The education and professional publisher Haights Cross Communications reported that total revenues for the first half of 2002 rose 14%, to nearly $88 million, and that EBITDA (earnings before interest, taxes, depreciation and amortization) increased 21%, to about $20 million. Sales to the library market grew the fastest in the period, up 24%, to $40 million, while sales in the professional segment increased 10%, to nearly $13 million. Revenues in the supplemental education segment rose 6%, to approximately $35 million.
Sales were led by a strong performance at Newbridge Educational Publishers, which did very well with its Discovery Links Science and Social Studies series, and its new Discovery Links Intermediate Plus series. Sales at Sundance Publishing were off in the period, although its AlphaKids guided reading program continued to sell well. Sales at Triumph Learning were up in the first half, driven by strong gains in Texas and Georgia, where Triumph completed its introduction of test prep books. New prep series will be introduced for Colorado, Kentucky and Tennessee in the second half of the year. Sales were soft at Chelsea House, but Haights Cross expects better results in the last six months of the year due to the introduction of 15 new series comprising 150 new titles. Sales at Oakstone Publishing, Haights Cross's professional publishing unit for the medical and legal market, had double-digit revenue growth in the first half of 2002.
Recorded Books Booms
Sales at Recorded Books, publisher of unabridged spoken-word audio, increased 17% in the first half of the year, led by sales of several Lord of the Rings titles plus a number of audio editions of New York Times bestsellers. During the quarter, Recorded Books completed the integration of Audio Adventure, acquired in 2001, into its Prince Frederick, Md., offices. Audio Adventure focuses on selling audiobooks to travel centers and libraries.
Recorded Books was one of three companies Haights Cross acquired in 1999, and revenues have tripled at the company under Haights Cross's ownership. Brian Downing, Recorded Books v-p, who has been with the company since before it was acquired, explained that while Recorded Books always possessed strong creative and marketing capabilities, it was Haights Cross's financial expertise that helped take the publisher to the next level. "I never heard of EBITDA" before the acquisition, Downing noted.
One of the first things Recorded Books did following the acquisition was move into the retail market in early 2000, and retail sales now account for about 15% of total revenues. Retail sales have been growing rapidly and Downing expects Recorded Books' retail presence to continue to expand. The publisher's retail offerings focus on literary fiction and nonfiction such as The Lovely Bones, Founding Brothers and The Crossroads of Freedom; its fall list includes new works from Zadie Smith and Umberto Eco.
The company, which initially focused on the major chains, is now moving into the independent bookseller market and is considering related markets such as college and university bookstores. Downing calls on the major retail accounts himself and the company has one full-time rep dedicated to the retail market and seven reps who devote some of their time to retail. Downing said that Recorded Books' return rate is under 10%, because the company is careful whom it deals with.
Schools and libraries remain Recorded Books' core market, responsible for 85% of total revenues. The company has 30 reps dedicated to calling on the institutional markets, and Downing estimated that the company services 90% of libraries that have "significant book budgets."
Recorded Books is Haights Cross's largest division. The company has about 228 employees located in its headquarters in Maryland and recording studios in New York City. The company will release approximately 630 titles in the U.S. and U.K. this year, a figure that has doubled in two years. Among the initiatives that have contributed to the higher title output was the launch of Recorded Books Inspirational, a religion book line that publishes 50 titles per year. The Lone Star Audio imprint was begun last year to focus on Texas authors and themes, and the company has added authors and themes from other Western states to expand the line. A similar line is being considered for the South.
Recorded Books is also doing very well with the Pimsleur language product that it licenses from Simon & Schuster. The company has library and mail order rights in the U.S. and all rights in the international market—where sales are increasing at a rapid clip and where Downing sees room for continued strong growth. Overseas, specifically the U.K., is also where Recorded Books has launched a large-print book line. "We're committed to diversifying our product line," Downing said. To that end, Recorded Books has begun testing the digital download waters. Although that market is now quite small, Downing is sure downloadable product eventually will be a major part of Recorded Books' business.
