Houghton Mifflin Harcourt Co (Form: 8-K, Received: 10/05/2018 06:46:50)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 1, 2018

HOUGHTON MIFFLIN HARCOURT COMPANY

(Exact name of registrant as specified in its charter)


Delaware	001-36166	27-1566372
(State or other jurisdiction of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

125 High Street Boston, MA		02110
(Address of principal executive offices)		(Zip Code)

(617) 351-5000

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.01

Completion of Acquisition or Disposition of Assets.

On October 1, 2018, Houghton Mifflin Harcourt Publishing Company (“HMH Sub”), a wholly owned subsidiary of Houghton Mifflin Harcourt Company (the “Company” and together with HMH Sub, the “Sellers”), completed the previously announced sale of all of the assets, including intellectual property, used primarily in its Riverside clinical and standardized testing business (the “Business”) pursuant to the Asset Purchase Agreement, dated September 12, 2018 and as amended on October 1, 2018 (the “Agreement”) with Riverside Assessments, LLC (the “Purchaser”), for cash consideration received by the Sellers of approximately $140.0 million and the Purchaser’s assumption of all liabilities relating to the Business subject to specified exceptions (collectively, the “Transaction”). The results of the Business were previously reported in the Company’s Education segment.

The foregoing description is qualified in its entirety by reference to the Agreement, a copy of which is filed as an exhibit to this filing. The Agreement has been attached as an exhibit to this report to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about HMH Sub, the Company or the Purchaser or any of their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Agreement were made only for the purposes of such agreement and as of specified dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of HMH Sub, the Company or the Purchaser or any of their respective subsidiaries or affiliates. In addition, the assertions embodied in the representations and warranties contained in the Agreement are qualified by information in a confidential disclosure schedule that the parties have exchanged. Accordingly, investors should not rely on the representations and warranties as characterizations of the actual state of facts, since (i) they were made only as of the date of such agreement or a prior, specified date, (ii) in some cases they are subject to qualifications with respect to materiality, knowledge and/or other matters and (iii) they may be modified in important part by the underlying disclosure schedule. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Agreement, which subsequent information may or may not be fully reflected in HMH Sub’s, the Company’s or the Purchaser’s public disclosures.

The Company is also filing herewith certain pro forma financial information related to the sale of the Business, which is attached hereto as Exhibit 99.1.

Item 7.01

Regulation FD Disclosure

On October 5, 2018, the Company issued a press release entitled “Houghton Mifflin Harcourt Updates Outlook to Reflect Completed Riverside Divestiture”. A copy of the press release is furnished herewith as Exhibit 99.2 to this report.

Item 9.01.

Financial Statements and Exhibits

(b) Pro Forma Financial Information.

The Unaudited Pro Forma Financial Statements of the Company reflecting the Closing of the sale of the Business are filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference:

i.	Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2018.

ii.	Unaudited Pro Forma Consolidated Statement of Operations for the six months ended June 30, 2018.

iii.	Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2017.

iv.	Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2016.

v.	Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2015.

(d) Exhibits.


Exhibit No.		Description

2.1a†		Asset Purchase Agreement, by and among Houghton Mifflin Harcourt Publishing Company, Houghton Mifflin Harcourt Company (solely for purposes of Section 8.2 and 8.3) and Riverside Assessment, LLC, dated as of September 12, 2018 (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on September 12, 2018).

2.1b†		Amendment No. 1 to Asset Purchase Agreement, by and among Houghton Mifflin Harcourt Publishing Company, Houghton Mifflin Harcourt Company (solely for purposes of Section 8.2 and 8.3) and Riverside Assessment, LLC, dated as of October 1, 2018.

99.1		Unaudited pro forma condensed consolidated balance sheet as of June 30, 2018 and unaudited pro forma consolidated statement of operations for the six months ended June 30, 2018 and for the years ended December 31, 2017, December 31, 2016 and December 31, 2015.

99.2		Press release dated October 5, 2018 titled “Houghton Mifflin Harcourt Updates Outlook to Reflect Completed Riverside Divestiture”

†		Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish supplementary copies of any of the omitted schedules or similar attachments upon request by the SEC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


HOUGHTON MIFFLIN HARCOURT COMPANY

By:		/s/ Joseph P. Abbott, Jr.
Name:		Joseph P. Abbott, Jr.
Title:		Executive Vice President and Chief Financial Officer

Dated: October 5, 2018

Exhibit 2.1b

AMENDMENT NO. 1

ASSET PURCHASE AGREEMENT

This Amendment No. 1 to Asset Purchase Agreement, dated October 1, 2018 (this “ Amendment ”), is made by and between Riverside Assessments, LLC, a Delaware limited liability company (“ Buyer ”), and Houghton Mifflin Harcourt Publishing Company, a Massachusetts corporation (“ Seller ”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Purchase Agreement (as defined below).

WHEREAS , Buyer, Seller and, for certain limited purposes, Houghton Mifflin Harcourt Company, a Delaware corporation, entered into that certain Asset Purchase Agreement, dated September 12, 2018 (the “ Purchase Agreement ”);

WHEREAS , pursuant to Section 9.11 of the Purchase Agreement, (i) no amendment of any provision of the Purchase Agreement shall be valid unless the same shall be in writing and signed by both Buyer and Seller and (ii) no waiver granted under the Purchase Agreement shall be valid unless in writing and signed by the Party to be charged; and

WHEREAS , each of Buyer and Seller desires to amend the Purchase Agreement and the Disclosure Schedule as set forth herein;

NOW, THEREFORE , in consideration of the covenants and agreements contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1.	Amendment .

(a) Section 1.1(d) of the Purchase Agreement is hereby amended to include the following subsection “(vii)”:

“(vii) all liabilities and obligations arising from any breach or alleged breach of Section 11A of the One Pierce Lease (as defined in Schedule 1.1(a)(ii) ) as a result of Buyer’s (or its employees’) occupancy or use of the leased real property described therein without the prior written consent of the landlord under the One Pierce Lease (the “ One Pierce Landlord ”) and any Landlord Consideration (defined below).

(b) The following is hereby added at the end of Section 1.5 of the Purchase Agreement:

“Notwithstanding anything to the contrary in this Section 1.5 or Section 1.6 below, if the One Pierce Landlord conditions its grant of a consent to the assignment of the One Pierce Lease from Seller to Buyer (including by threatening to exercise a “recapture” or other termination right or denying consent) upon, or otherwise requires as a condition to granting such consent a “profit sharing” payment or other consideration (including increased rent payments, increased lease term or other

increased lease obligations) or the provision of additional security or a guaranty (collectively, to the extent approved as provided in this sentence, “ Landlord Consideration ”), Seller shall be solely responsible for making all such payments or providing all such additional security, provided that the terms thereof shall be subject to written approval by each of Seller and Buyer (such approval not to be unreasonably withheld, conditioned or delayed); and provided, further, however , that customary consent fees and reimbursement of legal fees incurred by the One Pierce Landlord required by the One Pierce Lease in respect of the assignment of the One Pierce Lease from Seller to Buyer shall be subject to the provisions of the penultimate sentence of this Section 1.5 .”

(d) A new Section 8.9 shall be added to the Purchase Agreement as follows:

“8.9 Following the Closing, Buyer shall use its reasonable best efforts to arrange, as promptly as practicable following the Closing (such period following the Closing, the “ Replacement Period ”), to replace the letter of credit identified on Schedule 4.2 (collectively, the “ Letter of Credit ”). During the Replacement Period, Seller agrees to maintain the Letter of Credit in accordance with the requirement of the One Pierce Lease at Seller’s sole cost and expense.”

(e) Item 1 of Section 2.10(c) of the Disclosure Schedule is hereby amended and restated to read in its entity as set forth on Annex A hereto.

2.	Miscellaneous .

(a) Except as expressly set forth in this Amendment, the Purchase Agreement shall remain in full force and effect and the parties hereto ratify and confirm their agreements and covenants contained therein.

(b) This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

(c) This Amendment shall be enforced, governed and construed in all respects in accordance with the laws of the State of Delaware.

(d) This Amendment may be executed in counterparts and by facsimile signature, each of which shall be deemed an original and all of which taken together shall constitute one and the same instrument.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF , each of the Parties has executed this Amendment as of the date first written above.


BUYER: RIVERSIDE ASSESSMENTS, LLC

By:		/s/ Rajib Roy
Name:		Rajib Roy
Its:		President & Chief Executive Officer

[Signature Page to Amendment No. 1 to the Purchase Agreement]

IN WITNESS WHEREOF , each of the Parties has executed this Amendment as of the date first written above.


SELLER: HOUGHTON MIFFLIN HARCOURT PUBLISHING COMPANY

By:		/s/ William F. Bayers
Name:		William F. Bayers
Its:		EVP, General Counsel & Secretary

[Signature Page to Amendment No. 1 to the Purchase Agreement]

Exhibit 99.1

Houghton Mifflin Harcourt Company

Unaudited Pro Forma Condensed Consolidated Financial Statements

On October 1, 2018, Houghton Mifflin Harcourt Publishing Company (“HMH Sub”), a wholly owned subsidiary of Houghton Mifflin Harcourt Company (the “Company” and together with HMH Sub, the “Sellers”) completed the previously announced sale of all of the assets, including intellectual property, used primarily in its Riverside clinical and standardized testing business (the “Business”) pursuant to the Asset Purchase Agreement, dated September 12, 2018 and as amended on October 1, 2018 (the “Agreement”) with Riverside Assessments, LLC (the “Purchaser”), for cash consideration received by the Sellers of approximately $140.0 million and the Purchaser’s assumption of all liabilities relating to the Business subject to specified exceptions (collectively, the “Transaction”). The results of the Business were previously reported in the Company’s Education segment.

The foregoing description is qualified in its entirety by reference to the Agreement, a copy of which is filed as an exhibit to the Company’s Current Report on Form 8-K filed on October 5, 2018.

The following unaudited pro forma condensed consolidated financial statements are presented to comply with Article 11 of Regulation S-X and follow prescribed SEC regulations. The unaudited condensed consolidated pro forma financial statements do not purport to present what the Company’s results would have been had the disposition actually occurred on the dates indicated or to project what the Company’s results of operations or financial position would have been for any future period. The prescribed regulations limit pro forma adjustments to those that are directly attributable to the disposition on a factually supported basis. Consequently, the Company was not permitted within the condensed consolidated pro forma financial statements to allocate to the disposed operations any indirect corporate overhead or costs, such as administrative corporate functions or any other costs that were shared with the retained business of the Company. As a result, such costs are not reflected in the pro forma adjustments and are included in the retained business of the Company. The pro forma adjustments are described in the notes to the unaudited condensed consolidated pro forma financial statements.

The unaudited condensed consolidated pro forma financial statements have been prepared for informational purposes and to assist in the analysis of the Company’s sale of the Business to the Purchaser. This information should be read together with the historical consolidated financial statements and related notes of Houghton Mifflin Harcourt Company included in its Annual Report on Form 10-K for the year ended December 31, 2017 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.

The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2018 and the years ended December 31, 2017, December 31, 2016 and December 31, 2015, assume the sale occurred on the first day of the earliest fiscal period presented. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2018, assumes the sale occurred on June 30, 2018. The unaudited pro forma condensed consolidated financial statements are derived from the historical consolidated financial statements of the Company and are based on assumptions that management believes are reasonable in the circumstances.

Houghton Mifflin Harcourt Company

Pro Forma Condensed Consolidated Balance Sheets (Unaudited)

At June 30, 2018


(in thousands of dollars)	HMH		Pro Forma Adjustments				HMH Pro Forma
Assets
Current assets
Cash and cash equivalents	$	30,709	$	135,015		A	$	165,724
Accounts receivable, net		293,693		(6,047	)	B		287,646
Inventories		212,436		(4,075	)	B		208,361
Prepaid expenses and other assets		30,888		(600	)	B		30,288

Total current assets		567,726		124,293				692,019
Property, plant, and equipment, net		149,137		(5,233	)	B		143,904
Pre-publication costs, net		341,474		(11,206	)	B		330,268
Royalty advances to authors, net		49,964		—				49,964
Goodwill		783,073		(70,000	)	B		713,073
Other intangible assets, net		578,133		(27,375	)	B		550,758
Deferred income taxes		3,593		—				3,593
Deferred commissions		22,598		—				22,598
Other assets		28,658		—				28,658

Total assets	$	2,524,356	$	10,479			$	2,534,835

Liabilities and Stockholders’ Equity
Current liabilities
Revolving credit facility	$	50,000	$	—			$	50,000
Current portion of long-term debt		8,000		—				8,000
Accounts payable		94,920		(1,266	)	B		93,654
Royalties payable		67,085		(4,902	)	B		62,183
Salaries, wages, and commissions payable		39,938		(1,117	)	B		38,821
Deferred revenue		240,355		(6,486	)	B		233,869
Interest payable		293		—				293
Severance and other charges		6,760		—				6,760
Accrued postretirement benefits		1,618		—				1,618
Other liabilities		30,378		(1,954	)	B		28,424

Total current liabilities		539,347		(15,725	)			523,622
Long-term debt, net of discount and issuance costs		757,922		—				757,922
Long-term deferred revenue		400,803		(260	)	B		400,543
Accrued pension benefits		23,476		—				23,476
Accrued postretirement benefits		19,041		—				19,041
Deferred income taxes		28,144		(1,050	)	B		27,094
Other liabilities		21,364		(2,167	)	B		19,197

Total liabilities		1,790,097		(19,202	)			1,770,895

Stockholders’ equity		734,259		29,681		C		763,940

Total liabilities and stockholders’ equity	$	2,524,356	$	10,479			$	2,534,835

See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements.

Houghton Mifflin Harcourt Company

Pro Forma Consolidated Statements of Operations (Unaudited)

Six Months Ended June 30, 2018


(in thousands of dollars, except per share data)	HMH			Pro Forma Adjustments				HMH Pro Forma
Net sales	$	595,349		$	(38,225	)	D	$	557,124
Costs and expenses
Cost of sales, excluding publishing rights and pre-publication amortization		272,921			(13,130	)	D		259,791
Publishing rights amortization		18,238			—				18,238
Pre-publication amortization		54,315			(2,362	)	D		51,953

Cost of sales		345,474			(15,492	)			329,982
Selling and administrative		325,006			(10,156	)	D		314,850
Other intangible asset amortization		14,292			(750	)	D		13,542
Severance and other charges		6,018			—				6,018
Loss on sale of assets		384			—				384

Operating loss		(95,825	)		(11,827	)			(107,652	)

Other income (expense)
Retirement benefits non-service income		640			—				640
Interest expense		(22,408	)		—				(22,408	)
Interest income		623			—				623
Change in fair value of derivative instruments		(725	)		—				(725	)

Loss before taxes		(117,695	)		(11,827	)			(129,522	)
Income tax expense		6,888			(1,435	)	E		5,453

Net loss	$	(124,583	)	$	(10,392	)		$	(134,975	)

Net loss per share attributable to common stockholders
Basic	$	(1.01	)					$	(1.09	)

Diluted	$	(1.01	)					$	(1.09	)

See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements.

Houghton Mifflin Harcourt Company

Pro Forma Consolidated Statements of Operations (Unaudited)

Year Ended December 31, 2017


(in thousands of dollars, except per share data)	HMH			Pro Forma Adjustments				HMH Pro Forma
Net sales	$	1,407,511		$	(80,482	)	D	$	1,327,029
Costs and expenses
Cost of sales, excluding publishing rights and pre-publication amortization		617,802			(29,284	)	D		588,518
Publishing rights amortization		46,238			—				46,238
Pre-publication amortization		126,038			(6,130	)	D		119,908

Cost of sales		790,078			(35,414	)			754,664
Selling and administrative		658,346			(22,020	)	D		636,326
Other intangible asset amortization		30,748			(1,500	)	D		29,248
Impairment charge for pre-publication costs		3,980			—				3,980
Restructuring		40,653			(2,878	)	D		37,775
Severance and other charges		713			(536	)	D		177

Operating loss		(117,007	)		(18,134	)			(135,141	)

Other income (expense)
Retirement benefits non-service income		3,486			—				3,486
Interest expense		(42,805	)		—				(42,805	)
Interest income		1,338			—				1,338
Change in fair value of derivative instruments		1,366			—				1,366

Loss before taxes		(153,622	)		(18,134	)			(171,756	)
Income tax (benefit) expense		(50,435	)		19,280		E		(31,155	)

Net loss	$	(103,187	)	$	(37,414	)		$	(140,601	)

Net loss per share attributable to common stockholders
Basic	$	(0.84	)					$	(1.14	)

Diluted	$	(0.84	)					$	(1.14	)

See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements.

Houghton Mifflin Harcourt Company

Pro Forma Consolidated Statements of Operations (Unaudited)

Year Ended December 31, 2016


(in thousands of dollars, except per share data)	HMH			Pro Forma Adjustments				HMH Pro Forma
Net sales	$	1,372,685		$	(80,707	)	D	$	1,291,978
Costs and expenses
Cost of sales, excluding publishing rights and pre-publication amortization		610,715			(32,398	)	D		578,317
Publishing rights amortization		61,351			—				61,351
Pre-publication amortization		130,243			(8,377	)	D		121,866

Cost of sales		802,309			(40,775	)			761,534
Selling and administrative		703,797			(22,627	)	D		681,170
Other intangible asset amortization		26,750			(375	)	D		26,375
Impairment charge for intangible assets		139,205			(9,000	)	D		130,205
Restructuring		—			—				—
Severance and other charges		15,650			(279	)	D		15,371

Operating loss		(315,026	)		(7,651	)			(322,677	)

Other income (expense)
Retirement benefits non-service income		4,253			—				4,253
Interest expense		(39,181	)		—				(39,181	)
Interest income		518			—				518
Change in fair value of derivative instruments		(614	)		—				(614	)

Loss before taxes		(350,050	)		(7,651	)			(357,701	)
Income tax (benefit) expense		(65,492	)		13,936		E		(51,556	)

Net loss	$	(284,558	)	$	(21,587	)		$	(306,145	)

Net loss per share attributable to common stockholders
Basic	$	(2.32	)					$	(2.50	)

Diluted	$	(2.32	)					$	(2.50	)

See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements.

Houghton Mifflin Harcourt Company

Pro Forma Consolidated Statements of Operations (Unaudited)

Year Ended December 31, 2015


(in thousands of dollars, except per share data)	HMH			Pro Forma Adjustments				HMH Pro Forma
Net sales	$	1,416,059		$	(96,643	)	D	$	1,319,416
Costs and expenses
Cost of sales, excluding publishing rights and pre-publication amortization		622,668			(40,257	)	D		582,411
Publishing rights amortization		81,007			—				81,007
Pre-publication amortization		120,506			(7,614	)	D		112,892

Cost of sales		824,181			(47,871	)			776,310
Selling and administrative		683,911			(28,024	)	D		655,887
Other intangible asset amortization		22,038			—				22,038
Severance and other charges		4,767			(621	)	D		4,146

Operating loss		(118,838	)		(20,127	)			(138,965	)

Other income (expense)
Retirement benefits non-service income		2,787			—				2,787
Interest expense		(32,254	)		—				(32,254	)
Interest income		209			—				209
Change in fair value of derivative instruments		(2,362	)		—				(2,362	)
Loss on extinguishment of debt		(3,051	)		—				(3,051	)

Loss before taxes		(153,509	)		(20,127	)			(173,636	)
Income tax (benefit) expense		(19,640	)		(771	)	E		(20,411	)

Net loss	$	(133,869	)	$	(19,356	)		$	(153,225	)

Net loss per share attributable to common stockholders
Basic	$	(0.98	)					$	(1.12	)

Diluted	$	(0.98	)					$	(1.12	)

See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements.

1. Description of Transaction

On October 1, 2018, Houghton Mifflin Harcourt Publishing Company (“HMH Sub”), a wholly owned subsidiary of Houghton Mifflin Harcourt Company (the “Company” and together with HMH Sub, the “Sellers”) closed the previously announced sale of all of the assets, including intellectual property, used primarily in its Riverside clinical and standardized testing business (the “Business”) pursuant to the Asset Purchase Agreement, dated September 12, 2018 and as amended on October 1, 2018 (the “Agreement”) with Riverside Assessments, LLC (the “Purchaser”), for cash consideration received by the Sellers of approximately $140.0 million and the Purchaser’s assumption of all liabilities relating to the Business subject to specified exceptions (collectively, the “Transaction”).

2. Pro Forma Adjustments

The pro forma adjustments made to the historical condensed consolidated financial statements of the Company are described as follows:

A.	Reflects proceeds of $140.0 million received in cash from the sale adjusted for the expenses related to the Transaction of approximately $5.0 million.

B.	Reflects the adjustments to eliminate the assets and liabilities sold related to the Business. Goodwill represents a preliminary estimate of fair value of the Business relative to other components of the Company’s business.

C.	Represents the cash proceeds of the transaction and the net asset value transferred to the Purchaser.

D.	Represents the revenue and expenses directly attributable to the Business operations. The pro forma adjustments exclude the indirect and fixed costs allocated to the sold business.

The effective tax rates differ from the blended federal and state statutory rate of 26.2% for the six months ended June 30, 2018, 26.4%, 39.3% and 38.7% for the years ended December 31, 2017, 2016 and 2015, respectively. Differences are due to the reclassification of intangibles from indefinite-lived to definite-lived and the effects of an impairment on indefinite-lived intangible assets during the year ended December 31, 2016, and the impact of US Tax Reform for the year ended December 31, 2017.

LOGO

Exhibit 99.2

Houghton Mifflin Harcourt Updates Outlook to Reflect Completed Riverside Divestiture

BOSTON – Oct. 5, 2018 – Global learning company Houghton Mifflin Harcourt (HMH) (Nasdaq: HMHC) on Monday, October 1, 2018, completed its previously announced agreement to divest its Riverside clinical and standardized testing (Riverside) portfolio to private equity firm Alpine Investors for a purchase price of $140 million. Net proceeds to HMH were approximately $135 million after transaction fees.

The completion of the transaction enables HMH to sharpen its focus on developing and delivering next generation K-12 classroom offerings rooted in learning science that seamlessly combine teacher support, data-driven instructional practices, intervention solutions and focused content architecture to accelerate growth for all learners.

As stated at the time of announcement, HMH plans to invest the net proceeds in its Extensions businesses, supporting its overarching strategy to create integrated solutions and improve student outcomes.

New 2018 Outlook Reflecting Divestiture

As a result of the transaction, HMH revised its outlook for 2018. The Company’s outlook for its continuing operations is unchanged, and the revision reflects changes resulting from the transaction only. HMH now expects 2018 net sales to be in a range of $1.270 to $1.350 billion and billings to be in the range of $1.285 to $1.365 billion. Content development spend for 2018 is expected to be in the range of $117 to $142 million, with total capital expenditures including non-plate capital expenditures in the range of $174 to $199 million. HMH continues to expect 2018 free cash flow from continuing operations to be negative (but improved from 2017 free cash flow from continuing operations) at the midpoint of the revised billings guidance range. In 2017, giving pro forma effect to the transaction as if it had occurred on January 1, 2017, HMH’s adjusted fixed and variable costs as a percentage of billings were 48% and 39%, respectively. For 2018, the Company expects its adjusted fixed and variable costs as a percentage of billings to be comparable to pro forma 2017 adjusted costs at the midpoint of the revised billings guidance range.

About Houghton Mifflin Harcourt

Houghton Mifflin Harcourt (NASDAQ:HMHC) is a global learning company committed to delivering integrated solutions that engage learners, empower educators and improve student outcomes. As a leading provider of K–12 core curriculum, supplemental and intervention solutions and professional learning services, HMH partners with educators and school districts to uncover solutions that unlock students’ potential and extend teachers’ capabilities. HMH serves more than 50 million students and 3 million educators in 150 countries, while its award-winning children’s books, novels, non-fiction, and reference titles are enjoyed by readers throughout the world. For more information, visit www.hmhco.com.

Use of Non-GAAP Financial Measures:

To provide additional insight into our performance we have presented free cash flow from continuing operations, which is defined as net cash from continuing operating activities minus capital expenditures. This measure is not prepared in accordance with GAAP. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for financial information prepared in accordance with GAAP. Management believes that the presentation of free cash flow from continuing operations provides useful information to our investors because management regularly reviews this measure as an important indicator of how much cash is generated by general business operations, excluding capital expenditures, and makes decisions based on it. Although we use this non-GAAP measure to assess our business, the use of non-GAAP measures is limited as they include and/or do not include certain items not included and/or included in the most directly comparable GAAP measure. Management is unable to present a quantitative reconciliation of free cash flow from continuing operations to the most directly comparable GAAP financial measure of net cash provided by operating activities because management cannot reliably predict all of the necessary components of such GAAP measure on a forward-looking basis.

Forward-Looking Statements

This news release contains certain statements that are not historical facts, including information regarding our intentions, beliefs or current expectations concerning, among other things, the expected impact of the transaction described above, our results of operations, financial condition, liquidity, prospects, growth, strategies, the industry in which we operate and potential business decisions. Those statements constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results expressed in or implied by our forward-looking statements, including, but not limited to, changes in state and local education funding and/or related programs, legislation and procurement processes; adverse or worsening economic trends or the continuation of current economic conditions; changes in consumer demand for, and acceptance of, our products; industry cycles and trends; conditions and/or changes in the publishing industry; and other factors discussed in our news releases, public statements and/or filings with the U.S. Securities and Exchange Commission, including our most recent Annual and Quarterly Reports on Form 10-K and Form 10-Q. We undertake no obligation, and do not expect, to publicly update or publicly revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contact

Investors

Brian S. Shipman, CFA

Senior Vice President, Investor Relations

(212) 592-1177

brian.shipman@hmhco.com

Media

Bianca Olson

Senior Vice President, Corporate Affairs

(617) 351-3841

bianca.olson@hmhco.com