Costs associated with its transition to a stand-alone company limited improvement in Houghton Mifflin's bottom line in 2003, despite a 5.8% increase in revenue, to $1.26 billion. The publisher had operating income of $49.7 million in 2003 and a net loss of $71.6 million, compared to an operating loss of $703.5 million and a net loss of $790.1 million in 2002; results in 2002, however, included a $775-million goodwill charge. The company said that higher sales were offset by $25.2 million in payments to retain key employees, $9.9 million in inventory step-up amortization, and severance costs of $5.5 million.
HM's two educational publishing divisions had solid sales gains in the year. Sales in the school group rose 9.7%, to $848.4 million. The group benefited from the second year of sales in the California reading adoption as well as gains in Reading First products, secondary school social studies and literature programs. The increase also included $2.5 million in sales from Cognitive Concepts, which was acquired in October. Sales in the college division rose 6.7%, to $226.1 million, due mainly to improved frontlist sales.
Sales in the trade and reference group fell 13.4% last year, to $125.1 million. The decrease was due mainly to lower sales of J.R.R. Tolkien titles and lower sales of children's books. Sales in 2003 also included $17.6 million from Kingfisher Publications, which was acquired in December 2002.
HM president Tony Lucki said he was "very pleased" with 2003 results, but warned that the decrease in state textbook adoptions in 2004 will result in declines in the mid to high single digits in both sales and operating income. "Our goal this year is to position the company to compete effectively in all its markets as adoption opportunities increase in 2005 and beyond," Lucki said.
The company also announced a major personnel change, appointing Stephen Richards executive v-p, chief financial officer and chief operating officer. Richards, who will start April 1, succeeds Sylvia Metayer, who has been named president of the HM Assessment Group, which consists of Riverside Publishing, Promissor and Edusoft. Richards had been CFO at Harcourt, where he worked with Lucki.
