HOUGHTON MIFFLIN CO - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: to

COMMISSION FILE NUMBERS: 333-110720 and 333-105746

HM PUBLISHING CORP.

HOUGHTON MIFFLIN COMPANY

(Exact name of registrants as specified in their charters)

DELAWARE

MASSACHUSETTS

13-4265843

04-1456030

(State or other jurisdictions of

incorporation or organization)

(I.R.S. Employer

Identification Numbers)

222 BERKELEY STREET

BOSTON, MASSACHUSETTS 02116

(Address of principal executive offices)

(617) 351-5000

(Registrants’ telephone number, including area code)

Indicate by check mark whether HM Publishing Corp. (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

Indicate by check mark whether Houghton Mifflin Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Act): Yes ¨ No x

The number of shares outstanding of HM Publishing Corp.’s common stock as of May 14, 2004 was 1,000 shares.

The number of shares outstanding of Houghton Mifflin Company’s common stock as of May 14, 2004 was 1,000 shares.

This Form 10-Q is a combined quarterly report being filed separately by two registrants: HM Publishing Corp. and Houghton Mifflin Company. Unless the context indicates otherwise, any reference in this report to “Publishing” refers to HM Publishing Corp., and any reference to “Houghton Mifflin” refers to Houghton Mifflin Company, the wholly-owned operating subsidiary of Publishing. The “Company,” “we,” “us,” and “our” refer to HM Publishing Corp. together with Houghton Mifflin Company.

Houghton Mifflin Company meets the conditions set forth in general instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

HM PUBLISHING CORP. AND HOUGHTON MIFFLIN COMPANY

INDEX


		PAGE NO.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets (unaudited) – March 31, 2004 and December 31, 2003	3-4

	Consolidated Statements of Operations (unaudited) – Three Months Ended March 31, 2004 and 2003	5

	Consolidated Statements of Cash Flows (unaudited) – Three Months Ended March 31, 2004 and 2003	6-7

	Notes to Consolidated Financial Statements (unaudited)	8-17

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27

PART II.	OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K	28

	SIGNATURES	29

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars, except share data)


	HM PUBLISHING CORP.				HOUGHTON MIFFLIN COMPANY
	MARCH 31, 2004		DECEMBER 31, 2003		MARCH 31, 2004		DECEMBER 31, 2003
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	38,098	$	159,093	$	38,098	$	159,093
Accounts receivable, less allowance for bad debts and book returns of $26,722 at March 31, 2004 and $33,988 at December 31, 2003		119,384		194,932		119,384		194,932
Inventories		177,744		162,130		177,744		162,130
Deferred income taxes		74,031		62,941		74,031		62,941
Prepaid expenses and other current assets		21,746		27,761		21,746		27,761

TOTAL CURRENT ASSETS		431,003		606,857		431,003		606,857

Property, plant, and equipment, net		106,929		107,990		106,929		107,990
Pre-publication costs		114,668		107,674		114,668		107,674
Royalty advances to authors, net of allowance of $40,251 at March 31, 2004 and $38,949 at December 31, 2003		32,017		28,814		32,017		28,814
Goodwill		646,898		646,809		646,898		646,809
Other intangible assets, net		817,673		850,709		817,673		850,709
Other assets and long-term receivables		84,780		92,310		79,113		86,533

TOTAL ASSETS	$	2,233,968	$	2,441,163	$	2,228,301	$	2,435,386

See accompanying Notes to Unaudited Consolidated Financial Statements

UNAUDITED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands of dollars, except share data)


	HM PUBLISHING CORP.						HOUGHTON MIFFLIN COMPANY
	MARCH 31, 2004			DECEMBER 31, 2003			MARCH 31, 2004			DECEMBER 31, 2003
LIABILITIES AND STOCKHOLDER’S EQUITY

CURRENT LIABILITIES
Current portion of long-term debt	$	189		$	1,039		$	189		$	1,039
Accounts payable		99,127			74,786			99,127			74,786
Due to parent		4,364			4,619			5,221			5,524
Royalties payable		29,310			62,341			29,310			62,341
Salaries, wages, and commissions		21,334			60,430			21,334			60,430
Interest payable		15,284			40,242			15,284			40,242
Current portion of restructuring accrual		10,695			12,022			10,695			12,022
Other		61,166			68,475			60,047			67,345

TOTAL CURRENT LIABILITIES		241,469			323,954			241,207			323,729

Long-term debt		1,294,584			1,289,684			1,134,937			1,134,449
Royalties payable		3,145			3,443			3,145			3,443
Accrued pension benefits		71,925			71,011			71,925			71,011
Accrued postretirement benefits		55,141			54,781			55,141			54,781
Deferred income taxes		232,869			273,973			235,567			275,394
Other		28,566			28,343			28,566			28,343

TOTAL LIABILITIES		1,927,699			2,045,189			1,770,488			1,891,150

COMMITMENTS AND CONTINGENCIES (See Note 12)

STOCKHOLDER’S EQUITY
Common stock, $1 par value; 1,000 shares authorized and issued		1			1			1			1
Capital in excess of par value		469,756			469,756			614,999			614,999
Accumulated deficit		(165,116	)		(74,662	)		(158,815	)		(71,643	)
Other comprehensive income		1,628			879			1,628			879

TOTAL STOCKHOLDER’S EQUITY		306,269			395,974			457,813			544,236

	$	2,233,968		$	2,441,163		$	2,228,301		$	2,435,386

See accompanying Notes to Unaudited Consolidated Financial Statements

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of dollars)


	HM PUBLISHING CORP.						HOUGHTON MIFFLIN COMPANY
	THREE MONTHS ENDED MARCH 31,						THREE MONTHS ENDED MARCH 31,
	2004			2003			2004			2003
NET SALES	$	139,046		$	132,823		$	139,046		$	132,823

COSTS AND EXPENSES
Cost of sales excluding pre-publication and publishing rights amortization		82,297			78,229			82,297			78,229
Pre-publication and publishing rights amortization		43,635			36,807			43,635			36,807

Cost of sales		125,932			115,036			125,932			115,036
Selling and administrative		125,591			132,195			125,591			132,195
Other intangible asset amortization		1,208			249			1,208			249

		252,731			247,480			252,731			247,480

OPERATING LOSS		(113,685	)		(114,657	)		(113,685	)		(114,657	)

OTHER EXPENSE
Net interest		(28,829	)		(27,804	)		(24,269	)		(27,804	)
Debt extinguishment costs		—			(48,427	)		—			(48,427	)
Other income		24			18			24			18

		(28,805	)		(76,213	)		(24,245	)		(76,213	)

Loss from continuing operations before income taxes		(142,490	)		(190,870	)		(137,930	)		(190,870	)
Income tax benefit		(52,036	)		(70,240	)		(50,758	)		(70,240	)

Loss from continuing operations		(90,454	)		(120,630	)		(87,172	)		(120,630	)
Loss from discontinued operations, net of tax		—			(1,221	)		—			(1,221	)


NET LOSS	$	(90,454	)	$	(121,851	)	$	(87,172	)	$	(121,851	)

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