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HM Trade Unit Trims Loss in `97
Jim Milliot -- 4/27/98
Despite a 7.7% increase in sales, to $88.1 million in 1997 (News, Feb. 2), Houghton Mifflin's trade and reference group still posted a loss last year, although the $3.1 million loss was less then the $5.1 million the unit lost in 1996.
HM attributed the improvement to increased sales of its children's and adult titles, with the latter being led by Mariner Books. The company also said it was able to cut the group's operating loss because of improved efficiencies in the trade division and noted that as a percent of sales, every category of operating expense except royalty and administrative costs decreased from 1996. In addition, the group benefited from a 39% increase in the sales of Houghton Mifflin Interactive, which contributed revenues of approximately $5.4 million. The May acquisition of Chapters Publishing, for which HM paid $3.3 million, also added to revenues.

On the education side, operating profits rose 16%, to $130.9 million, on an 11.5% increase in sales, to $709.2 million. All of HM's education units reported improved performances in the year. However, in its annual report, HM repeated its earlier outlook for 1998 that, because of a lack of adoptions, revenues in the school division will fall this year compared to 1997. Total revenues for the company should be up modestly this year.

The company further noted that operating profits will be held down by HM's investments in new technology upgrades to its distribution and warehouse management systems, as well as expenditures to ensure that the company is "2000 compliant." HM estimates that the year 2000 computer project will eventually cost $30 million to $35 million.

Will Distribute LKC

HM's trade division announced earlier this month that it will provide sales and fulfillment services to the U.S. trade for the complete list of Larousse Kingfisher Chambers. LKC will retain services for all house accounts. LKC operates as the U.S. sales and marketing arm for its French-based parent company, Compagnie General des Eaux. It currently has a backlist of 500 titles in the areas of children's, adult reference and cookbooks. The agreement with HM takes effect July 1.
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