Soft Year at Haights Cross

Sluggish education and library markets were the main factors behind a 0.7% decline in revenue, to $162 million, at Haights Cross Communications in 2003, executives said last week. The dip in sales plus continued investment in new products and restructuring charges resulted in a 5.5% decline in EBITDA, to $44.4 million, although Haights's net loss was cut to $1.9 million from $27.7 million in 2002.

The company's two largest publishers for the supplementary market had the best results in the year. Sales at Sundance/Newbridge rose 4.9%, to $44.8 million, led by sales of AlphaKids Guided Reading and Second Chance Reading programs as well as its Go Facts Guided Writing line. Sales at Triumph Learning increased 16.1%, to $25.2 million, helped by the release of 162 new titles, a record. Sales at Oakstone were flat last year at $18.2 million.

Revenue was down at both of the company's library publishing operations. Sales at Recorded Books dropped to $61.1 million from $65.4 million, while sales at Chelsea House fell 14.7%, to $12.8 million. Both Haights chairman Peter Quandt and CFO Paul Crecca emphasized that the decline at Recorded Books came in its consumer channels—bookstores and truck stops—and not in its library market, where sales rose 8%. Sales to the consumer market fell by more than $7 million last year, due in part to the high sales in 2002 of the audio editions of Lord of the Rings. Sales were also hurt by the loss of more than 200 truck stop stores that had been serviced by Recorded Books unit Audio Adventures. In 2003, Recorded Books generated sales of about $40 million from the library market, while Audio Adventures added $9 million and retail accounts $6 million.

Chelsea House "had a very difficult year," Quandt acknowledged, with sales falling for the second straight year. With limited budgets, libraries focused on buying frontlist titles, not the backlist titles that are Chelsea's strength, Quandt said. Haights is diverting some development money from Chelsea to Triumph this year, but is investing funds to expand the division's sales and marketing forces.

The creation of a new in-house sales team is one of the top priorities for Haights in 2004, Crecca said, and the company will continue to invest in new title development. Quandt said he is optimistic about Haights making an acquisition in 2004. Earlier this year, Haights said it was in talks to acquire a $25-million supplementary publisher and Quandt said that if the due diligence process moves as expected, the company could complete the acquisition by the end of April. Without an acquisition, Haights said it expects sales in 2004 to be flat with 2003, while EBITDA will be down slightly. Results are projected to bounce back in 2005.