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HOUGHTON MIFFLIN TAKES STEPS TO IMPROVE LONG-TERM PROFITABILITY

HOUGHTON MIFFLIN TAKES STEPS TO IMPROVE LONG-TERM PROFITABILITY
 NEW YORK, N.Y., Oct. 14 /PRNewswire/ -- Houghton Mifflin Company (NYSE: HTN) said it has taken several actions designed to increase its efficiency and long-term profitability. Speaking at a business briefing here today, Nader F. Darehshori, chairman and chief executive officer, said, "I am very enthusiastic about the steps we have taken, which position the company well to achieve the objectives we have set."
 Houghton Mifflin stated that its Riverside Publishing Company subsidiary is integrating the clinical/special needs testing publications list recently acquired from DLM Inc., into its existing editorial and marketing operations. With the acquisition, completed for $17 million at the beginning of the fourth quarter, Houghton Mifflin becomes the second-largest publisher in this testing segment, said Darehshori.
 The new list should increase Riverside's sales base by some 25 percent with a good margin, strong cash flow business. The company expects earnings per share to benefit by 11 cents to 13 cents per share starting in 1993.
 The company also announced further progress in implementing its international strategy of establishing long-term relationships with other publishers in key international markets. The moves are designed to strengthen Houghton Mifflin's global position and expand the distribution of its publications. The first such alliance was established in 1991 with Jacaranda Wiley in Australia, and the company recently has reached agreement with new partners in two key markets.
 On Oct. 6, Houghton Mifflin acquired a significant minority interest in Cassell PLC, a well-known British trade and reference publisher. In a separate transaction, Cassell purchased Houghton Mifflin's British trade subsidiary, Victor Gollancz Limited. Houghton Mifflin acquired Gollancz in Oct. 1989 for approximately $12 million and made further investment in it over the last three years. The integration of Gollancz into Cassell continues the Gollancz publishing tradition and eliminates many of the costs Gollancz incurred as a free-standing publisher, the company said. In 1991 and 1990, Gollancz's losses amounted to $2.5 million and $1.7 million, respectively, and Gollancz reported losses for the first nine months of 1992 of $2.1 million, or 15 cents per share. This sale will result in a fourth-quarter, pre-tax write-off of $12 million, said Stephen O. Jaeger, executive vice president and chief financial officer.
 In Canada, Houghton Mifflin has signed a letter of intent to establish a new alliance with Nelson Canada, a division of Thomson Canada Limited, and one of Canada's largest school publishers. Finalization of the agreement is expected in early November. Nelson Canada will purchase certain assets of Houghton Mifflin Canada, the company said, and assume responsibility for marketing and selling Houghton Mifflin's school and reference publications in Canadian schools. The two companies also plan to work together to identify co- publishing opportunities.
 Fourth-quarter costs, currently estimated at $800,000, or 4 cents per share will be associated with closure of the Toronto distribution facility and the sale of assets and transfer of the school publishing operation to Nelson, said Jaeger. Houghton Mifflin said it would retain its profitable Canadian College sales organization. The elimination of school publishing losses, which amounted to $1 million, or 7 cents per share in each of the last two years will allow the company to apply available tax net operating losses from prior periods against prospective Canadian college income, Jaeger said.
 In the area of retiree medical benefits, Darehshori stated that the company has changed its benefits plan to allow this expense to be managed into the future. The company's cumulative retiree healthcare liability approximates $21 million. The board of directors has approved adoption of the new accounting standard for these costs in the fourth quarter, when the company will take the full after-tax charge of $13 million. It also will comply with a new standard for income taxes, since recognition of the tax credit relative to the $21 million retiree healthcare obligation requires such compliance. The new tax standard will result in a $1.2 million tax charge in the fourth quarter, the company said.
 In June 1992, the company formed a benefits trust whose purpose is to use Houghton Mifflin common stock, as well as dividends on the stock to help fund certain employee compensation and benefit obligations. One objective is to pre-fund the company's retiree healthcare benefit transition obligation. The trust currently holds 650,000 shares. "Sale of shares from the trust to pay retiree healthcare premiums will begin in 1993," said Jaeger. The ultimate value of the trust depends on share price appreciation. To the extent that appreciation exceeds changes in the retiree healthcare liability, fewer shares are required to fund it, and the surplus will be available to pay other benefit costs.
 The company stated that fourth-quarter results will reflect these recent actions. One-time charges for the sale of Gollancz, sale and transfer of the Canadian school publishing assets, and adoption of the new accounting standards will approximate $34.1 million, $21.2 million after taxes, or $1.54 per share, said Jaeger. The actions are cash flow neutral, he added.
 Looking to 1993, Houghton Mifflin announced that it has launched a revised K-8 reading program for the expanded number of statewide adoption opportunities available next year, which include Texas. The College Division's list includes a number of new editions of market- leading textbooks in such major disciplines as accounting and history. With the continuing emphasis on improving American education, said Darehshori, the company's educational publishing businesses, its largest segment, have great potential. In general publishing, Houghton Mifflin's focus is on balancing the trade and reference list, concentrating on the higher-margin areas of reference and children's books. The company said that the third edition of The American Heritage Dictionary, published in August, has gotten off to a strong start. The dictionary and its derivatives will provide an important revenue stream for years to come, said Darehshori. In 1993, the company will launch the college edition, which has traditionally been the major seller in the dictionary line.
 The company stated that the actions taken in 1992 to reorganize unprofitable operations, the addition of the testing list, a continued commitment to hold down general and administrative costs, and favorable adoption opportunities for the School Division should more than compensate for 1993's increased publication development costs. Jaeger said, although we have not completed the 1993 budget, net sales should better the company's 10 percent minimum growth objective and earnings per share of less than $2.25 would be a disappointment.
 -0- 10/14/92
 /CONTACT: Stephen O. Jaeger, Houghton Mifflin executive vice president and chief financial officer, 617-725-5017/
 (HTN) CO: Houghton Mifflin Company ST: Massachusetts IN: PUB SU:


CH -- NE013 -- 9920 10/14/92 13:35 EDT
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Date:Oct 14, 1992
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