-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GwC890mgnUyLDizfPghILcO2dSQ0x0DerFHV79LDXU8bWlG+fERUScBFpG+JTeXC 0cXVluKTPMXwc5t//F7Uwg== 0000950135-00-001430.txt : 20000317 0000950135-00-001430.hdr.sgml : 20000317 ACCESSION NUMBER: 0000950135-00-001430 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000131 FILED AS OF DATE: 20000316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARCOURT GENERAL INC CENTRAL INDEX KEY: 0000040493 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 041619609 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04925 FILM NUMBER: 570900 BUSINESS ADDRESS: STREET 1: 27 BOYLSTON ST BOX 1000 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 BUSINESS PHONE: 6172328200 MAIL ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: BOX 1000 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL CINEMA CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MID WEST DRIVE IN THEATRES INC DATE OF NAME CHANGE: 19660907 10-Q 1 HARCOURT GENERAL INC 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended January 31, 2000 ----------------------------------------------------------- Commission File Number 1-4925 ---------------------------------------------------------- HARCOURT GENERAL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 04-1619609 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 27 Boylston Street, Chestnut Hill, MA 02467 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (617) 232-8200 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] As of March 6, 2000, the number of outstanding shares of each of the issuer's classes of common stock was: Class Outstanding Shares - ------------------------------ ------------------ Common Stock, $1.00 Par Value 51,717,928 Class B Stock, $1.00 Par Value 20,020,227 2 HARCOURT GENERAL, INC. I N D E X Part I. FINANCIAL INFORMATION PAGE NUMBER Item 1. Condensed Consolidated Balance Sheets as of January 31, 2000 and October 31, 1999 1 Condensed Consolidated Statements of Operations for the Three Months Ended January 31, 2000 and 1999 2 Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, 2000 and 1999 3 Notes to Condensed Consolidated Financial Statements 4-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 Exhibit 27.1 12 3 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) January 31, October 31, 2000 1999 ----------- ----------- (UNAUDITED) ASSETS Current assets: Cash and equivalents $ 52,493 $ 24,144 Accounts receivable, net 336,124 473,577 Inventories 227,187 212,771 Deferred income taxes 80,716 80,716 Other current assets 35,833 39,549 ---------- ---------- Total current assets 732,353 830,757 ---------- ---------- Property and equipment, net 128,676 128,804 Other assets: Prepublication costs, net 326,073 322,346 Investment in The Neiman Marcus Group, Inc. 121,908 119,414 Goodwill, net 1,394,709 1,409,485 Other intangible assets, net 49,123 52,538 Other 91,190 86,761 ---------- ---------- Total other assets 1,983,003 1,990,544 ---------- ---------- Total assets $2,844,032 $2,950,105 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of long-term liabilities $ 51,304 $ 6,868 Accounts payable 222,566 203,521 Other current liabilities 494,415 483,168 ---------- ---------- Total current liabilities 768,285 693,557 ---------- ---------- Long-term liabilities: Notes and debentures 1,222,331 1,356,804 Other long-term liabilities 183,975 182,842 Deferred income taxes 55,946 55,946 ---------- ---------- Total long-term liabilities 1,462,252 1,595,592 ---------- ---------- Minority interest 18,856 19,093 Shareholders' equity: Preferred stock 813 863 Common stock 71,707 71,167 Paid-in capital 318,976 317,037 Accumulated other comprehensive income 843 2,269 Retained earnings 202,300 250,527 ---------- ---------- Total shareholders' equity 594,639 641,863 ---------- ---------- Total liabilities and shareholders' equity $2,844,032 $2,950,105 ========== ========== See Notes to Condensed Consolidated Financial Statements. 1 4 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands except for per share amounts) FOR THE THREE MONTHS ENDED JANUARY 31, ------------------------- 2000 1999 --------- --------- Revenues $ 402,947 $ 387,637 Costs applicable to revenues 154,897 143,642 Selling, general and administrative expenses 278,347 267,555 Corporate expenses 5,676 5,148 --------- --------- Operating loss (35,973) (28,708) Investment and other income 8,521 877 Interest expense (25,870) (26,468) --------- --------- Loss from continuing operations before income taxes and minority interest (53,322) (54,299) Income tax benefit 19,729 21,303 --------- --------- Loss from continuing operations before minority interest (33,593) (32,996) Minority interest in net losses of subsidiaries 237 715 --------- --------- Loss from continuing operations (33,356) (32,281) Earnings from discontinued specialty retail operations, net -- 12,778 --------- --------- Net loss $ (33,356) $ (19,503) ========= ========= Weighted average number of common and common equivalent shares outstanding: Basic and diluted shares 71,186 71,060 ========= ========= Basic and diluted amounts per common share: Continuing operations $ (.47) $ (.46) Discontinued specialty retail operations -- .18 --------- --------- Basic and diluted net loss $ (.47) $ (.28) ========= ========= Dividends per share: Common Stock $ .21 $ .20 ========= ========= Class B Stock $ .189 $ .18 ========= ========= Series A Stock $ .2826 $ .2275 ========= ========= See Notes to Condensed Consolidated Financial Statements. 2 5 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) FOR THE THREE MONTHS ENDED JANUARY 31, ------------------------- 2000 1999 --------- --------- Cash flows from operating activities: Net loss $ (33,356) $ (19,503) Adjustments to reconcile net loss to net cash provided by operating activities: Discontinued specialty retail operations -- (12,778) Amortization of prepublication costs 36,160 31,524 Depreciation and other amortization 26,433 32,250 Gain on sale of securities (7,644) -- Minority interest (237) (715) Other items (2,375) 799 Changes in assets and liabilities: Accounts receivable 137,453 124,139 Inventories (14,416) (8,749) Other current assets (4,715) (158) Accounts payable and other current liabilities 30,186 35,507 --------- --------- Net cash provided by operating activities 167,489 182,316 --------- --------- Cash flows from investing activities: Capital expenditures (47,605) (40,657) Proceeds from sale of securities 12,394 -- --------- --------- Net cash used for investing activities (35,211) (40,657) --------- --------- Cash flows from financing activities: Repayments of revolving credit facilities, net (90,465) (130,000) Repayment of debt -- (477) Cash dividends paid (14,871) (14,018) Other equity transactions 1,407 1,487 --------- --------- Net cash used for financing activities (103,929) (143,008) --------- --------- Cash and equivalents Increase (decrease) during the period 28,349 (1,349) Beginning balance 24,144 58,556 --------- --------- Ending balance $ 52,493 $ 57,207 ========= ========= See Notes to Condensed Consolidated Financial Statements. 3 6 HARCOURT GENERAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The Condensed Consolidated Financial Statements of Harcourt General, Inc. (the Company) are submitted in response to the requirements of Form 10-Q and should be read in conjunction with the Consolidated Financial Statements in the Company's Annual Report on Form 10-K. In the opinion of management, these statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for the interim periods presented. The consolidated financial statements include the accounts of Harcourt General, Inc. (the Company or Harcourt General) and its majority-owned subsidiaries. The Company's consolidated financial statements have been restated to reflect the specialty retail operations as a discontinued operation. Harcourt General is a leading global multiple-media publisher and service provider for the educational, assessment, training and professional information markets. All significant intercompany accounts and transactions are eliminated. Except as indicated, amounts reflected in the consolidated financial statements or disclosed in the notes to the consolidated financial statements relate to the Company's continuing operations, and prior year amounts have been restated and reclassified to conform with the current presentation. The Company's businesses are seasonal in nature, and historically the results of operations for these periods have not been indicative of the results for the full year. 2. LOSS PER SHARE Pursuant to the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share," the loss from continuing operations used in computing basic and diluted loss per share is as presented in the table below: THREE MONTHS ENDED -------------------------------- (In thousands) January 31, January 31, 2000 1999 ------------ ----------- Loss from continuing operations $(33,356) $(32,281) Less: dividends on Series A Cumulative Convertible Stock (230) (206) ------------ ----------- Loss from continuing operations for computation of basic and diluted loss per share $(33,586) $(32,487) ============ =========== The shares for the computation of basic and diluted loss per share are 71,186,000 and 71,060,000 shares for the three months ended January 31, 2000 and 1999, respectively. 4 7 HARCOURT GENERAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. LOSS PER SHARE (CONTINUED) Options to purchase 3,397,514 and 1,050,086 shares of common stock and the assumed conversion of 813,000 and 863,000 shares of Series A Cumulative Convertible Stock were not included in the computation of diluted loss per share because of the net loss in the first quarter of fiscal 2000 and 1999, respectively. 3. COMPREHENSIVE LOSS Total comprehensive loss amounted to $39.6 million and $13.7 million for the three months ended January 31, 2000 and 1999, respectively. Comprehensive loss differs from net loss primarily due to foreign currency translation adjustments and unrealized gains or losses on the Company's available-for-sale securities, less reclassification for realized gains or losses included in net loss. 4. OPERATING SEGMENTS The Company has four reportable segments: Education Group, Higher Education Group, Corporate and Professional Services Group and Worldwide Scientific, Technical and Medical (STM) Group. The Education Group consists of the Company's K-12 and supplemental and trade publishing operations. The Higher Education Group includes college, distance learning and graduate test preparation businesses. The Corporate and Professional Services Group is comprised of testing and related services, career counseling and technology-based IT and human resources training. The Worldwide STM Group includes the Company's scientific, technical and medical publishing businesses and its international publishing and distribution operations. Other includes unallocated corporate items. The following tables set forth the information for the Company's reportable segments for the three months ended January 31: (In thousands) 2000 1999 -------- -------- REVENUES: Education Group $ 49,511 $ 41,394 Higher Education Group 83,913 83,137 Corporate and Professional Services Group 101,757 103,233 Worldwide STM Group 167,766 159,873 -------- -------- Total $402,947 $387,637 ======== ======== OPERATING EARNINGS (LOSS): Education Group $(58,564) $(51,372) Higher Education Group 8,842 4,935 Corporate and Professional Services Group (1,323) 6,299 Worldwide STM Group 20,748 16,578 Other (5,676) (5,148) -------- -------- Total $(35,973) $(28,708) ======== ======== 5 8 HARCOURT GENERAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. ACQUISITION LIABILITIES At October 31, 1999, $56.4 million is included in other current liabilities representing facility exit costs of $32.0 million, severance and employee benefit obligations of $8.3 million, unfulfilled contractual obligations of $6.1 million and other obligations of $10.0 million. In the three months ended January 31, 2000, approximately $9.9 million was charged against acquisition liabilities. At January 31, 2000, $46.5 million is included in other current liabilities consisting primarily of facility exit costs of $30.9 million, severance and employee benefit obligations of $4.9 million, unfulfilled contractual obligations of $6.0 million and other obligations of $4.7 million. 6 9 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED JANUARY 31, 2000 COMPARED TO THREE MONTHS ENDED JANUARY 31, 1999 The following table illustrates revenues and operating earnings (loss) by business segment for the three months ended January 31. (In thousands) 2000 1999 -------- -------- Revenues: Education Group $ 49,511 $ 41,394 Higher Education Group 83,913 83,137 Corporate and Professional Services Group 101,757 103,233 Worldwide STM Group 167,766 159,873 -------- -------- Total revenues $402,947 $387,637 ======== ======== Operating Earnings (Loss): Education Group $(58,564) $(51,372) Higher Education Group 8,842 4,935 Corporate and Professional Services Group (1,323) 6,299 Worldwide STM Group 20,748 16,578 Corporate expenses (5,676) (5,148) -------- -------- Total operating loss $(35,973) $(28,708) ======== ======== EDUCATION GROUP Revenues from the Education Group increased $8.1 million, or 19.6%, in the first three months of fiscal 2000. The increase was primarily attributable to higher math, science, social studies, and reading program sales, as well as higher sales at Steck-Vaughn, the Group's supplemental educational publishing business. The Education Group incurred an operating loss of $58.5 million in the first quarter of fiscal 2000, increasing by $7.1 million from a loss of $51.4 million in the first three months of fiscal 1999. The loss increased primarily as a result of higher selling and marketing, sampling and plate amortization costs. HIGHER EDUCATION GROUP Revenues from the Higher Education Group increased to $83.9 million in the first three months of fiscal 2000 from $83.1 million in the first three months of fiscal 1999. The increase was primarily due to higher sales of college titles. Operating earnings from the Higher Education Group increased $3.9 million, or 79.2%, in the first quarter of fiscal 2000. The increase resulted primarily from higher revenues in the Group's college publishing business and general and administrative expense reductions at Harcourt Learning Direct, the Group's distance learning business. 7 10 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CORPORATE AND PROFESSIONAL SERVICES GROUP Revenues from the Corporate and Professional Services Group decreased 1.4% to $101.7 million in the first quarter of fiscal 2000 from $103.2 million in the prior year. The decrease was primarily attributable to lower revenues at NETg, the Group's technology-based training business for information technology professionals. The decrease was partially offset by higher sales at Drake Beam Morin (DBM), the Group's professional services and outplacement business, and The Psychological Corporation, the Group's educational and clinical assessment business. The Corporate and Professional Services Group incurred an operating loss of $1.3 million compared to earnings of $6.3 million in the prior year period. The decrease was primarily due to lower revenues at NETg, and to a lesser extent, to higher expenses at Assessment Systems, Inc. related to expansion initiatives. WORLDWIDE SCIENTIFIC, TECHNICAL AND MEDICAL (STM) GROUP Revenues from the Worldwide STM Group increased 4.9% to $167.8 million in the first quarter of fiscal 2000 from $159.9 million in the prior year. The increase was primarily due to higher journal sales at Academic Press, the Company's scientific publisher. Operating earnings from the Worldwide STM Group increased $4.1 million, or 25.2%, in the first quarter of fiscal 2000. The increase was primarily due to higher margins at Harcourt Health Sciences resulting from the integration of Mosby and to higher revenues at Academic Press. CORPORATE EXPENSES Corporate expenses increased $.5 million, or 10.3%, in the first three months of fiscal 2000. The increase resulted primarily from higher compensation costs. INVESTMENT AND OTHER INCOME Investment and other income increased $7.6 million to $8.5 million in the first quarter of fiscal 2000. The increase resulted primarily from a gain of $7.6 million from the sale of securities. INTEREST EXPENSE Interest expense decreased $.6 million, or 2.3%, in the first quarter of fiscal 2000. The increase was primarily due to lower average outstanding borrowings. LIQUIDITY AND CAPITAL RESOURCES The following discussion analyzes liquidity and capital resources by operating, investing and financing activities as presented in the Company's condensed consolidated statements of cash flows. Cash provided by operating activities for the quarter ended January 31, 2000 was $167.5 million compared to $182.3 million in the prior year period. The cash provided by the Company's operations and borrowings under its revolving credit facility was sufficient to fund working capital, capital expenditures and the Company's dividend requirements. The most significant item affecting working capital was a seasonal decrease of $137.5 million in accounts receivable. Cash flows used by investing activities were $35.2 million for the quarter ended January 31, 2000 and consisted primarily of expenditures for prepublication costs. Capital expenditures are expected to approximate $230.0 million in fiscal 2000. Also in the first quarter of fiscal 2000 the Company recorded proceeds from the sale of securities of $12.4 million. 8 11 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS At January 31, 2000, the Company had $515.0 million available under its $750.0 million revolving credit agreement, which expires in July 2002. The Company expects to use this facility to repay subordinated notes of $125 million that mature in March 2000. The Company believes its cash on hand, cash generated from operations and its current and future debt capacity will be sufficient to fund its planned capital growth, operating and dividend requirements. YEAR 2000 The Company has completed its assessment of its hardware and software systems, including the embedded systems in the Company's buildings, property and equipment, and has implemented plans to ensure that the operations of such systems would not be adversely affected by the Year 2000 date change. As of the date of this report, the Company has not experienced any significant problems with its hardware and software systems related to the Year 2000 date change. The Company established a program to communicate with its significant suppliers and vendors to determine the extent to which the Company's systems and operations are vulnerable to those third parties' failure to rectify their own Year 2000 issues. As of the date of this report, the Company has not experienced any significant problems with its suppliers and vendors related to the Year 2000 date change. The Company is not presently aware of any significant exposure arising from potential third-party failures. However, there can be no assurance that the systems of other companies on which the Company's systems or operations rely have been successfully converted or that any failure of such parties to achieve Year 2000 compliance would not have an adverse effect on the Company's results of operations. FORWARD-LOOKING STATEMENTS Statements in this report referring to the expected future plans and performance of the Company are forward-looking statements. Actual future results may differ materially from such statements. Factors that could affect future performance in the Company's businesses include, but are not limited to: the Company's ability to develop and market its products and services; the relative success of the products and services offered by competitors; integration of acquired businesses; the seasonal and cyclical nature of the markets for the Company's products and services; changes in economic conditions; changes in public funding for the Company's educational products and services; and changes in purchasing patterns in the Company's markets. 9 12 PART II Item 6. Exhibits and Reports on Form 8-K. (a) EXHIBITS. 27.1 Financial data schedule (b) REPORTS ON FORM 8-K. On November 1, 1999, the Company filed a report on Form 8-K reporting the distribution on October 22, 1999 of 21,440,960 shares of Class B Common Stock of The Neiman Marcus Group, Inc. to holders of the Company's Common Stock and Class B Stock. 10 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HARCOURT GENERAL, INC. Date: March 13, 2000 /s/ John R. Cook ------------------------- John R. Cook Senior Vice President and Chief Financial Officer Date: March 13, 2000 /s/ Catherine N. Janowski ------------------------- Catherine N. Janowski Vice President and Controller 11 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 This schedule contains a summary of financial information extracted from the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS 3-MOS OCT-31-2000 OCT-31-1999 JAN-31-2000 JAN-31-1999 52,493 57,207 121,908 0 375,262 338,461 39,138 36,602 227,187 216,267 732,353 699,063 320,996 331,376 192,320 182,943 2,844,032 3,270,609 768,285 771,454 1,222,331 1,314,340 0 0 813 906 71,707 71,086 522,119 826,943 2,844,032 3,270,609 402,947 387,637 402,947 387,637 154,897 143,642 438,920 416,345 0 0 32,878 24,276 25,870 26,468 (53,322) (54,299) (19,729) (21,303) (33,356) (32,281) 0 12,778 0 0 0 0 (33,356) (19,503) (0.47) (0.28) (0.47) (0.28)
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