HM Sees Moderate Gains in 2001
Jim Milliot -- 11/6/00

Houghton Mifflin is looking for revenues to grow between 8% and 10% in 2001 with net income growth of mid-single to low double digits before taking into account an equity loss related to its investment in the start-up Classwell Learning (News, Sept. 18). The forecast came in remarks accompanying the release of HM's third-quarter results that showed net sales up 4.1%, to $476.5 million, and income from operations ahead 6.5%, to $99.7 million; as reported by HM earlier in October, the results were lower than analysts' expectations (News, Oct. 16). HM chairman Nader Darehshori said the company "was disappointed that we did not meet our expectations; however, we still expect the year 2000 to reflect significant net sales and earnings growth."

Sales in the company's k-12 publishing segment rose 3.4%, to $353.7 million, with strong performances from HM's supplementary publishing and testing divisions offset by lower than expected sales from certain core textbook lines. College division sales inched up 1%, to $87.8 million, due to lower high school advanced placement orders. Sales in HM's "other" segment increased 21.6% to $34.9 million, led by substantial gains in the trade and reference group. Darehshori said that the group benefited from strong sales of TheAmerican Heritage Dictionary as well as solid gains in its children's and adult publishing operations.

Darehshori said his optimism about results in 2001 is based in large part on the fact that there will be more adoption opportunities in HM's areas of strength (reading, literature, language arts and math) than in 2000. He said net income growth will be dampened by the loss in its Classwell investment, increased investment in technology systems and an increase in plate amortization. In addition, net income is expected to be negatively affected by what Darehshori called the industry-wide trends of rising selling costs; higher development costs due to requirements for more customized instructional materials; and higher technology costs.

In responding to a question about the company's long-term prospects, Darehshori said that the HM board "is considering every possibility to unlock shareholder value... nothing is out of the question."