Houghton Mifflin Harcourt ends third quarter with $524 million of cash

By Lisa Kerner

Charlotte, N.C., Nov. 5 – Houghton Mifflin Harcourt Co. ended the third quarter with $524 million of cash and cash equivalents and short-term investments.

This was down from $743 million at Dec. 31, 2014, according the company’s earnings release.

The company is comfortable with about $400 million of cash at year’s end, said chief financial officer Eric Shuman during the company’s earnings call on Thursday.

Long-term debt, net of discount, was about $786 million, compared with $176 million at Dec. 31, 2014.

The Boston-based publishing company plans to increase its debt by $250 million and use the proceeds to fund share repurchases and for general corporate purposes.

On Tuesday, Houghton Mifflin’s board authorized the repurchase of an additional $500 million of shares of the company’s common stock, bringing the program total to $1 billion.

During the third quarter, the company repurchased 2 million shares for about $48 million, for a year-to-date total of about $240 million of shares repurchased.

Financial highlights

“To date in 2015 we have continued to generate free cash flow, invest in our growth, execute on key strategic initiatives and maintained a leading 40% market share despite the overall anticipated contraction in the domestic education market this year,” said Shuman. “We believe that this is a testament to the ongoing strength of our business and further underscores our long-term growth potential.”

Net sales increased 4% year over year to $576 million, driven by the $82 million contribution from the EdTech business.

The company’s net income increased 22%, or $24 million, to $131 million.

Third-quarter adjusted EBITDA rose 4% year over year to $192 million.

Operating income was down 12% at $116 million.

“In spite of market challenges and revisions to our 2015 guidance, our underlying business remains healthy,” said president and chief executive officer Linda Zecher. “We continue to lead our core domestic education market and have been encouraged by the strides made in key strategic growth areas.”

Houghton Mifflin revised its full-year guidance for net sales, which are now expected to be 3% to 6% higher than net sales in 2014.

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