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White Plains, NY, August 20, 2008 – Haights Cross Communications, Inc. (HCC) today reported results for the second quarter ended June 30, 2008. On July 1, 2008, HCC announced that it was suspending the sale process for its test-prep and intervention business, Triumph Learning, and its audio book publishing business, Recorded Books. HCC also announced that it had closed the sale of its Oakstone Publishing business. The
operations of Oakstone Publishing, which are reported as a discontinued operation in the second quarter of 2008, have been removed from results from continuing operations for all periods presented. On August 15, 2008, HCC refinanced its senior secured term loans due August 15, 2008. HCC borrowed $108.2 million under the new credit facility and used a combination of net proceeds plus cash on hand, including cash received from its previous sale of its Oakstone Publishing business to repay its existing senior secured term loans in full. In addition, on August 15, 2008 HCC retired $31.2 million of its 11 ¾% Senior Notes due 2011.
Second Quarter 2008 Results
Revenue for the second quarter 2008 was $51.9 million, an increase of $1.3 million, or 2.7%, compared to revenue of $50.6 million for the second quarter 2007, reflecting growth in our Test-Prep and Intervention and Library segments, partially offset by a continued revenue decline in our K-12 Supplemental Education segment.
Revenue for the Library segment, representing our Recorded Books business, increased $1.2 million, or 5.5%, to $23.6 million for the second quarter 2008, resulting primarily from growth in the school channel due to sales of (PITR) Plugged Into Reading and the core public library channel, offset by a decline in the retail channel.
Revenue for the Test-prep and Intervention segment increased $2.6 million, or 14.3%, to
$21.1 million for the second quarter 2008, reflecting continued strong growth of 31.1% in
our Coach product line (Triumph Learning’s flagship brand) and a 1.9% increase in the
Buckledown/Options product lines.
Revenue for the K-12 Supplemental Education segment, reflecting our Sundance/Newbridge business, declined $2.5 million, or 25.9%, to $7.2 million for the second quarter 2008, we believe resulting from substantially increased competition in the supplemental education market as previously reported and the impact of our wind down of the business.
Income from Operations increased $3.5 million to $8.4 million for the second quarter 2008, primarily reflecting the revenue growth for the quarter, in addition to decreased cost of goods sold expenses and amortization of pre-publication costs associated with the wind-down of our Sundance/Newbridge business.
EBITDA, which we define as earnings before interest, taxes, depreciation, amortization,
discontinued operations and goodwill impairment charges, grew $1.8 million to $14.4 million for the second quarter 2008, primarily reflecting quarter revenue growth and decreased cost of goods sold, offset by increased restructuring costs associated with the wind-down of our Sundance/Newbridge business.
Adjusted EBITDA, which we define as EBITDA excluding non-recurring expenses and
restructuring and restructuring related charges, increased $2.8 million to $15.9 million for
the second quarter 2008, primarily reflecting increases in Recorded Books and
Sundance/Newbridge Business and decreases in our Triumph Learning business and costs associated with our suspended efforts to sell our Recorded Books and Triumph Learning businesses.
Results for the six months ended June 30, 2008
Revenue for the six months ended June 30, 2008 increased $0.6 million, or 1.0%, to $96.8 million from $96.2 million for the six months ended June 30, 2007, reflecting growth in our Library, Test-prep and Intervention segments offset by a revenue decline in our K-12 Supplemental Education segment.
Revenue for the Library segment increased $1.9 million, or 4.4%, for the six months ended June 30, 2008. The year-over-year revenue performance reflects approximately 17% growth in school channel revenues due to the success of the PITR product line and 6.5% growth in the core library channel. These increases were partially offset by
declines in the retail channel.
Revenue for the Test-prep and Intervention segment increased $3.1 million, or 8.1%, for
the six months ended June 30, 2008 attributable to the continued success of our Coach product line which increased 18.9% partially offset by a decline in our Buckledown/Options product lines which decreased 2.3%.
Revenue for the K-12 Supplemental Education segment declined $4.4 million, or 28.8%,
for the six months ended June 30, 2008, reflecting we believe the effect of substantially
increased competition in the supplemental education market, other market factors as
previously reported and the impact of our wind down of the business.
Income from Operations for the six months ended June 30, 2008 increased $1.3 million,
primarily due to the decreases in costs of goods sold and amortization of pre-publication
costs offset by increased restructuring related costs associated with the wind down of our
Sundance/Newbridge business and increased professional fees related to the suspended
efforts to sell our Recorded Books and Triumph Learning businesses.
EBITDA improved $0.2 million to $23.1 million for the six months ended June 30, 2008,
reflecting increases in our Library and K-12 Supplemental Education segments off-set by
a decrease in our Test-prep and Intervention segment and one time charges associated with our suspended efforts to sell our Recorded Books and Triumph Learning businesses.
Adjusted EBITDA increased $2.6 million to $26.3 million for the six months ended June 30, 2008, primarily due to increases in our Library and K-12 Supplemental Education segments, off-set by a decrease in our Test-prep and Intervention segment.
Capital expenditures -- pre-publication costs relate to costs incurred in the development
of new products. For the six months ended June 30, 2008, we invested $10.6 million in
pre-publication costs, compared to $11.4 million during the same period in 2007. HCC anticipates pre-publication expenditures of approximately $22.1 million for fiscal year 2008.
Capital expenditures -- property and equipment relates to the purchase of tangible fixed
assets such as computers, software, and leasehold improvements. For the six months
ended June 30, 2008, we invested $0.6 million in property and equipment, compared to $1.1 million during the same period in 2007. HCC anticipates property and equipment expenditures of approximately $2.7 million for fiscal year 2008.
Investor Conference Call
HCC’s conference call for investors, analysts, and the media will be held on August 20,2008, starting at 4:00 PM (ET). Participating in the call will be Paul J. Crecca, HCC President and CEO, and Mark Kurtz, HCC Senior Vice President and CFO. To participate, please call 1-800-230-1074 (USA) or 612-332-0923 (International).
Digitized replay of the conference call will be available from August 20, 2008, starting at
6:30 PM (ET) ending on September 20, 2008 at 11:59 PM (ET). To listen to the replay,
please call 1-800-475-6701 (USA) or 320-365-3844 (International) and enter the access
code of 956052.
For more details, please view the PDF below:
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