A federal appeals court on Friday upheld the major rate hikes imposed in August by the U.S. Postal Service, saying the Postal Regulatory Commission’s order underlying the increases was neither arbitrary and capricious, nor did it exceed the Commission’s statutory authority. The decision, by the U.S. Court of Appeals for the District of Columbia Circuit, preserves a 6.8% increase for first-class mail and an 8.8% increase for package services — hikes of unprecedented size in recent years. The increases came after the PRC late last year finished an overhaul of the existing rate-setting system, which it had deemed inadequate. The new rate system ties price caps to what the PRC identified as the USPS’ most significant cost drivers: fewer pieces of mail going to more addresses and benefits payments the agency is required to make for future retirees.
Global learning company Houghton Mifflin Harcourt (“HMH” or the “Company”) (Nasdaq: HMHC) today announced its financial results for the year ended December 31, 2017.
“During 2017, we laid the foundation for long-term growth by bringing in new executive talent, establishing a leaner cost structure and investing in highly differentiated, next generation products,” said Jack Lynch, Chief Executive Officer of HMH. “We are focused on executing against our long-term strategy, and we remain confident we will drive continued market leadership and create value for our customers and our shareholders.”
Joe Abbott, Chief Financial Officer of HMH added, “We delivered on our guidance for the full year in 2017, despite contraction in our addressable market. As we move into the new year, we have positioned HMH as a leaner, more efficient organization, and we expect to make further progress on our operating efficiency initiatives.”
HMH expects 2018 net sales to be in a range of $1.350 to $1.430 billion and billings to be in the range of $1.365 to $1.445 billion. Content development spend for 2018 is expected to be in the range of $125 to $150 million, with total capital expenditures including non-plate capital expenditures in the range of $185 to $210 million.
Assumptions underlying this guidance include a flat to slightly higher HMH addressable market of approximately $2.5 billion and our market share to be equal to or greater than the 38% we achieved in 2017.
Full Year 2017 Financial Results:
Net Sales: Net Sales for the full year increased $35 million, or 2.5%, year over year. The net sales increase was driven by a $19 million increase in our Trade Publishing segment and a $16 million increase in our Education segment during the current period. Within our Trade business, the increase was primarily due to sales of the Whole30 series and Tim Ferriss’ Tribe of Mentors and Tools of Titans, stronger eBook sales, such as The Handmaid’s Tale and 1984, and backlist print title sales, such as The Polar Express and The Giver, along with a lower product return rate and higher subrights income. Within our Education segment, the increase was primarily due to greater sales from our Extension businesses, which primarily consist of Heinemann, intervention, supplemental and assessment products as well as professional services. Extension businesses net sales for the current period increased $22 million from $565 million in 2016 to $587 million in 2017 primarily driven by higher Heinemann and supplemental net sales in 2017. The primary drivers of the increase in our Heinemann net sales were sales of Classroom Libraries along with the introduction of Fountas & Pinnell Classroom product.
Billings: Billings for the full year decreased $18 million, or 1.3%, year over year. The billings decrease was driven by a $36 million decrease in our Education segment partially offset by an $18 million increase in our Trade Publishing segment during the current period. Within our Education segment, the decrease was primarily due to lower Core Solutions billings, inclusive of international billings, which declined by $40 million from $660 million in 2016 to $620 million. The primary drivers of the decrease in our Core Solutions business were lower reading and math billings in open territory states, lower math program sales in adoption states and lower billings from our international business, primarily due to a large Department of Defense order in 2016 not repeating in 2017. Partially offsetting the decrease was a $5 million one-time fee we recognized within Core Solutions in 2017 in connection with the expiration of a distribution agreement. Further offsetting the decrease in Core Solutions billings was a $4 million increase in our Extension businesses.
Operating Loss: Operating loss for the full year 2017 was $114 million, $197 million lower than the $311 million operating loss recorded in 2016. The favorable change of $197 million was primarily the result of our prior year strategic decision to gradually migrate away from specific imprints, primarily Holt McDougal and various supplemental brands, in favor of branding our products under the HMH and Houghton Mifflin Harcourt names resulting in a $139 million non-cash impairment charge in 2016. Additionally, the increase in net sales and a decrease in cost of sales and selling and administrative costs contributed to the year over year improvement. Partially offsetting the decrease in operating loss was a $41 million charge associated with our 2017 Restructuring Plan.
Net Loss: Net loss of $103 million for the full year 2017 was $182 million lower than the net loss of $285 million in 2016, due primarily to the same factors impacting operating loss offset by a $15 million unfavorable change in our income tax benefit in 2017, from an income tax benefit of $65 million for the same period in 2016 to an income tax benefit of $50 million in 2017. In 2016, the income tax benefit was primarily due to a change in indefinite-lived intangibles to definite-lived. In 2017, the income tax benefit was primarily due to the effects of U.S. tax reform. Further, interest expense increased by $4 million primarily due to net settlement payments on our interest rate derivatives during 2017 and a slight increase in the interest rate of our term loan facility.
Adjusted EBITDA: Adjusted EBITDA for the full year 2017 was $219 million, an increase of $36 million from $183 million in 2016, primarily due to higher net sales and lower selling and administrative costs.
more detail at: https://www.hmhco.com/about-us/press-releases/houghton-mifflin-harcourt-announces-full-year-2017-results