Haights Cross Communications Reports Third Quarter 2005 Results; Investor and Analyst Conference Call Scheduled for Tuesday, November 8, 2005, at 4:00 PM

Business Wire, Nov 8, 2005

WHITE PLAINS, N.Y. -- Haights Cross Communications, Inc. (HCC) today reported results for the third quarter ended September 30, 2005.

Results for the Third Quarter 2005

Revenue for the third quarter 2005 was $56.3 million, an increase of $9.9 million, or 21.4%, from revenue of $46.4 million for the third quarter 2004, reflecting Options Publishing in the 2005 quarter only as it was acquired in December 2004. On a proforma basis for Options Publishing, third quarter revenue was up $6.4 million, or 12.8%.

Revenue for the K-12 Supplemental Education segment, which upon the divestiture of Chelsea House reflects our Sundance/Newbridge product lines, declined $0.7 million, or 5.0%, to $13.1 million for the third quarter 2005, resulting from a challenging sales environment thus far in 2005 for supplemental education products generally. Our Chelsea House product line, which was previously reported in our K-12 Supplemental Education segment, was sold on August 9, 2005 and is reported as a discontinued operation for all periods.

Revenue for the Test-prep and Intervention segment increased $6.1 million to $16.2 million for the third quarter 2005, reflecting Options Publishing in the 2005 quarter only. On a proforma basis for Options Publishing, revenue for the third quarter 2005 increased $2.6 million, or 19.0%, to $16.2 million. Revenue from the Triumph and Buckle Down product lines increased $2.0 million, or 20.1%, to $12.1 million for the third quarter 2005 driven by the release of new products and increased demand resulting from the NCLB testing requirements, an outcome HCC has been expecting for some time. On a proforma basis, Options Publishing revenue grew 16.1% in the quarter.

Revenue for the Library segment increased $2.1 million, or 12.6%, to $19.1 million for the third quarter 2005, driven by continued strong demand for Recorded Books' traditional unabridged audiobooks, especially in CD format. Sales growth was reported in the library, school, and consumer channels.

Revenue for the Medical Education segment increased $2.3 million to $8.0 million for the third quarter 2005. Third quarter 2005 revenue includes results from the newly acquired Scott Publishing and CMEinfo product lines. Revenue from our existing Oakstone Medical and Wellness product lines declined $0.7 million, due to special issues of our core medical education products being shipped in the 2004 quarter.

Income from operations for the third quarter 2005 declined $0.9 million to $10.0 million, which includes results from Options Publishing, Scott Publishing and CMEinfo in the 2005 quarter. On a proforma basis for Options Publishing, income from operations declined $0.9 million to $10.0 million for the third quarter 2005, equal to the GAAP performance as Options was essentially breakeven for the 2004 period. This decline reflects our proforma revenue and related gross profit gain for the period being more than offset by increased spending on sales and marketing efforts, increased costs for public company compliance and HCC's Sarbanes-Oxley compliance effort, and increased amortization of product development costs.

EBITDA, which we define as earnings before interest, taxes, depreciation, and amortization, increased by $1.0 million to $14.7 million for the third quarter 2005. On a proforma basis for Options Publishing, EBITDA increased $0.2 million period over period as increased revenue and gross margin was offset by increased sales and marketing and general and administrative expenses.

Capital expenditures -- pre-publication costs relate to costs incurred in the development of new products. For the third quarter 2005, HCC invested $6.0 million in pre-publication costs, reflecting the inclusion of Options Publishing, Scott Publishing and CMEinfo, as well as increased investments in our other business units, compared to $3.3 million during the third quarter 2004. HCC plans expenditures of approximately $23.2 million for full-year 2005, which excludes 2005 expenditures relating to Chelsea House which is reported as a discontinued operation.

Capital expenditures -- property and equipment relate to the purchase of tangible fixed assets such as computers, software, and leasehold improvements. For the third quarter 2005, HCC invested $1.4 million in property and equipment, compared to $0.9 million during the third quarter 2004. HCC plans expenditures of approximately $4.1 million for the full-year 2005.

Results for the nine months ended September 30, 2005

Revenue for the nine months ended September 30, 2005 was $159.3 million, an increase of $28.8 million, or 22.1%, reflecting our acquisitions of Buckle Down, Options Publishing, Scott Publishing and CMEinfo, while the 2004 period only includes Buckle Down prospectively from April 15, 2004, the acquisition date. On a proforma basis for Buckle Down and Options Publishing, revenue for the nine months increased $10.4 million, or 7.0%.

Revenue for the K-12 Supplemental Education segment, which reflects our Sundance/Newbridge product lines, declined $3.7 million, or 9.2%, to $36.9 million for the nine months ended September 30, 2005, resulting from a challenging supplemental education market generally that has emerged in the second and third quarters of 2005.