The Company had an after-tax gain from the sale of securities in the year-ago quarter of $4.8 million, equal to 7 cents per share, reducing the net loss for the quarter to $33.4 million, or 47 cents per share.
Brian J. Knez, co-chief executive officer, said the quarter’s seasonal loss was in line with the Company’s expectations, with operating profits in the Worldwide Scientific, Technical and Medical (STM) Group and the Higher Education Group more than offset by the expected seasonal loss in the K-12 Education Group, by a small loss in the Corporate and Professional Group, and by higher corporate expenses related to the sale of the Company.
Our first quarter is a seasonally slow period. However, most of our businesses at this early stage are performing pretty much as expected and our outlook for the full year remains unchanged, with earnings growth anticipated for each of our four operating groups, Mr. Knez said.
Harcourt General typically has losses in its first two fiscal quarters when expenses reflect significant selling and marketing costs associated with its K-12 Education Group. Product shipments, however, do not occur until the Company’s third and fourth fiscal quarters when revenues are recognized.
For the three months ended January 31, 2001, the Company reported revenues of $407.1 million, up 1.0 percent from $402.9 million a year ago.
The seasonal operating loss in the first quarter of 2001 was $54.4 million, compared to an operating loss of $36.0 million the previous year. Corporate expenses in the first quarter of 2001 were $9.9 million, up significantly from $5.7 million a year ago as a result of the costs associated with the sale of the Company to Reed Elsevier.
Investment and other income in the first quarter of 2001 was $1.1 million, compared to $8.5 million in the prior year. The prior year included a $7.6 million pre-tax gain from the sale of securities.
The Company had a net loss of $48.6 million, or 67 cents per share, in the first quarter, compared to a net loss of $33.4 million, or 47 cents per share, a year ago.
The Company’s K-12 Education Group had first quarter revenues of $54.3 million, up 9.8 percent from the prior year, while its operating loss grew to $65.8 million from $58.6 million the prior year. Robert A. Smith, co-chief executive officer of Harcourt General, indicated that the larger loss was a result of higher selling, marketing and sampling expenses by the Company’s K-12 publishers. We anticipate another year of strong demand for our instructional programs in the K-12 market, Mr. Smith said, and we have budgeted our up-front marketing activities to take advantage of these opportunities.
The Higher Education Group had revenues of $77.2 million in the quarter, down 8.0 percent from a year ago. Operating earnings were $7.5 million, compared to $8.8 million the previous year. Improved profitability at Harcourt Learning Direct was more than offset by a slightly higher loss from the Company’s online distance education initiative and lower profits at Harcourt College. With a strong frontlist of 2001 titles, we continue to believe that Harcourt College will have a good second half and will meet its revenue and earnings growth targets for the full year, Mr. Knez said.
The Corporate and Professional Services Group had a 15.6 percent increase in revenues in the first quarter to $117.6 million, with an operating loss of $6.0 million compared to a loss of $1.3 million the previous year. A stronger performance by The Psychological Corporation, our testing and assessment business, was more than offset by a planned larger loss at NETg, our technology-based training business for information technology professionals. NETg remains on track to achieve profitable growth for the full year, Mr. Knez stated.
The Worldwide STM Group had revenues in the quarter of $158.0 million, down from $167.8 million the prior year, while operating earnings were $19.9 million compared to $20.7 million a year ago. Harcourt Health Sciences revenues and earnings declined in the quarter.
As planned, lower journal revenues reflect the discontinuance of the Blood Journal publication, while book sales were off from the prior year due in large part to a switch in distribution from wholesalers, who typically stock more inventory in the first quarter, to direct retail channels.
These book revenues are expected to be recovered in the coming quarters, Mr. Smith noted. Academic Press, our scientific publisher, had another solid quarter of growth in revenues and earnings, he said.
