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| 8-K - FORM 8-K - McGraw-Hill Global Education Intermediate Holdings, LLC | d39643d8k.htm |
 McGraw-Hill Global Education Holdings
Q2-2015 Investor Update
August 13, 2015 Exhibit 99.1 |
 All statements in this presentation and the oral remarks made in connection
herewith that are not statements of historical fact are
“forward-looking statements” within the meaning of securities laws. Forward-looking statements include any statements regarding our strategy, future operations, future
financial position, future revenue, projected costs, prospects, plans, and
objectives of management. The words
‘‘anticipate,’’ ‘‘believe,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘may,’’ ‘‘plan,’’
‘‘predict,’’ ‘‘project,’’
‘‘target,’’ ‘‘potential,’’
‘‘will,’’ ‘‘would,’’ ‘‘could,’’ ‘‘should,’’ ‘‘continue,’’ and similar expressions commonly
indicate a forward-looking statement, although not all forward-looking
statements may contain these words.
You should not put undue reliance on forward-looking statements. All
forward-looking statements are subject to certain risks and
uncertainties, and actual results or events could differ materially from the plans, intentions and expectations described therein. We undertake no obligation to revise forward-looking
statements to reflect events or circumstances that arise after the statements
are made. Important Notice
Regarding Forward-Looking Statements
2 |
 Meeting Participants & Agenda
3 Introduction Business & Digital Transformation Update Financial Overview David Kraut, Treasurer, Senior Vice President – Investor Relations David Levin, President & Chief Executive Officer Patrick Milano, Chief Financial Officer
& Chief Administrative Officer
|
     4 Q2-15 Business Update |
 Q2-15 Solid Digital Momentum
Second quarter and YTD financial results met expectations
– Increased Higher Ed market share in the LTM period – International Cash Revenue grew on a constant currency basis; reported
results unfavorably impacted by the strong U.S. dollar
Digital momentum driving strong sales and financial performance
– Robust user growth across flagship digital solutions such as ALEKS,
Connect
and LearnSmart – Ownership of adaptive technology remains a key differentiator – Direct to consumer e-commerce revenue growth continues Acquired €6 million equity stake in busuu in July, a global mobile language learning
platform Appointed Sally Shankland as president of Higher Education business 5 |
 Higher Education Business Mix
Q2-15 Digital Trends
Digital transformation progressing well
Digital now 41% of Higher Ed Cash Revenue
in the LTM period
– YTD proprietary e-commerce Cash Revenue up 47% Y/Y Double digit unique user growth across platforms and solutions Instructor and student engagement levels continue to increase – Promotes real-time feedback to instructors and students – Deeper understanding of concepts User Engagement 4 Billion LearnSmart questions answered since 2009; Averaging 100 Million + per month 6 Unique Users YTD June 2015 vs. YTD 2014 Connect 1.9 million + 13% Instructor Assignments Created 5.9 million + 26% Student Assignments Submitted 42.6 million + 13% LearnSmart 1.2 million + 33% ALEKS 0.6 million + 17% 9% 16% 30% 38% 41% 10% 13% 24% 29% 28% 81% 71% 46% 33% 31% 2008 2010 2012 2014 LTM June 2015 Digital Custom Print Traditional $687 $803 $776 $838 $853 ($ in Millions) |
 Evolving from “Inputs Focused” to “Results Driven”
Model Agile, faster quality enhancement
Content revision driven by usage data
Lower plate investment
Development Approach First editions published each year and existing title revisions published every 2-4 years Product sale paid upfront; revenue recognized over time Increasingly direct to student Disintermediate used and rental Sales Model Product sale paid upfront; revenue recognized upfront Third party channel partners Full service center Outcomes focused – feedback used to improve offerings Support Minimal service after the sale Little ongoing contact with customer Print: Not Readily Known Digital: Measurable Real-Time Educational Impact Digital Print 7 Book first Rigid platform One size fits all Adaptive and personalized Modular learning platform Open access Curriculum Concept |
 Digital Transformation
Connect Your Way, a digital first product offer, launched this summer – Competitively priced digital offering with optional loose leaf print supplement
– Facilitates easy transition to digital – Disintermediates used and rental Enhancing tools and platforms while pursuing digital growth across all offerings
– New simplified
Connect design launching this summer, for better student experience – Tablet-ready version of SmartBook available for new titles – Beginning to implement enterprise architecture to eliminate duplicate products and
platforms to better leverage technology and drive innovation
– Advancing international adaptive market reach with ALEKS Spanish availability Pipeline growing for third-party licensing of LearnSmart and SmartBook adaptive learning – Successfully launched Danish publisher on the platform – Corporate pilots underway 8 |
 Q2-15 Financial Update 9 |
 Q2-15 Financial Update
Q2 and YTD financial results met expectations with strong Cash Revenue growth
in Higher Ed driven in part by favorable timing of distribution
partner purchases in June Digital Cash Revenue growth, thorough
cost management efforts and operating efficiencies across the
business improved profitability in the quarter Digital Cash
Revenue growth continues to outpace traditional print revenue declines Sales visibility during the summer is becoming more challenging as digital purchases
continue to move closer to the start of the semester
International Cash Revenue grew in Q2 on a constant currency
basis Issued
$100 million of additional HoldCo debt in the quarter and issued dividend from OpCo to HoldCo during the quarter sufficient to cover the August debt service payment Acquired €6 million equity stake in busuu in July 10 |
 MHGE Financial Performance Summary
Growth in digital
continues to offset
the decline in
traditional print
volume
Higher Education YTD digital growth of
25% driven by increasing sales of
Connect and
ALEKS International YTD digital growth of 8% driven by Connect
and ALEKS sales Professional digital Cash Revenue approaching 50% of total YTD cash revenue Total Cash Revenue Digital Cash Revenue Post Plate Adjusted Cash EBITDA ($ in Millions) 11 Continued strong growth of digital Cash Revenues in Q2 and YTD 2015 Significant continuing investment in our high growth digital offerings being funded by cost savings and Cash Revenue growth Continued growth of digital driving total Cash Revenue increases $10 million negative impact to YTD and $6 million for Q2 due to strong U.S. dollar Traditional print declined $23 million or 10% in the YTD period Actioned $92 million of run-rate cost savings since 2013; approximately two-thirds realized through the P&L Digital Platform Group (DPG) non- capitalized YTD investment increased nearly 10% in 2015 vs. 2014 Inclusive of DPG investment, operating expenses down YTD Total MHGE % Change / % of total Cash Revenue Q214 Q215 YTD 14 YTD 15 $73 $81 $138 $164 32% 36% 33% 40% +12% +19% Q214 Q215 YTD 14 YTD 15 Q214 Q215 YTD 14 YTD 15 $227 $228 $414 $412 +1% (0%) $15 $24 $4 $16 7% 11% 1% 4% +58% +354% |
 $114 $125 $229 $244 +9% +6% ($ in Millions) Total Cash Revenues % Change Post Plate Adjusted Cash EBITDA % Change / Margin % 25% growth in digital Cash Revenues YTD and 17% for Q2 Digital growth driven by increased sales of Connect and ALEKS Traditional print sales declined 9% YTD, as expected Traditional print sales down 14% YTD and 18% in Q2 Cash EBITDA decline driven by timing related Cash Revenue variance International Cash Revenues grew on a constant currency basis in the quarter Full year digital growth driven by sales of Connect and ALEKS across multiple regions Higher Education Professional International Notes: Post Plate Adjusted Cash EBITDA will not sum to total MHGE due to the ‘Other’ reporting segment. See Appendix for
reconciliation. Business Unit Financial Performance
Summary Q214
Q215 YTD 14 YTD 15 Q214 Q215 YTD 14 YTD 15 Q214 Q215 YTD 14 YTD 15 Q214 Q215 YTD 14 YTD 15 Q214 Q215 YTD 14 YTD 15 Q214 Q215 YTD 14 YTD 15 $33 $30 $57 $52 (10%) (9%) $11 $8 $13 $9 31% 27% 23% 17% (23%) (32%) $79 $74 $127 $117 (7%) (8%) $8 $6 $(4) $(4) 10% 8% -3% -3% (29%) +6% 12 $(1) $11 $(3) $11 -1% 9% -2% 5% (nm) (nm) |
 $17 $14 $31 $27 51% 47% 54% 51% (18%) (14%) $74 $68 $118 $106 93% 92% 93% 91% (8%) (10%) $5 $6 $9 $10 7% 8% 7% 9% +4% +8% $150 $200 $250 $300 $350 $400 2013 2014 LTM June YTD 2015 Trad. Print Custom Print Digital $32 $41 $85 $78 28% 33% 37% 32% +26% (9%) ($ in Millions) Digital Cash Revenues % Change / % of total Cash Revenue Custom Print Cash Revenues % Change / % of total Cash Revenue Traditional Print Cash Revenues % Change / % of total Cash Revenue Higher Education Cash Revenue Trend Higher Education Professional International $811 $838 $853 Digital Cash Revenue is growing at a CAGR of 15.0% since 2012 Total Cash Revenue Revenue Mix by Business Unit Q214 Q215 YTD 14 YTD 15 $51 $60 $102 $128 45% 48% 45% 52% +17% +25% Q214 Q215 YTD 14 YTD 15 $31 $24 $42 $38 27% 19% 18% 16% (22%) (9%) Q214 Q215 YTD 14 YTD 15 Q214 Q215 YTD 14 YTD 15 Q214 Q215 YTD 14 YTD 15 Q214 Q215 YTD 14 YTD 15 Q214 Q215 YTD 14 YTD 15 $16 $16 $26 $25 49% 53% 46% 49% (2%) (2%) 13 |
 Significant liquidity of
$287 million – $47 million of cash – Bank revolver fully available as of June 30, 2015 and as of today Diligent working capital management Net leverage of 3.2x as of June 30 – Net leverage including HoldCo debt of 4.4x ($ in Millions) 14 9.75% Notes Due 2021 $800.0 4.75% (Floating) Term Loan Due 2019 677.3 Revolving Credit Facility Due 2018 ($240M) - Total Indebtedness $1,477.3 Cash and Cash Equivalents (46.6) Net Indebtedness at June 30, 2015 $1,430.7 Last Twelve Months Covenant EBITDA (1) $440.3 Net First Lien Leverage Ratio (2) 3.25x 8.5% Holdco Notes Due 2019 (3) $500.0 Pro Forma for Holdco Debt 4.38x Cash and Cash Equivalents $46.6 Revolving Credit Facilities $240.0 Outstanding Letters of Credit - Outstanding Borrowings - Available Under Credit Facilities at June 30, 2015 $240.0 Total Liquidity at June 30, 2015 $286.6 Indebtedness Liquidity Q2-15 Capital Structure & Liquidity Update Debt balances exclude unamortized Original Issue Discount (OID). (1) Covenant definition of EBITDA is Pre-Plate Pro Forma Adjusted EBITDA.
(2) Net First Lien Leverage covenant of 7.00x
takes effect only if 20% of
revolving line of
credit is drawn. (3) On
April 6, 2015, the company issued an incremental $100 million of
HoldCo debt due
in 2019. During Q2, Company made a dividend payment to
HoldCo sufficient
to cover the August 1, 2015 debt service payment. |
 15 Appendix: Key Terms & Financial Detail |
 Glossary McGraw-Hill Global Education Holdings, LLC (MHGE) McGraw-Hill Education’s Higher Education, Professional and International businesses
Connect Mobile-first learning platform for students and instructors in the higher education market
SmartBook Adaptive reading product designed to help students understand and retain course material by guiding each
student through a highly personal study experience
LearnSmart Adaptive learning program which personalizes learning and designs targeted study paths for students
ALEKS Adaptive learning technology for the K-12 and higher education markets, primarily Math Financial Terminology Cash Revenue GAAP revenue plus the change in deferred revenue excluding the impact of purchase accounting
Deferred Revenue
Advance payments or unearned revenue recorded until services have been
rendered or products have been delivered in accordance with
GAAP Adjusted Cash EBITDA
Adjusted EBITDA is defined as EBITDA adjusted to exclude unusual items and
other adjustments required or permitted in calculating covenant
compliance under the indenture governing our senior secured notes and/or our senior secured credit facilities Post-Plate Adjusted Cash EBITDA EBITDA adjusted to exclude unusual items and other adjustments required or permitted in calculating covenant
compliance including the cash spent for plate investment
Plate Investment Cash Costs
Plate investment cash costs reflect the costs incurred in the development of instructional solutions, principally design and content creation. These costs are capitalized when the title is expected to generate future economic benefits and are amortized upon publication of the title over its estimated useful life of up to six years
Digital Revenue
Represents standalone digital sales and, where digital product is sold in a bundled arrangement, only the value attributed to the digital component (s) is included. The attribution of value in bundled arrangement is based on relative selling prices (inclusive of discounts) 16 |
 What is Adaptive Technology?
Adaptive ownership drives a true competitive advantage
– Method of practice based on educational theory and cognitive science that personalizes
learning by continually assessing students’ knowledge, skill and
confidence levels and designing targeted study paths that help
improve areas of weakness and retain competencies –
Proprietary algorithms used in ALEKS, LearnSmart and SmartBook adaptive tools Adaptive technology is a win-win Empowers educators by providing them more information to engage with learners in real-time
For the learner, our tools and resources adapt to specific needs and learning
styles for more effective and efficient learning with outcomes
measured real time For McGraw-Hill Education
– Promotes stickiness of the product – Disintermediates rental and used substitutes and claws back lost share – Drives net revenue growth and improves margins over time 17 |
 Cash Revenue Bridge and Operating Segment Detail
Amounts above may not sum due to rounding.
18 ($ in Millions) June 30, 2014 June 30, 2015 June 30, 2014 June 30, 2015 Reported Revenue 252 $
251
$
456
$
451
$
Eliminate Impact
of Purchase Accounting (3)
- (2)
1 Total
249 251
454 451
Change in Deferred Revenues
(22) (22)
(41) (39)
Total Cash Revenues
227 $
228
$
414
$
412
$
Cash Revenue by
Segments Higher Ed
114 $
125
$
229
$
244
$
Professional 33 30
57 52
International 79 74
127 117
Total 227 $
228
$
414
$
412
$
Cash EBITDA by
Segments Higher Ed
(1) $
11
$
(3) $
11
$
Professional 11 8
13 9
International 8 6
(4) (4)
Other (2) (0)
(2) 0
Total 15 $
24
$
4 $
16
$
Three
Months Ended Six Months Ended |
 ($ in Millions) Q2-15 Cash Revenue Detail Accrued returns are reflected in traditional revenue. Custom Cash Revenue includes traditional print products sold as part of a bundled custom solution.
Q2 Cash Revenue Detail by Component 19 June YTD Cash Revenue Detail by Component Figures are represented on a cash basis inclusive of actual returns but excluding purchase accounting adjustments detailed in the
Appendix. Q2 Digital Cash Revenue
Q2 Custom Print Cash Revenue
Q2 Traditional Print & Other Cash Revenue
Q2 Total Cash Revenue
2013 2014 2015 2014 2013 2014 2015 2014 2013 2014 2015 2014 2013 2014 2015 2014 Higher Ed $43 $51 $60 16.8% $30 $31 $24 (21.5%) $35 $32 $41 26.4% $108 $114 $125 9.2% Professional 11 16 16 (1.9%) - - - N/C 18 17 14 (18.3%) 29 33 30 (10.3%) International 3 5 6 3.5% - - - N/C 83 74 68 (7.8%) 87 79 74 (7.0%) Other - - - N/C - - - N/C (0.0) (0.0) (0.0) (74.5%) (0.0) (0.0) (0.0) (74.5%) Total MHGE $57 $73 $81 11.6% $30 $31 $24 (21.5%) $137 $123 $123 (0.3%) $224 $227 $228 0.7% % of total Higher Ed 40% 45% 48% 27% 27% 19% 33% 28% 33% 100% 100% 100% Professional 37% 49% 53% 0% 0% 0% 63% 51% 47% 100% 100% 100% International 4% 7% 8% 0% 0% 0% 96% 93% 92% 100% 100% 100% Total MHGE 26% 32% 36% 13% 14% 11% 61% 54% 54% 100% 100% 100% % vs % vs % vs % vs YTD Digital Cash Revenue YTD Custom Print Cash Revenue YTD Traditional Print Cash Revenue YTD Total Cash Revenue 2013 2014 2015 2014 2013 2014 2015 2014 2013 2014 2015 2014 2013 2014 2015 2014 Higher Ed $84 $102 $128 24.9% $47 $42 $38 (9.2%) $77 $85 $78 (8.6%) $208 $229 $244 6.3% Professional 22 26 25 (2.5%) - - - N/C 35 31 27 (13.8%) 57 57 52 (8.6%) International 6 9 10 8.2% - - - N/C 139 118 106 (9.8%) 145 127 117 (8.4%) Other - - - N/C - - - N/C 0.0 (0) (0) N/M 0.0 (0) (0) N/M Total MHGE $112 $138 $164 18.6% $47 $42 $38 (9.2%) $251 $234 $211 (9.9%) $410 $414 $412 (0.3%) % of total Higher Ed 40% 45% 52% 22% 18% 16% 37% 37% 32% 100% 100% 100% Professional 39% 46% 49% 0% 0% 0% 61% 54% 51% 100% 100% 100% International 4% 7% 9% 0% 0% 0% 96% 93% 91% 100% 100% 100% Total MHGE 27% 33% 40% 11% 10% 9% 61% 57% 51% 100% 100% 100% % vs % vs % vs % vs |
 Q2-15 Income Statement Excluding Impact of Transaction 20 ($ in Millions) 2014 2015 2014 2015 2014 2015 Revenue 252 $
251 $
(3) $
- $
249 $
251 $
Cost of goods sold
71 74 3 - 74 74 Gross profit 181 176 (6) - 175 176 Operating expenses Operating & administration expenses 154 139 - - 154 139 Depreciation 4 6 - - 4 6 Amortization of intangibles 31 23 (29) (21) 2 2 Transaction costs 1 - (1) - - - Total operating expenses 190 168 (30) (21) 160 147 (Loss) income from operations (9) 9 25 21 16 30 Interest (income) expense, net 36 32 (36) (32) - - Other (income) (1) (6) 1 6 - - (Loss) income from operations before taxes on income (44) (17) 59 47 16 30 Income tax (benefit) provision 10 (4) 23 18 33 14 Net (loss) income (54) (13) 36 29 (18) 16 Less: Net loss attributable to noncontrolling interests 0 - - - 0 - Net loss (income) attributable to McGraw-Hill Global Education Intermediate Holdings, LLC (54) $
(13) $
36 $
29 $
(17) $
16 $
Post-Plate Adjusted Cash EBITDA
15 $
24 $
15 $
24 $
Cash Revenue Bridge
Revenue per above
249 251 Change in deferred revenue per Cash Revenue schedule (22) (22) Cash Revenue 227 228 Operating Expense Bridge Total Operating Expenses Per Above 160 147 Less: Depreciation & Amortization of intangibles (6) (8) Less: Acquisition costs (0) - Less: Amortization of prepublication costs (10) (9) Less: Restructuring and cost savings implementation charges (5) (5) Less: Physical Separation Costs (6) - Less: Other adjustments (7) (4) Adjusted Operating Expenses 125 121 Reported Transaction Impact Excluding Impact From Transaction Three Months Ended June 30, Three Months Ended June 30, Three Months Ended June 30, |
 June YTD Income Statement Excluding Impact of Transaction 21 ($ in Millions) 2014 2015 2014 2015 2014 2015 Revenue 456 $
451 $
(2) $
1 $
455 $
451 $
Cost of goods sold
125 130 3 - 128 130 Gross profit 331 321 (4) 1 327 322 Operating expenses Operating & administration expenses 322 286 - - 322 286 Depreciation 9 13 - - 9 13 Amortization of intangibles 57 47 (53) (43) 4 4 Transaction costs 3 - (3) - - - Total operating expenses 391 345 (56) (43) 335 302 (Loss) income from operations (60) (24) 52 44 (7) 19 Interest (income) expense, net 80 66 (80) (66) - - Other (income) (10) (7) 10 7 - - (Loss) income from operations before taxes on income (130) (83) 123 103 (7) 19 Income tax (benefit) provision (19) (26) 47 40 28 14 Net (loss) income (111) (57) 75 63 (36) 5 Less: Net loss attributable to noncontrolling interests 0 - - - 0 - Net loss (income) attributable to McGraw-Hill Global Education Intermediate Holdings, LLC (111) $
(57) $
75 $
63 $
(36) $
5 $
Post-Plate Adjusted Cash EBITDA
4 $
16 $
4 $
16 $
Cash Revenue Bridge
Revenue per above
455 451 Change in deferred revenue per Cash Revenue schedule (41) (39) Cash Revenue 414 412 Operating Expense Bridge Total Operating Expenses Per Above 335 302 Less: Depreciation & Amortization of intangibles (13) (16) Less: Acquisition costs (3) - Less: Amortization of prepublication costs (21) (19) Less: Restructuring and cost savings implementation charges (14) (10) Less: Physical Separation Costs (11) - Less: Other adjustments (13) (9) Adjusted Operating Expenses 260 248 Reported Transaction Impact Excluding Impact From Transaction Six Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, |
 EBITDA and Adjusted EBITDA
EBITDA, a measure used by management to assess operating performance, is
defined as income from continuing operations plus interest,
income taxes, depreciation and amortization, including amortization of prepublication costs (“plate investment”). Adjusted EBITDA is defined as EBITDA adjusted to exclude unusual items and other adjustments required or permitted in
calculating covenant compliance under the indenture governing our senior
secured notes and/or our new senior secured credit facilities.
Post-Plate Adjusted Cash EBITDA reflects the impact of cash spent for plate investment. Plate investment costs, reflecting the cost of developing education content, are capitalized and amortized. These costs are capitalized when
the title is expected to generate probable future economic benefits and are
amortized upon publication of the title over its estimated
useful life of up to six years. Post-Plate Adjusted Cash EBITDA reflects EBITDA as defined in the First Lien Credit Agreement and the Bond Indenture. Each of the above described EBITDA-based measures is not a recognized term under U.S. GAAP and does not purport to be
an alternative to income from continuing operations as a measure of operating
performance or to cash flows from operations as a measure of
liquidity. Additionally, each such measure is not intended to be a measure of free cash flows available for management’s discretionary use, as it does not consider certain cash requirements such as interest payments,
tax payments and debt service requirements. Such measures have
limitations as analytical tools, and you should not consider any
of such measures in isolation or as substitutes for our results as reported under U.S. GAAP. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement U.S. GAAP results to
provide a more complete understanding of the factors and trends affecting the
business than U.S. GAAP results alone. Because not all companies
use identical calculations, these EBITDA-based measures may not be comparable to other similarly titled measures of other companies. Management believes EBITDA is helpful in highlighting trends because EBITDA excludes the results of decisions that are
outside the control of operating management and can differ significantly from
company to company depending on long- term strategic
decisions regarding capital structure, the tax rules in the jurisdictions in which companies operate, and capital investments. In addition, EBITDA provides more comparability between the historical operating results and operating results
that reflect purchase accounting and the new capital structure.
Management believes that the inclusion of supplementary adjustments to EBITDA
applied in presenting Adjusted EBITDA and Post-Plate
Adjusted Cash EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future.
22 |
 Q2-15 Adjusted Cash EBITDA 23 ($ in Millions) Jun 30, 2014 Jun 30, 2015 June 30, 2014 June 30, 2015 Net Income (54) $
(13)
$
(111) $
(57) $
Interest (income) expense, net
36 32
80 66
Provision for (benefit from) taxes on income 10 (4)
(19) (26)
Depreciation, amortization and plate investment amortization
45 38
86 78
EBITDA 38 $
53
$
37 $
61
$
Deferred revenue (a)
(25) (22)
(43) (38)
Restructuring and cost savings implementation charges (b)
5 5
14 10
Sponsor fees (c) 1 1
2 2
Purchase accounting (d) (3) -
(3) -
Transaction costs (e) 1 -
3 -
Acquisition costs (f) 0 -
3 -
Physical separation costs (g) 6 -
11 -
Other (h) 5 (3)
1 0
Adjusted EBITDA 28 $
33
$
26 $
35
$
Plate
investment cash costs (i) (13)
(9) (22)
(18) Post-Plate Adjusted Cash EBITDA
15 $
24
$
4 $
16
$
Three
Months Ended Six Months Ended |
 Adjusted Cash EBITDA Footnotes
24 Notes:
(a) We receive cash for certain digital products up front but recognize revenue over time. We record a liability for deferred revenue
when we receive the cash. This adjustment represents the net
effect of converting deferred revenues (inclusive of deferred royalties) on digital sales to a cash basis assuming the collection of all receivable balances. For the six months ended June 30, 2015, this adjustment was $38,927, and there was also purchase
accounting adjustments that decreased reported revenues by
$683. (b) Represents run-rate cost savings, non-recurring severance and other expenses associated with headcount reductions and other
cost savings initiated in 2014 as part of our formal
restructuring initiatives to create a flatter and more agile organization. (c) Beginning in 2014, $3,500 of annual management fees was recorded and payable to the Sponsor. (d) Represents the effects of the application of purchase accounting associated with the acquisition of MHC's educational materials and
learning solutions business on March 22, 2013, driven by the
step-up of acquired inventory. The deferred revenue adjustment recorded as a result of purchase accounting has been considered in the deferred revenue adjustment. (e) The amount represents the transaction costs associated with the acquisition of MHC's educational materials and learning solutions
business on March 22, 2013.
(f) The amount represents costs incurred for acquisitions subsequent to the Founding Acquisition for ALEKS and Area 9.
(g) The amount represents costs incurred to physically separate our operations
from MHC. These physical separation costs were incurred subsequent to the Founding Acquisition. (h) For the six months ended June 30, 2015, the amount represents (i) non-cash incentive compensation expense; and (ii) other
adjustments permitted and/or required under the indentures
governing MHGE's notes and the credit agreement governing MHGE's senior credit facilities. For the six months ended June 30, 2014, the amount represents (i) cash distributions to noncontrolling interest holders of $169; (ii) non-cash incentive compensation
expense; (iii) elimination of non-cash gain of $7,329 in Area
9; and (iv) other adjustments permitted and/or required under the indentures governing MHGE's notes and the credit agreement governing MHGE's senior credit facilities. (i) Represents cash spent for plate investment during the period. |