Haights Cross Communications, Inc.

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Haights Cross Communications, Inc.

10 New King Street, Suite 102
White Plains, New York 10604
U.S.A.
Telephone: (914) 289-9400
Fax: (914) 289-9401
Web site: http://www.haightscross.com

Private Company
Incorporated: 1996
Employees: 822
Sales: $210.5 million (2005)
NAIC: 511130 Book Publishers

Haights Cross Communications, Inc., is a private publishing company located in White Plains, New York, offering products for the K–12 education, library, and continuing education markets through several subsidiaries. Oakstone Publishing, Oakstone Medical Publishing, and Oakstone Wellness Publishing produce continuing education materials for the legal and medical fields; subscription summaries of medical and dental journals in either electronic or audio formats; and self-help wellness publications that companies can provide to their employees, including newsletters, books, brochures, posters, and calendars. The company's Buckle Down Publishing subsidiary serves students in second grade through high school, producing state-customized workbooks and practice tests to help students prepare for state assessment programs. Newbridge Educational Publishing helps pre-K through middle school students meet standards in reading, writing, mathematics, science, and social studies. Options Publishing targets K–8 students struggling to meet grade level standards, offering intervention programs and test preparation materials. Sundance Publishing concentrates on reading skills and language arts learning materials for students pre-K through middle school. Another Haights Cross Unit, Triumph Learning, offers a program to help students prepare for norm referenced, criterion referenced, and college admissions exams on a state-by-state basis. Finally the Recorded Books subsidiary is the world's largest independent publisher of unabridged audiobooks for schools, libraries, and general consumers. Haights Cross is majority owned by the investment group Media/Communications Partners. The company's founder and chief executive, Peter Quandt, owned about 25 percent of the business.

COMPANY FOUNDED: 1996

Quandt founded Haights Cross in 1996 with backing from Boston-based Great Hill Partners. A graduate of Georgetown University with a degree in Government, he became involved in the educational publishing field through Macmillan, Inc., where he held a variety of editorial, marketing, and management positions. As a group vice president for Macmillan he headed New Bridge Communications, which was sold to Primedia in 1989. Quandt became a group vice-president for Primedia as well as chief executive officer of Primedia Education Group. While he was in charge, Newbridge grew from a $20 million a year business to $160 million a year. As well, net earnings improved from $1 million to $20 million. In addition, he had a number of other units reporting to him, including Weekly Reader Corporation, Krames Communications, and Films for the Humanities and Sciences.

In 1995 Quandt left Primedia to strike out on his own with the goal of acquiring and operating professional and educational publishing companies. He found a financial backer in Boston-based Great Hill Partners, an investment firm that was targeting the professional information and educational materials market. Although neither Quandt nor Great Hill had any particular acquisitions in mind, they forged an agreement to work together in June 1996, with Great Hill making a $15 million commitment to Quandt. He formed Haights Cross in Chappaqua, New York (located on Haights Cross Road), to serve as an acquisition vehicle in creating a major information company. Later investors included Caravelle Advisors; Donaldson, Lufkin & Jenrette Merchant Banking Partners; and Fleet Bank.

To help scout out opportunities, Quandt enlisted the services of Whitestone Communications, Inc., a New York City mergers and acquisitions advisory firm serving the publishing, information, and training industries. Haights Cross' first acquisition came in March 1997 and addressed the medical education field, as Haights Cross picked up Educational Reviews, Inc., forming a foundation for the company's Oakstone publishing units. Based in Birmingham, Alabama, Educational Reviews was established in 1975 by a radiologist, Dr. Bernard Schencker, to help time-challenged physicians and dentists keep up with the latest developments in their fields. He created a service that distilled the key information found in major medical and dental journals, and provided them to subscribers in the form of summary cards and audiocassettes. In 1984 Dr. Schencker introduced QuickScan, which put the same information on a computer disk. Educational Reviews' products served 22 medical and dental specialties as well as four allied health areas. Later in 1997, Quandt was also able to acquire a business he once ran, Newbridge Publishing, the addition of which gave Haights Cross a foothold in the education field. Included in the deal was Gryphon Editions, a professional facsimile book business that did not fit in with Haights Cross' plans and was divested several months later.

EDUCATIONAL REVIEW BOLSTERED: 1998

Haights Cross picked up the pace of acquisitions in 1998. Educational Reviews was supplemented by the purchase of the wellness newsletter, Top Health, which became a cornerstone of the Oakstone Wellness Publishing unit. Published monthly since 1987, Top Health was sold to employers in bulk and distributed to more than one million employees, providing health and safety information. Less than a month later, in May 1998, Haights Cross completed another acquisition for Educational Reviews: Data Research Inc., a 25-year-old publisher of newsletters, special reports, and books focusing on legal issues in education, insurance, and employment, geared for lawyers and non-lawyers alike. Some of the company's newsletters included Legal Notes for Education, Legal Notes for Insurance, and Employment Law Report. Books included Deskbook Encyclopedia of American Insurance Law, Deskbook Encyclopedia of Public Employment Law, and U.S. Supreme Court Education Cases. The Data Research assets formed the basis for the Oakstone Legal and Business unit. One month later, in June 1998, Haights Cross beefed up its supplemental education business with the $35.5 million purchase of Sundance Publishing, a Littleton, Massachusetts, publisher of reading instructional materials for preschool through grade 8, and a publisher and distributor of literature-based reading skills and language arts learning materials for grades K–12.

COMPANY PERSPECTIVES

Haights Cross Communications is focused on educational and professional publishing. The employees of Haights Cross are dedicated to creating the finest books, audio products, periodicals, software, and online services in each of the markets we serve. We grow through encouraging our employees to introduce products that improve the effectiveness and increase the enjoyment of students, teachers, and professionals.

Haights Cross added to its legal education holdings in 1999 with the acquisition of Philadelphia, Pennsylvania–area Andrews Publications, which published some three dozen newsletters and provided special reports and online services for attorneys, paralegals, librarians, and executives. Also in 1999 Haights Cross acquired Triumph Learning, a New York publisher of test preparation materials. Haights Cross became involved in the publishing of computer-related books in 1999 with the purchase of Scottsdale, Arizona-based Coriolis Group, which also produced CD-ROMs and magazines. Coriolis hoped that a change in ownership would allow it to grow into one of the leading providers of information technology services, materials, and courses. The largest deal of the year for Haights Cross came in mid-December when for $260 million it acquired three companies in a single stroke: Chelsea House, Education Design, and Recorded Books. Founded in 1966, Chelsea House was another Philadelphia publisher, turning out young adult titles intended mostly for the library and school market. It had a deep backlist of titles, numbering more than 2,300 and including such well-known reference works as Bloom's Notes, a literary criticism series edited by Yale professor Harold Bloom, and the Growth of Presidential Power. Educational Design, operating out of New York City, was a major publisher of test preparation materials for state and national tests, founded in 1963. Recorded Books, established in 1979, was one of the largest publishers of unabridged audio-books in the world, boasting a list of more than 2,500 titles, sold to the library, school, and consumer markets. It maintained facilities in Prince Frederick, Maryland; New York City; and London. Under new ownership Recorded Books quickly became involved in the retail market. With these three companies in the fold, Haights Cross increased its annual revenues to the neighborhood of $150 million. It also restructured its holdings into two divisions. Haights Cross Publishing included Chelsea and Recorded Books, while Haights Cross Educational Publishing housed Educational Design, Newbridge Educational, and Sundance.

CORIOLIS CLOSED: 2002

In addition to external growth, Haights Cross looked to create its own businesses. In 2000 it formed Skillspower. com, a subsidiary that sought to leverage content owned by the parent company to provide test preparation materials for grades K–12 via the Internet, CD-ROM, and through in-service training. It was not a good time to launch an Internet business, however. With the bursting of the dot-com bubble and the demise of the tech sector in general, Haights Cross also had trouble with Coriolis. In 2001 the unit was downsized and by 2002 it was put up for sale. When no buyers emerged it was simply shut down in the spring of 2002, although a large number of the Coriolis titles found a new home.

Despite the economy slipping into recession in 2001, Haights Cross performed fairly well, with the core businesses experiencing strong growth. Doing especially well was Recorded Books, which enjoyed a retail hit with The Lord of the Rings, narrated by Rob Inglis. This business was also supplemented in 2001 by the acquisition of Audio Adventures, Inc., an audio retailer with two divisions: Travel Centers provided audiobooks at truck stops and travel centers located close to major highways, allowing customers to pick up titles at one location and drop them off at another; and Landmark leased audiobooks to small to midsize libraries operating with budgets that prevented them from acquiring a large collection. Also doing well in 2001 was Newbridge Educational, especially the Sundance Publishing unit.

With the economy continuing to struggle, schools and libraries had to contend with budget cutbacks, a situation that had an adverse impact on Haights Cross' education and library sales. The company made some changes in 2002 to adjust the business mix. The Triumph Learning College unit was sold in July 2002. Buyers were also sought for Andrews Communications and the Oakstone Legal and Business units. These assets were then sold in two separate transactions in 2003. Later in the year Haights Cross strengthened its financial position by arranging $270 million in credit refinancing with Bear, Stearns & Co., earmarking the money to pay down bank debt and invest in internal growth as well as acquisitions.

Poor conditions in the education and library markets continued to trouble Haights Cross in 2003. In particular, Recorded Books endured a rough path, experiencing a loss of sales from $65.4 million to $61.1 million. For the second consecutive year Chelsea House saw a drop in sales. Working with limited budgets, libraries opted to spend their money on new titles rather than the backlist titles that were Chelsea's strong suit. Haights Cross invested some money in expanding Chelsea's sales and marketing capabilities, but the business failed to come around and was divested in August 2005. Haights Cross also considered selling Oakstone Publishing, but retained the unit.

KEY DATES

1996:: The company is founded by Peter Quandt.
1997:: First acquisitions are completed.
1999:: Recorded Books, LLC, is acquired.
2003:: The company is refinanced.
2004:: Options Publishing LLC is acquired.

Haights Cross looked to retool, shifting its focus to becoming a pure-play K–12 educational and library publisher. In keeping with this goal, in 2004 it acquired Buckle Down Publishing, an Iowa City, Iowa-based publisher of preparation materials for mandated tests in 25 states. Buckle Down also brought a direct-mail operation that benefited Triumph's field sales force. Late in 2004 Haights Cross completed another acquisition to strengthen its educational assets, paying $50 million for Options Publishing LLC, a New Hampshire publisher of reading, math, and literature supplemental education materials for K–8 students.

More acquisitions followed in 2005. Scott Publishing, Inc., was bought in April, adding to Oakstone Wellness Publishing with Scott's line of employee wellness newsletters, calendars, and web-based products. Two months later Haights Cross acquired CMEinfo. com, Inc. to bolster Oakstone Medical Publishing. CMEinfo.com worked with such medical institutions as the Mayo Clinic, Cleveland Clinic, Harvard, the University of California–Los Angeles, and the University of Chicago to develop programs to help doctors prepare for board certification and recertification exams. The courses, offered in video and audio formats, also helped physicians to master new clinical procedures.

Haights Cross increased revenues from $170.9 million in 2004 to $210.5 million in 2005, but the company, which had never turned a profit, continued to lose money: $22.6 million in 2004 and another $44.4 million in 2005. Sales continued to increase in 2006, but the company continued to struggle in its bid to achieve profitability.

Ed Dinger

PRINCIPAL SUBSIDIARIES

Haights Cross Operating Company; Sundance/Newbridge Educational Publishing, LLC; Triumph Learning, LLC; Recorded Books, LLC; Oakstone Publishing, LLC; Options Publishing, LLC.