12 core
curriculum, supplemental and intervention solutions, and
professional learning services, HMH partners with educators and
school districts to uncover solutions that unlock students'
potential and extend teachers' capabilities. HMH estimates that it
serves more than 50 million students and three million
educators in 150 countries, 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
Investors
Brian S.
Shipman, CFA
SVP, Investor Relations
(212) 592-1177
brian.shipman@hmhco.com
Media
Bianca Olson
SVP, Corporate Affairs
(617) 351-3841
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," "should," "forecast," "intend," "plan,"
"potential," "project," "target" or, in each case, their negative,
or other variations or comparable terminology. Forward-looking
statements include all statements that are not statements of
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
performance, financial condition; liquidity; products and services,
including for new adoptions; outlook for full year 2020; prospects;
growth; markets and our positions therein; strategies, including
with respect to investing in our Core Solutions and Extensions
offerings and operational excellence; efficiency and cost savings
initiatives, including actions thereunder and expected impact; 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; changes in state academic standards; state
acceptance of submitted programs and participation rates therefor;
industry cycles and trends; the rate and state of technological
change; state requirements related to digital instruction; changes
in product distribution channels and concentration of retailer
power; changes in our competitive environment, including free and
low cost open educational resources; periods of operating and net
losses; our ability to enforce our intellectual property and
proprietary rights; risks based on information technology systems
and potential breaches of those systems; dependence on a small
number of print and paper vendors; third-party software and
technology development; possible defects in digital products; our
ability to identify, complete, or achieve the expected benefits of,
acquisitions; our ability to execute on our long-term growth
strategy; 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; changes in tax law or
interpretations; management and other personnel changes; timing,
higher costs and unintended consequences of our operational
efficiency and cost-reduction initiatives, including our recently
announced workforce reduction; 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
|
|
|
|
December
31,
|
|
(in thousands of
dollars, except share information)
|
|
2019
|
|
|
2018
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
296,353
|
|
|
$
|
253,365
|
|
Short-term
investments
|
|
|
—
|
|
|
|
49,833
|
|
Accounts receivable,
net
|
|
|
184,425
|
|
|
|
203,574
|
|
Inventories
|
|
|
213,059
|
|
|
|
184,209
|
|
Prepaid expenses and
other assets
|
|
|
19,257
|
|
|
|
15,297
|
|
Total current
assets
|
|
|
713,094
|
|
|
|
706,278
|
|
|
|
|
|
|
|
|
|
|
Property, plant, and
equipment, net
|
|
|
100,388
|
|
|
|
125,925
|
|
Pre-publication
costs, net
|
|
|
268,197
|
|
|
|
323,641
|
|
Royalty advances to
authors, net
|
|
|
44,743
|
|
|
|
47,993
|
|
Goodwill
|
|
|
716,977
|
|
|
|
716,073
|
|
Other intangible
assets, net
|
|
|
474,225
|
|
|
|
520,892
|
|
Operating lease
assets
|
|
|
132,247
|
|
|
|
—
|
|
Deferred income
taxes
|
|
|
2,520
|
|
|
|
3,259
|
|
Deferred
commissions
|
|
|
29,291
|
|
|
|
22,635
|
|
Other
assets
|
|
|
31,490
|
|
|
|
28,428
|
|
Total
assets
|
|
$
|
2,513,172
|
|
|
$
|
2,495,124
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
19,000
|
|
|
$
|
8,000
|
|
Accounts
payable
|
|
|
52,128
|
|
|
|
76,313
|
|
Royalties
payable
|
|
|
72,985
|
|
|
|
66,893
|
|
Salaries, wages, and
commissions payable
|
|
|
54,938
|
|
|
|
50,225
|
|
Deferred
revenue
|
|
|
305,285
|
|
|
|
251,944
|
|
Interest
payable
|
|
|
3,826
|
|
|
|
136
|
|
Severance and other
charges
|
|
|
12,407
|
|
|
|
6,020
|
|
Accrued postretirement
benefits
|
|
|
1,571
|
|
|
|
1,512
|
|
Operating lease
liabilities
|
|
|
8,685
|
|
|
|
—
|
|
Other
liabilities
|
|
|
24,325
|
|
|
|
26,649
|
|
Total current
liabilities
|
|
|
555,150
|
|
|
|
487,692
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net
of discount and issuance costs
|
|
|
638,187
|
|
|
|
755,649
|
|
Operating lease
liabilities
|
|
|
134,994
|
|
|
|
—
|
|
Long-term deferred
revenue
|
|
|
542,821
|
|
|
|
395,500
|
|
Accrued pension
benefits
|
|
|
23,648
|
|
|
|
29,320
|
|
Accrued
postretirement benefits
|
|
|
15,113
|
|
|
|
14,300
|
|
Deferred income
taxes
|
|
|
30,871
|
|
|
|
27,075
|
|
Other
liabilities
|
|
|
6,028
|
|
|
|
17,118
|
|
Total
liabilities
|
|
|
1,946,812
|
|
|
|
1,726,654
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01
par value: 20,000,000 shares authorized; no shares issued
and outstanding at
December 31, 2019 and 2018
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.01
par value: 380,000,000 shares authorized; 148,928,328
and 148,164,854
shares issued at December 31, 2019 and 2018, respectively;
124,351,294 and
123,587,820 shares outstanding at December 31, 2019 and 2018,
respectively
|
|
|
1,489
|
|
|
|
1,481
|
|
Treasury stock,
24,577,034 shares as of December 31, 2019 and 2018, respectively,
at cost
|
|
|
(518,030)
|
|
|
|
(518,030)
|
|
Capital in excess of
par value
|
|
|
4,906,165
|
|
|
|
4,893,174
|
|
Accumulated
deficit
|
|
|
(3,775,992)
|
|
|
|
(3,562,971)
|
|
Accumulated other
comprehensive loss
|
|
|
(47,272)
|
|
|
|
(45,184)
|
|
Total stockholders'
equity
|
|
|
566,360
|
|
|
|
768,470
|
|
Total liabilities and
stockholders' equity
|
|
$
|
2,513,172
|
|
|
$
|
2,495,124
|
|
Houghton Mifflin
Harcourt Company
Consolidated
Statements of Operations
|
|
|
|
(Unaudited)
Three Months Ended
December 31,
|
|
|
Years Ended
December 31,
|
|
(in thousands of
dollars, except share and per share data)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net
sales
|
|
$
|
241,475
|
|
|
$
|
249,038
|
|
|
$
|
1,390,674
|
|
|
$
|
1,322,417
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales,
excluding publishing rights and pre-publication
amortization
|
|
|
134,695
|
|
|
|
119,928
|
|
|
|
668,108
|
|
|
|
581,467
|
|
Publishing rights
amortization
|
|
|
6,340
|
|
|
|
8,237
|
|
|
|
26,557
|
|
|
|
34,713
|
|
Pre-publication
amortization
|
|
|
41,375
|
|
|
|
29,210
|
|
|
|
149,515
|
|
|
|
109,257
|
|
Cost of
sales
|
|
|
182,410
|
|
|
|
157,375
|
|
|
|
844,180
|
|
|
|
725,437
|
|
Selling and
administrative
|
|
|
146,400
|
|
|
|
158,243
|
|
|
|
662,606
|
|
|
|
649,295
|
|
Other intangible
asset amortization
|
|
|
5,791
|
|
|
|
6,695
|
|
|
|
25,310
|
|
|
|
26,933
|
|
Restructuring/severance and other charges
|
|
|
15,821
|
|
|
|
2,021
|
|
|
|
21,742
|
|
|
|
11,478
|
|
Gain on sale of
assets
|
|
|
—
|
|
|
|
(585)
|
|
|
|
—
|
|
|
|
(201)
|
|
Operating
loss
|
|
|
(108,947)
|
|
|
|
(74,711)
|
|
|
|
(163,164)
|
|
|
|
(90,525)
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement benefits
non-service income
|
|
|
42
|
|
|
|
320
|
|
|
|
167
|
|
|
|
1,280
|
|
Interest
expense
|
|
|
(13,636)
|
|
|
|
(11,645)
|
|
|
|
(48,778)
|
|
|
|
(45,680)
|
|
Interest
income
|
|
|
1,459
|
|
|
|
1,650
|
|
|
|
3,157
|
|
|
|
2,550
|
|
Change in fair value
of derivative instruments
|
|
|
272
|
|
|
|
(400)
|
|
|
|
(899)
|
|
|
|
(1,374)
|
|
Income from
transition services agreement
|
|
|
—
|
|
|
|
1,889
|
|
|
|
4,248
|
|
|
|
1,889
|
|
Loss on
extinguishment of debt
|
|
|
(4,363)
|
|
|
|
—
|
|
|
|
(4,363)
|
|
|
|
—
|
|
Loss from continuing
operations before taxes
|
|
|
(125,173)
|
|
|
|
(82,897)
|
|
|
|
(209,632)
|
|
|
|
(131,860)
|
|
Income tax expense
(benefit) for continuing operations
|
|
|
(55)
|
|
|
|
3,493
|
|
|
|
4,201
|
|
|
|
5,597
|
|
Loss from continuing
operations
|
|
|
(125,118)
|
|
|
|
(86,390)
|
|
|
|
(213,833)
|
|
|
|
(137,457)
|
|
Earnings from
discontinued operations, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,833
|
|
Gain on sale of
discontinued operations, net of tax
|
|
|
—
|
|
|
|
30,469
|
|
|
|
—
|
|
|
|
30,469
|
|
Income from
discontinued operations, net of tax
|
|
|
—
|
|
|
|
30,469
|
|
|
|
—
|
|
|
|
43,302
|
|
Net loss
|
|
$
|
(125,118)
|
|
|
$
|
(55,921)
|
|
|
$
|
(213,833)
|
|
|
$
|
(94,155)
|
|
Net loss per share
attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(1.01)
|
|
|
$
|
(0.70)
|
|
|
$
|
(1.72)
|
|
|
$
|
(1.11)
|
|
Discontinued
operations
|
|
|
—
|
|
|
|
0.25
|
|
|
|
—
|
|
|
|
0.35
|
|
Net loss
|
|
$
|
(1.01)
|
|
|
$
|
(0.45)
|
|
|
$
|
(1.72)
|
|
|
$
|
(0.76)
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
124,342,086
|
|
|
|
123,575,325
|
|
|
|
124,152,984
|
|
|
|
123,444,943
|
|
Houghton Mifflin
Harcourt Company
Consolidated
Statements of Cash Flows
|
|
|
|
Years Ended
December 31,
|
|
(in thousands of
dollars)
|
|
2019
|
|
|
2018
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(213,833)
|
|
|
$
|
(94,155)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
|
|
|
|
|
Earnings from
discontinued operations, net of tax
|
|
|
—
|
|
|
|
(12,833)
|
|
Gain on sale of
discontinued operations, net of tax
|
|
|
—
|
|
|
|
(30,469)
|
|
Gain on sale of
assets
|
|
|
—
|
|
|
|
(201)
|
|
Depreciation and
amortization expense
|
|
|
272,692
|
|
|
|
250,466
|
|
Amortization and
impairments of operating lease assets
|
|
|
15,949
|
|
|
|
—
|
|
Amortization of debt
discount and deferred financing costs
|
|
|
4,286
|
|
|
|
4,181
|
|
Deferred income
taxes
|
|
|
4,535
|
|
|
|
5,140
|
|
Stock-based
compensation expense
|
|
|
13,968
|
|
|
|
13,248
|
|
Loss on extinguishment
of debt
|
|
|
4,363
|
|
|
|
—
|
|
Change in fair value
of derivative instruments
|
|
|
899
|
|
|
|
1,374
|
|
Changes in operating
assets and liabilities, net of acquisitions
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
19,182
|
|
|
|
(11,005)
|
|
Inventories
|
|
|
(28,850)
|
|
|
|
(33,515)
|
|
Other
assets
|
|
|
(20,155)
|
|
|
|
3,908
|
|
Accounts payable and
accrued expenses
|
|
|
(12,136)
|
|
|
|
16,144
|
|
Royalties payable and
author advances, net
|
|
|
9,342
|
|
|
|
(1,650)
|
|
Deferred
revenue
|
|
|
200,473
|
|
|
|
(7,692)
|
|
Interest
payable
|
|
|
3,690
|
|
|
|
(186)
|
|
Severance and other
charges
|
|
|
10,631
|
|
|
|
(2,823)
|
|
Accrued pension and
postretirement benefits
|
|
|
(4,800)
|
|
|
|
(904)
|
|
Operating lease
liabilities
|
|
|
(17,281)
|
|
|
|
—
|
|
Other
liabilities
|
|
|
(7,980)
|
|
|
|
5,056
|
|
Net cash provided by
operating activities—continuing operations
|
|
|
254,975
|
|
|
|
104,084
|
|
Net cash provided by
operating activities—discontinued operations
|
|
|
—
|
|
|
|
10,831
|
|
Net cash provided by
operating activities
|
|
|
254,975
|
|
|
|
114,915
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
Proceeds from sales
and maturities of short-term investments
|
|
|
50,000
|
|
|
|
86,539
|
|
Purchases of
short-term investments
|
|
|
—
|
|
|
|
(49,553)
|
|
Additions to
pre-publication costs
|
|
|
(102,562)
|
|
|
|
(123,403)
|
|
Additions to
property, plant, and equipment
|
|
|
(37,561)
|
|
|
|
(53,741)
|
|
Proceeds from sale of
business
|
|
|
—
|
|
|
|
140,000
|
|
Acquisition of
business, net of cash acquired
|
|
|
(5,447)
|
|
|
|
—
|
|
Investment in
preferred stock
|
|
|
(750)
|
|
|
|
(500)
|
|
Proceeds from sale of
assets
|
|
|
—
|
|
|
|
1,085
|
|
Net cash (used in)
provided by investing activities—continuing operations
|
|
|
(96,320)
|
|
|
|
427
|
|
Net cash used in
investing activities—discontinued operations
|
|
|
—
|
|
|
|
(6,832)
|
|
Net cash used in
investing activities
|
|
|
(96,320)
|
|
|
|
(6,405)
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
Proceeds from term
loan, net of discount
|
|
|
364,800
|
|
|
|
—
|
|
Proceeds from senior
secured notes, net of discount
|
|
|
299,880
|
|
|
|
—
|
|
Borrowings under
revolving credit facility
|
|
|
60,000
|
|
|
|
50,000
|
|
Payments of revolving
credit facility
|
|
|
(60,000)
|
|
|
|
(50,000)
|
|
Payments of long-term
debt
|
|
|
(772,000)
|
|
|
|
(8,000)
|
|
Payments of deferred
financing fees
|
|
|
(8,493)
|
|
|
|
—
|
|
Tax withholding
payments related to net share settlements of restricted stock units
and awards
|
|
|
(2,018)
|
|
|
|
(1,190)
|
|
Issuance of common
stock under employee stock purchase plan
|
|
|
1,028
|
|
|
|
1,263
|
|
Net collections under
transition service agreement
|
|
|
1,136
|
|
|
|
3,803
|
|
Net cash used in
financing activities—continuing operations
|
|
|
(115,667)
|
|
|
|
(4,124)
|
|
Net increase in cash
and cash equivalents
|
|
|
42,988
|
|
|
|
104,386
|
|
Cash and cash
equivalents at the beginning of the period
|
|
|
253,365
|
|
|
|
148,979
|
|
Cash and cash
equivalents at the end of the period
|
|
$
|
296,353
|
|
|
$
|
253,365
|
|
Houghton Mifflin
Harcourt Company
Non-GAAP
Reconciliations (Unaudited)
|
|
Adjusted EBITDA
from continuing operations
|
|
Consolidated
(in thousands of
dollars)
|
|
|
|
Three Months Ended
December 31,
|
|
|
Years Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net loss from
continuing operations
|
|
$
|
(125,118)
|
|
|
$
|
(86,390)
|
|
|
$
|
(213,833)
|
|
|
$
|
(137,457)
|
|
Interest
expense
|
|
|
13,636
|
|
|
|
11,645
|
|
|
|
48,778
|
|
|
|
45,680
|
|
Interest
income
|
|
|
(1,459)
|
|
|
|
(1,650)
|
|
|
|
(3,157)
|
|
|
|
(2,550)
|
|
Provision (benefit)
for income taxes
|
|
|
(55)
|
|
|
|
3,493
|
|
|
|
4,201
|
|
|
|
5,597
|
|
Depreciation
expense
|
|
|
14,530
|
|
|
|
18,659
|
|
|
|
61,475
|
|
|
|
75,116
|
|
Amortization
expense—film asset
|
|
|
3,063
|
|
|
|
6,057
|
|
|
|
9,835
|
|
|
|
6,057
|
|
Amortization
expense
|
|
|
53,506
|
|
|
|
44,142
|
|
|
|
201,382
|
|
|
|
170,903
|
|
Non-cash
charges—stock-compensation
|
|
|
2,874
|
|
|
|
3,959
|
|
|
|
13,968
|
|
|
|
13,248
|
|
Non-cash
charges—(gain) loss on derivative
instruments
|
|
|
(272)
|
|
|
|
400
|
|
|
|
899
|
|
|
|
1,374
|
|
Excess inventory
obsolescence
|
|
|
9,758
|
|
|
|
—
|
|
|
|
9,758
|
|
|
|
—
|
|
Fees, expenses or
charges for equity offerings,
debt or
acquisitions/dispositions
|
|
|
5,596
|
|
|
|
553
|
|
|
|
6,327
|
|
|
|
2,883
|
|
Restructuring/severance and other charges
|
|
|
15,821
|
|
|
|
2,021
|
|
|
|
21,742
|
|
|
|
11,478
|
|
Gain on sale of
assets
|
|
|
—
|
|
|
|
(585)
|
|
|
|
—
|
|
|
|
(201)
|
|
Loss on
extinguishment of debt
|
|
|
4,363
|
|
|
|
—
|
|
|
|
4,363
|
|
|
|
—
|
|
Adjusted EBITDA from
continuing operations
|
|
$
|
(3,757)
|
|
|
$
|
2,304
|
|
|
$
|
165,738
|
|
|
$
|
192,128
|
|
|
|
Free Cash
Flow
|
|
Consolidated
(in thousands of
dollars)
|
|
|
|
Three Months Ended
December 31,
|
|
|
Years Ended
December 31,
|
|
|
|
2019
|
|
|
2018
(1)
|
|
|
2019
|
|
|
2018
(1)
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
127,603
|
|
|
$
|
77,978
|
|
|
$
|
254,975
|
|
|
$
|
104,084
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to
pre-publication costs
|
|
|
(21,030)
|
|
|
|
(31,201)
|
|
|
|
(102,562)
|
|
|
|
(123,403)
|
|
Additions to
property, plant, and equipment
|
|
|
(10,211)
|
|
|
|
(12,253)
|
|
|
|
(37,561)
|
|
|
|
(53,741)
|
|
Free Cash
Flow
|
|
$
|
96,362
|
|
|
$
|
34,524
|
|
|
$
|
114,852
|
|
|
$
|
(73,060)
|
|
1
|
All amounts have been
adjusted to eliminate the impact of the Riverside Standardized
Testing business which has been classified as discontinued
operations.
|
|
|
We are unable to
reconcile forward looking cash flow (both before and after interest
payments) and related margin without unreasonable
efforts.
|
Houghton Mifflin
Harcourt Company
Calculation of
Billings (Unaudited)
|
|
Billings
(in thousands of dollars)
|
|
Consolidated
|
|
|
|
Three Months
Ended
December
31,
|
|
|
Years
Ended
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net sales
|
|
$
|
241,475
|
|
|
$
|
249,038
|
|
|
$
|
1,390,674
|
|
|
$
|
1,322,417
|
|
Change in deferred
revenue
|
|
|
(40,618)
|
|
|
|
(42,055)
|
|
|
|
200,662
|
|
|
|
(7,693)
|
|
Billings
(1)
|
|
$
|
200,857
|
|
|
$
|
206,983
|
|
|
$
|
1,591,336
|
|
|
$
|
1,314,724
|
|
|
|
Education
|
|
|
|
Three Months
Ended
December
31,
|
|
|
Years
Ended
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net sales
|
|
$
|
189,387
|
|
|
$
|
188,754
|
|
|
$
|
1,210,646
|
|
|
$
|
1,122,689
|
|
Change in deferred
revenue
|
|
|
(40,514)
|
|
|
|
(41,095)
|
|
|
|
201,621
|
|
|
|
(7,980)
|
|
Education Billings
(1)
|
|
$
|
148,873
|
|
|
$
|
147,659
|
|
|
$
|
1,412,267
|
|
|
$
|
1,114,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMH
Books & Media
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December
31,
|
|
|
Years
Ended
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net sales
|
|
$
|
52,088
|
|
|
$
|
60,284
|
|
|
$
|
180,028
|
|
|
$
|
199,728
|
|
Change in deferred
revenue
|
|
|
(104)
|
|
|
|
(960)
|
|
|
|
(959)
|
|
|
|
287
|
|
HMH Books & Media
Billings
|
|
$
|
51,984
|
|
|
$
|
59,324
|
|
|
$
|
179,069
|
|
|
$
|
200,015
|
|
Billings is an
operating measure utilized by the Company derived as shown
above.
|
|
|
1
|
All amounts have been
adjusted to eliminate the impact of the Riverside Standardized
Testing business which has been classified as discontinued
operations.
|
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SOURCE Houghton Mifflin Harcourt