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, 2005
OR
| ¨ | 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 x No ¨
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 11, 2005 was 1,000 shares.
The number of shares outstanding of Houghton Mifflin Company’s common stock as of May 11, 2005 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
2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars)
| HM PUBLISHING CORP. |
HOUGHTON MIFFLIN COMPANY |
|||||||||||||||
| THREE MONTHS ENDED MARCH 31, |
THREE MONTHS ENDED MARCH 31, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| NET SALES |
$ | 146,388 | $ | 139,046 | $ | 146,388 | $ | 139,046 | ||||||||
| COSTS AND EXPENSES |
||||||||||||||||
| Cost of sales excluding pre-publication and publishing rights amortization |
84,392 | 81,435 | 84,392 | 81,435 | ||||||||||||
| Pre-publication and publishing rights amortization |
42,836 | 43,298 | 42,836 | 43,298 | ||||||||||||
| Cost of sales |
127,228 | 124,733 | 127,228 | 124,733 | ||||||||||||
| Selling and administrative |
139,052 | 126,790 | 139,052 | 126,790 | ||||||||||||
| Other intangible asset amortization |
1,116 | 1,208 | 1,116 | 1,208 | ||||||||||||
| 267,396 | 252,731 | 267,396 | 252,731 | |||||||||||||
| OPERATING LOSS |
(121,008 | ) | (113,685 | ) | (121,008 | ) | (113,685 | ) | ||||||||
| OTHER INCOME (EXPENSE) |
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| Net interest |
(32,505 | ) | (28,829 | ) | (27,510 | ) | (24,269 | ) | ||||||||
| Other income (expense) |
(10 | ) | 24 | (10 | ) | 24 | ||||||||||
| (32,515 | ) | (28,805 | ) | (27,520 | ) | (24,245 | ) | |||||||||
| Loss before income taxes |
(153,523 | ) | (142,490 | ) | (148,528 | ) | (137,930 | ) | ||||||||
| Income tax benefit |
(55,440 | ) | (52,036 | ) | (53,767 | ) | (50,758 | ) | ||||||||
| NET LOSS |
$ | (98,083 | ) | $ | (90,454 | ) | $ | (94,761 | ) | $ | (87,172 | ) | ||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except share data)
| HM PUBLISHING CORP. |
HOUGHTON MIFFLIN COMPANY |
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| MARCH 31, 2005 |
DECEMBER 31, 2004 |
MARCH 31, 2005 |
DECEMBER 31, 2004 |
|||||||||||||
| ASSETS | ||||||||||||||||
| CURRENT ASSETS |
||||||||||||||||
| Cash and cash equivalents |
$ | 70,537 | $ | 151,358 | $ | 70,537 | $ | 151,358 | ||||||||
| Short-term investments |
— | 54,200 | — | 54,200 | ||||||||||||
| Accounts receivable, less allowance for bad debts and book returns of $29,572 at March 31, 2005 and $37,434 at December 31, 2004 |
121,905 | 191,324 | 121,905 | 191,324 | ||||||||||||
| Inventories |
200,400 | 167,660 | 200,400 | 167,660 | ||||||||||||
| Deferred income taxes |
90,329 | 65,173 | 90,329 | 65,173 | ||||||||||||
| Prepaid expenses and other current assets |
14,390 | 20,253 | 14,390 | 20,253 | ||||||||||||
| TOTAL CURRENT ASSETS |
497,561 | 649,968 | 497,561 | 649,968 | ||||||||||||
| Property, plant, and equipment, net |
115,002 | 116,020 | 115,002 | 116,020 | ||||||||||||
| Pre-publication costs |
149,720 | 148,642 | 149,720 | 148,642 | ||||||||||||
| Royalty advances to authors, net of allowance of $47,219 at March 31, 2005 and $45,968 at December 31, 2004 |
28,273 | 26,605 | 28,273 | 26,605 | ||||||||||||
| Goodwill |
629,093 | 629,093 | 629,093 | 629,093 | ||||||||||||
| Other intangible assets, net |
692,656 | 718,479 | 692,656 | 718,479 | ||||||||||||
| Other assets and long-term receivables |
68,024 | 70,840 | 62,728 | 65,396 | ||||||||||||
| TOTAL ASSETS |
$ | 2,180,329 | $ | 2,359,647 | $ | 2,175,033 | $ | 2,354,203 | ||||||||
| LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||||||||||
| CURRENT LIABILITIES |
||||||||||||||||
| Current portion of long-term debt |
$ | 23 | $ | 44 | $ | 23 | $ | 44 | ||||||||
| Accounts payable |
144,146 | 95,610 | 144,146 | 95,610 | ||||||||||||
| Due to parent |
4,284 | 4,284 | 4,920 | 4,920 | ||||||||||||
| Royalties payable |
28,888 | 64,944 | 28,888 | 64,944 | ||||||||||||
| Salaries, wages, and commissions payable |
16,228 | 61,212 | 16,228 | 61,212 | ||||||||||||
| Interest payable |
15,282 | 40,271 | 15,282 | 40,271 | ||||||||||||
| Current portion of restructuring accrual |
3,394 | 5,768 | 3,394 | 5,768 | ||||||||||||
| Other |
73,556 | 72,382 | 72,436 | 71,262 | ||||||||||||
| TOTAL CURRENT LIABILITIES |
285,801 | 344,515 | 285,317 | 344,031 | ||||||||||||
| Long-term debt |
1,315,351 | 1,309,983 | 1,137,032 | 1,136,512 | ||||||||||||
| Royalties payable |
769 | 1,036 | 769 | 1,036 | ||||||||||||
| Accrued pension benefits |
62,276 | 58,791 | 62,276 | 58,791 | ||||||||||||
| Accrued postretirement benefits |
56,295 | 56,103 | 56,295 | 56,103 | ||||||||||||
| Deferred income taxes |
204,727 | 235,138 | 214,111 | 242,848 | ||||||||||||
| Other |
27,533 | 28,304 | 27,533 | 28,304 | ||||||||||||
| TOTAL LIABILITIES |
1,952,752 | 2,033,870 | 1,783,333 | 1,867,625 | ||||||||||||
| COMMITMENTS AND CONTINGENCIES |
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| STOCKHOLDER’S EQUITY |
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| 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 | ||||||||||||
| Retained earnings |
(243,131 | ) | (145,048 | ) | (224,251 | ) | (129,490 | ) | ||||||||
| Other comprehensive income |
951 | 1,068 | 951 | 1,068 | ||||||||||||
| TOTAL STOCKHOLDER’S EQUITY |
227,577 | 325,777 | 391,700 | 486,578 | ||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY |
$ | 2,180,329 | $ | 2,359,647 | $ | 2,175,033 | $ | 2,354,203 | ||||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
| HM PUBLISHING CORP. |
HOUGHTON MIFFLIN COMPANY |
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| THREE MONTHS ENDED MARCH 31, |
THREE MONTHS ENDED MARCH 31, |
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