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  1. INDUSTRY PROFILE 12/12/2011Book PublishersSIC CODES: 2731NAICS CODES: 51113About First ResearchFirst Research, a D&B company, is the leading provider of Industry Intelligence Tools that help sales and marketing teamsperform faster and smarter, open doors and close more deals. First Research performs the “heavy lifting” by analyzinghundreds of sources to create insightful and easy to digest Industry Intelligence that can be consumed very quickly to betterunderstand a prospect’s or client’s business issues. Customers include leading companies in banking, accounting,insurance, technology, telecommunications, business process outsourcing and professional services such as ADP, Bank ofAmerica, Merrill Lynch and Sprint. Used by more than 60,000 sales professionals, First Research can benefit anyorganization which has prospects in multiple industries.Attention: This Industry Profile purchase is an individual license and is not to be distributed to additional individuals evenwithin the same organization. For corporate or small business subscription information, visit www.firstresearch.com or call866-788-9389.
  2. Industry OverviewThe US book publishing industry consists of about 2,700 companies with combined annual revenue of about $25 billion.Major companies include John Wiley & Sons, McGraw-Hill, Pearson, and Scholastic, as well as publishing units of largemedia companies such as HarperCollins (owned by News Corp); Random House (owned by Bertelsmann); and Simon &Schuster (owned by CBS). The industry is highly concentrated: the top 50 companies generate about 80 percent ofrevenue.COMPETITIVE LANDSCAPEDemand for books is driven by demographics and is largely resistant to economic cycles. The profitability of individualcompanies depends on product development and marketing. Large publishers have an advantage in bidding fornew manuscripts or authors. Small and midsized publishers can succeed if they focus on a specific subject or market.The industry is capital-intensive: average annual revenue per worker is more than $320,000.PRODUCTS, OPERATIONS & TECHNOLOGYPublishers produce books for general reading (adult "trade" books); text, professional, technical, childrens, andreference books. Textbooks and adult trade books each account for about 25 percent of the market, professional books20 percent, childrens books 10 percent, and reference books 5 percent.About 290,000 new books are published in the US every year. The number of non-traditional books -- on-demand titlesproduced by reprint companies specializing in the public domain as well as self-publishers and "micro-niche" publications-- has grown significantly in recent years.Operations include acquiring content, managing relationships with authors, editing, designing books, manufacturing, andmarketing. Publishers acquire content by contracting with authors to produce new work, buying finished manuscriptsoffered for sale, or acquiring the rights to existing content through licensing agreements. Publishers often have contractswith authors for multi-book deals. The editorial staff usually specializes in a particular area. A large publisher may ownseveral "imprints" (brand names such as Penguin or Viking) or branded book series such as CliffsNotes, each with itsown editorial staff.Editorial work on a book includes proofing and editing, acquiring illustrations, choosing fonts and paper, and design worksuch as layout and cover art. Most publishers outsource printing and book binding to commercial printers, with thecost of paper borne by the publisher. Large publishers operate their own warehouses from which they ship books asneeded.Publishers or their parent companies often produce complementary products such as magazines, TV programs, films,DVDs and videos, audiobooks, and toys.Computer technology is essential in book publishing for creating and editing content and book design, printing,managing inventory and distribution, and creating new electronic or other products. Publishers can use the same digitalsources in print, online, and for new products, such as on-demand publishing and customized books made-to-order. Forexample, a college can select specific chapters for its own version of a textbook.Electronic availability of the information from traditional books has so far been successful mainly with professional andtechnical material, such as legal texts and subscriptions. Publishers offer this material both on the Internet and throughCDs or DVDs. But change is likely ahead. Electronic readers such as the Amazon Kindle spurred e-book sales in thelate 2000s. As a result, the e-book segment grew fastest among all book publishing segments in 2010, rising nearly170 percent compared to a year earlier. Electronics giants like Apple also developed rival e-readers in an effort to grabmarket share.SALES & MARKETINGBook publishers sell mainly to wholesalers, retailers, school districts, colleges, libraries, businesses, and book clubs.Publishers produce and sell newly created books (the "frontlist") and books that are reissued (the "backlist").Publishers usually have a field sales force and a website for marketing and inquiries. Trade shows are an importantsource of sales. Most large book publishers dont sell directly to consumers but conduct consumer advertisingcampaigns. Major distributors are Baker & Taylor and Ingram Book Company.
  3. Multi-faceted promotion and publicity campaigns are key marketing strategies for adult and childrens trade books.Tactics include in-store advertising, author readings, book signings, and posting a sample chapter online for freeaccess. High-profile or best-selling authors appear on national television shows.In the children’s market, sales hinge primarily on price and quality, while brand-name marketing and licensing areimportant. Marketing tie-ins that complement book sales include branded merchandise such as toys and video games.Despite higher prices, interactive and audio books are popular.Professional and technical books are advertised in industry trade magazines, industry or professional associations,and direct mail.In the public education market, publishers compete to win contracts with state and local school systems. Many statesbuy textbooks through large contracts, on a statewide basis, each according to its own “adoption" cycle, which can spanfive to seven years. In other states ("open territories"), school districts buy books independently. Publishers sell with adirect sales force and by sending sample copies to teachers and government reviewers.Because book stores have limited shelf space and constantly make way for new books, many books have only a shortsales period, which Internet retailers like Amazon that dont have inventory constraints can extend.A major concern for publishers is determining how many copies of a book to print. Technical books may have just afew thousand copies printed, while mass-market books are printed in the hundreds of thousands. Rarely, (like the HarryPotter series) books sell in the millions. Books a retailer cant sell are usually returned to the publisher for full credit.Returned books may be re-sold at highly discounted prices, or destroyed.Publishers sell books with a suggested retail price that may be twice as high as their wholesale price but that is typicallydiscounted by retailers. Large retail book chains like Barnes & Noble routinely sell books at a 30 to 40 percent discountfrom the list price. In recent years, list prices for adult trade hardcover books have been just under $30, while paperbackversions list for about $15. Mass market paperbacks sell at retail for less than $10. Prices for professional books andcollege textbooks, on the other hand, are often over $50. E-book prices hover around $15.Sales of used books have gained popularity in recent years as a cheaper alternative for some consumers. Retailsales of used books online and in stores such as Half Price Books rose during the late 2000s recession, heating upcompetition for new book sales.FINANCE & REGULATIONCash flow is highly seasonal in the consumer and education segments due to buying patterns. Consumer book salespeak during the winter holidays; textbook sales coincide with school terms. Company borrowing tends to peak inSeptember or October, and is at its lowest in May. Publishers with multi-year contracts from state or local school systemsreceive periodic payments.Receivables can be fairly high, while inventory and warehousing operations are capital-intensive. Capital spending isprimarily for offices, computer equipment, software, and warehouse equipment.Inventory turnover is usually rapid because inventories are, in effect, held by wholesalers and retailers, who returnwhat they cant sell. The high rate of returned books is an industrywide problem and can be up to 40 percent in somecategories. The high cost of handling and storing returned paperbacks led to the practice of returning only the frontcovers. Obsolete books are common in technology and science. Publishers may hold a reserve equal to about 3 percentof sales in anticipation of returned books.Books have protection under copyright law. The copyright is usually in the authors name but is assigned to the publisherin exchange for royalty payments.INTERNATIONAL INSIGHTSMany publishers produce foreign editions of successful US books, either in English or in foreign languages. The mostcommon method is to contract with a foreign publisher. For most publishers, however, foreign sales are relatively small.REGIONAL HIGHLIGHTSNew York has the highest concentration of publishers in terms of revenue. California has the largest number ofpublishers, but many are small.
  4. The population of school-aged children will grow at different rates during the next decade, affecting demand for schooltextbooks. From 2010 to 2030, the number of school-aged children is expected to grow 15 percent nationally, butstates such as New York, Michigan, and Ohio will likely see decreases of 2 to 4 percent.HUMAN RESOURCESThough highly educated, the professional staff at book publishers earn a relatively modest average hourly wage,slightly higher than the national average. The industrys injury rate is negligible.Industry Employment GrowthBureau of Labor StatisticsAverage Hourly Earnings & Annual Wage IncreaseBureau of Labor StatisticsRecent DevelopmentsINDUSTRY INDICATORSThe spot price of crude oil, which indicates energy and ink prices paid by book publishing operations, rose 11.6 percentin the week ending November 11, 2011, compared to the same week in 2010.US retail sales for sporting goods, hobby, book, and music stores, a potential measure of demand for books, increased6.1 percent in the first ten months of 2011 compared to the same period in 2010.Total US revenue for book, directory and mailing list, and other publishers rose 2.6 percent in the second quarter of2011 compared to the same period in 2010.QUARTERLY INDUSTRY UPDATEMore Publishers Abandon Print Catalogs - Random House plans to drop its print catalog, joining the growing group
  5. of publishers using digital catalogs exclusively. While publishers have been transitioning toward digital catalogs foryears, many had maintained print catalogs, as well. Not all publishers support the shift, although they concede digitalcatalogs offer significant savings on production and shipping, as well as an arguably lower environmental footprint,according to Publishers Weekly. In addition to Random House, HarperCollins and Hyperion have gone all-digital, andMacmillan and Simon & Schuster both plan to complete their digital transition by spring 2012.Business ChallengesCRITICAL ISSUESIndustry Sales Declining - Book sales in the US declined nearly 5 percent between 2009 and 2010, with adult fiction,mass market paperbacks, and audio books among the hardest-hit segments, according to Nielsen BookScan. Bookpublishers are facing threats from other sources of entertainment; a recent study by the National Endowment for the Artsshows that just over half of adults read literature for entertainment. However, the explosion in electronic readers hasspurred a rise in e-book sales, which could offset declines in traditional categories.Demand for Cheaper, Easily Available E-Books - Rising demand for electronic books that are cheaper to obtain andeasier to use presents a new challenge to publishers. The explosion in e-readers such as Amazons Kindle deviceindicate solid demand among consumers for new, low-cost content. However, publishers have been slow to meet thatdemand; some claim low e-book prices eat into their margins. Publishers also are concerned over e-book sales ofbacklist titles: authors have argued for higher royalties on backlist titles since they require no further investment togenerate sales.OTHER BUSINESS CHALLENGESIndustry Consolidation - Taking advantage of economies of scale in production and marketing, a handful of largebook publishers have grown rapidly by acquiring smaller publishers. Larger publishers can more easily sell a full line ofbooks to big booksellers like Barnes & Noble, Borders, and Amazon. Smaller publishers have less marketing leverage.Textbook Sales Depend on Government Budgets - Publishers that sell to public school systems and state highereducation institutions depend on state economies and local government budgets. When revenues are squeezed, statesand school boards can delay buying new books or the supplemental materials that are often an important source ofrevenue. Textbooks account for about 25 percent of the book market.Dependence on Large Buyers - Publishers may depend on a few large buyers. Particularly vulnerable are publishersthat compete for contracts in the states that represent about half of the nation’s school population that buy textbooksthrough multi-year contracts statewide. Loss of a state contract can materially affect a publisher.Professional Book Sales Depend on Customer Industries - Publishers of professional books depend on the healthof the industries that their books cover. Sales of business and investing books depend on the level of the stock market.One such publisher, Bloomberg Press, exited the market in 2010.Trends & OpportunitiesBUSINESS TRENDSMore Titles - Although the overall volume of books sold has been relatively flat in recent years, the number of new booktitles published has steadily increased, suggesting that publishers can accept lower volume sales for individual titlesbecause the publishing process has become more cost effective. The number of new traditional titles published in the USincreased more nearly 35 percent between 2002 and 2009; new titles among non-traditional books, including publicdomain reprints, self-publishers, and micro-niche publications, grew more than 180 percent between 2008 and 2009,according to Bowker.Greater Technology Use - Publishers use technology strategically and competitively for information and customerservice, especially in the education market. Book publishers invest in improving and expanding websites, electronicmedia, and Internet use. For example, John Wiley & Sons invests in technology as a strategic differentiator: it offerscorporations and academic institutions multi-site licenses to access content online and from handheld devices and Web-enabled mobile phones.Copyright Piracy - The greater availability of books in electronic format has increased the ease of producing pirated
  6. versions. Unauthorized foreign editions of US works are common. The Association of American Publishers estimates thatUS publishers lose over $600 million a year due to copyright piracy.Competition from Used Books - The Internet provides an easy way for consumers to re-sell used books, competingwith new book sales. On Amazon, for example, used books appear next to the postings of new copies of the same title;eBay is another Internet forum for used book sales. Textbook publishers historically countered the used book threat byupdating content and issuing new versions regularly.INDUSTRY OPPORTUNITIESInternet Availability - Publishers make a large number of books available on the Internet through subscription services;legal, scientific and other technical books are the most popular, with college textbooks a growing market. Unlike e-books,these Internet versions arent meant to be downloaded. John Wiley & Sons online book revenue, coming primarily frominstitutional library customers, grew 44 percent in 2010.Electronic Books - Books that can be downloaded from the Web offer the industry a way to keep content current andavailable, and to contain or decrease costs. The higher education market has proven particularly lucrative for e-booksellers. Professors and students download the e-books to computers, specialized e-book readers, or other handhelddevices. The profit margins arent as high, but printing and distribution costs are eliminated.Custom Publishing - Buying books “by the chapter” occurs in the higher education market, and could expand to othersegments. Professors already customize textbooks by selecting specific chapters, but not whole books, to be madeavailable to students, typically via online channels. The same concept could apply to other types of books; for example,a customer could choose to buy and print relevant chapters of a home improvement book.Executive InsightCHIEF EXECUTIVE OFFICER - CEODiversifying into New Product Lines and ServicesBecause the US book market is mature and relatively flat, many publishers seek to grow domestically and/or abroadthrough acquisitions, mergers, or new businesses. McGraw-Hill works with local partners worldwide. It has acquired TVbroadcast stations in the US, and its Standard & Poors business has expanded into information and media services, andtrade and business magazines.Increasing Digital Content Products and ServicesTo increase revenue beyond hardcopy, publishers are delivering content digitally via hard media and the Internet. Digitalcontent is growing in popularity, but many companies continue to explore strategies to broaden their digital productofferings. Of Scholastic’s fiscal 2010 Book Club revenue, for instance, nearly 70 percent came from products andservices sold or delivered via the Internet.CHIEF FINANCIAL OFFICER - CFOIdentifying and Controlling Project CostsA major challenge in the industry is to increase efficiencies and reduce costs in book development, production, anddelivery. Financial planning systems are increasingly being used by editors to more accurately predict and track the costof book projects. Outsourcing and offshoring printing functions are becoming more common.Developing New Revenue ModelsFinancial analysis teams create business models for additional sources of revenue, such as subscriptions to textbookupdates, and packages that include books and multi-media products and services. Offering a product in multiple mediacan significantly expand its market. Creating ancillary products for textbooks and merchandise for fiction works cansubstantially increase project profitability.CHIEF INFORMATION OFFICER - CIOEnhancing Internet Access to Selected Digital ContentMost publishers are offering Web access to selected products. The Wiley Online Library (formerly Wiley InterScience)
  7. website offers access to journals, major reference works, online books, laboratory manuals, databases, and a suite ofprofessional and management resources. Since its creation 10 years ago, the site has grown to offer access to morethan 4 million articles across 1,500 journals and 8,000 online books and reference works.Supporting Online Book SalesStatistics indicate that the Internet is becoming increasingly dominant in selling books. Nearly 60 percent of US Webusers buy books online, according to the Center for the Digital Future. Online merchant Amazon reported that it hadback-orders for 2.2 million copies of the final Harry Potter book before its publication.HUMAN RESOURCES - HRRetaining Key Editorial PersonnelIn an industry with consolidation at the top and relatively flat revenue, competition for successful editorial executives isfierce. A poor year can trigger reorganization and recruiting from competitors. HR professionals help executivemanagement understand what incentives appeal to high-level editors: top editors often cite broader editorialresponsibility and the opportunity to grow business as compelling reasons to stay in a job or take a new one.Retraining for New Media and TechnologyPublishers have gained much efficiency from computerized editorial and production processes, but upgrades and newapplications require retraining existing staff, and continuous education. Working in digital media often requires trainingfor process and workflow changes. Publishing is now largely computer-based, computer skills are important foremployment, and more training is developed and delivered online.VP SALES/MARKETING - SALESPromoting and “Selling” AuthorsBrand – either the author’s or the publisher’s – is important in selling books. Publishers want an author to have a“platform” (credentials and visibility) through newsletters, conferences, speeches, or previous books. HarperCollinsincludes a speakers bureau, which helps authors reach expanded audiences. O’Reilly and Associates’ authors benefitfrom the publisher’s respected brand for computer books.Finding New Channels Beyond BookstoresGetting shelf space in bookstores is harder, due to tighter inventory control, quicker returns, and chains’ proprietarytitles. Publishers seek to gain new retail and nonprofit channels, especially ones that won’t return books. Examples arespecialty/gift shops and galleries; book fundraisers for nonprofits; and book clubs, book fairs, and direct-to-consumercatalogs.Call Preparation QuestionsEXECUTIVE INSIGHTCEO: What challenges does the company see in expanding into new product lines and services?McGraw-Hill has acquired TV stations, built foreign partnerships, and expanded into information and media services andtrade and business magazines.CEO: What digital or online publishing opportunities is the company exploring?To increase revenue beyond hardcopy, publishers are delivering content digitally via hard media and the Internet.CFO: How successful are the companys efforts to control project costs?Financial planning systems are used to more accurately predict and track project costs. Outsourcing and offshoringprinting functions are more common.CFO: How does the company develop new revenue streams?Financial analysis teams create new revenue-generating business models, such as subscriptions to textbook updatesand merchandise for fiction works.CIO: What benefits has the company gained from offering online access to its products and services?
  8. Most publishers are offering Web access to selected products.CIO: How is the company challenged by selling books and related products and services on the Internet?Nearly 60 percent of US Web users buy books online.HR: What strategies or programs does the company use to retain editorial staff?Competition for successful editorial executives is fierce; HR helps executive management understand what incentivesappeal to high-level editors.HR: How does the company keep staff up-to-date on new publishing technology?Since publishing is now largely computer-based, upgrades and new applications require retraining existing staff andcontinuous education.Sales: How does the company help authors gain exposure?Publishers want an author to have a “platform” (credentials and visibility) through newsletters, conferences, speeches,and/or previous books.Sales: How is the company challenged by selling beyond traditional bookstore channels?New channels include specialty/gift shops and galleries, book fundraisers for nonprofits, book clubs, and direct-to-consumer catalogs.CONVERSATION STARTERSHow have changes in book readership impacted company revenues?Book sales in the US declined nearly 5 percent between 2009 and 2010, with adult fiction, mass market paperbacks, andaudio books among the hardest-hit segments, according to Nielsen BookScan.How are publishers adapting to the rising demand for electronic books?Rising demand for electronic books that are cheaper to obtain and easier to use presents a new challenge to publishers.What strategies has the company used recently to grow revenues?Taking advantage of economies of scale in production and marketing, a handful of large book publishers have grownrapidly by acquiring smaller publishers.What types of books available on the Internet are the most popular with the companys customers?Publishers make a large number of books available on the Internet through subscription services; legal, scientific andother technical books are the most popular, with college textbooks a growing market.What advantages does the company see in offering downloadable products from the Internet?Books that can be downloaded from the Web offer the industry a way to keep content current and available, and tocontain or decrease costs.Has the company considered selling books "by the chapter" that can be downloaded from the Internet?Buying books “by the chapter” occurs in the higher education market, and could expand to other segments.QUARTERLY INDUSTRY UPDATETo what extent has the company converted its catalogs and other marketing materials to digital formats?Random House plans to drop its print catalog, joining the growing group of publishers using digital catalogs exclusively.OPERATIONS, PRODUCTS, AND FACILITIESWhat types of books does the company publish?Publishers produce books for general reading (adult "trade" books); text, professional, technical, childrens, andreference books.How many different book imprints (brands) does the company own?Large publishers may own dozens of imprints.How many new books does the company publish in a typical year?In the US each year, around 290,000 new titles are published.How many titles does the company have in print?Some titles may sell well for many years.
  9. What products other than books does the company produce?Publishers also produce maps, pamphlets, and calendars. Education publishers produce tests and learning products.To what extent does the company outsource printing and manufacturing?Most publishers use independent printers and binders.CUSTOMERS, MARKETING, PRICING, COMPETITIONWhat are the company’s largest markets?Textbooks and adult trade books each account for about 25 percent of the market, professional books 20 percent,childrens books 10 percent, and reference books 5 percent.What are the company’s major distribution channels?Publishers use multiple channels, including wholesalers, independent book stores, book chains, mass merchants,supermarkets, toy stores, and direct sales to school districts.What are the company’s most profitable book imprints (brands)? Titles?One top-selling consumer book (“title”) can produce large profits.How does the company differentiate itself from its competitors?A book publisher may focus on a specific market or subject matter.What percentage of company revenue comes from new titles? What percentage from backlist (previouslyreleased) titles?Keeping inventory of backlist titles can be expensive, so companies tend to produce multiple printings to meet demand.To what extent does the company have statewide textbook contracts? If so, when do they expire?Many states have statewide contracts that can span a five to seven-year adoption cycle.What is the range of suggested retail prices for the companys books?Trade hardcover books generally sell for just under $30, paperbacks for $15, mass market books for less than $10.REGULATIONS, R&D, IMPORTS AND EXPORTSWhat products is the company developing?Some publishers are producing e-books, on-demand books printed onsite at a retail establishment, or custom-publishingwhereby a customer selects which chapters of a book to buy.To what extent does seasonality affect the company?Cash flow is highly seasonal in the consumer and education segments due to buying patterns.What impact do returned books have on the company?The high rate of returned books is an industrywide problem, reaching up to 40 percent in some categories.What are the companys criteria for producing foreign editions?Many publishers produce foreign editions of successful US books, either in English or in foreign languages.ORGANIZATION AND MANAGEMENTHow does the company hire, train, and retain workers?Editors usually need expertise in a particular field.Does the company use mainly a salaried or commissioned sales force?Salaries are more common in the education market, commissions in the trade market.If the company owns several imprints, how many have a separate editorial staff?Publishers have pruned staff in recent years to become more efficient.How many outside authors and illustrators does the company have contracts with?Because producing a book may take several years, publishers need many authors to have a steady supply of newbooks.FINANCIAL ANALYSISHow uneven is the companys cash flow?
  10. Sales of trade and education books are highly seasonal.How much does inventory change throughout the year? What are the peak inventory months?Inventory varies depending on the segment of the market the publisher sells to.How has the company’s pricing changed over the past few years?Prices for trade books have been flat, but prices in some other segments have risen steadily in recent years.How large a reserve does the company keep in anticipation of returned books?Reserves may equal 3 percent of sales. In some segments, returns can be much higher.What is the average collection period on receivables?Receivables can be fairly high, while inventory and warehousing operations are capital-intensive.How much does the company spend annually to upgrade its computer systems?Computers are used extensively in publishing, from composition and editing to printing and inventory management.BUSINESS AND TECHNOLOGY STRATEGIESIn which specific industry segments does the company foresee growth?The education segment is expected to grow rapidly in some states.What are the company’s growth strategies?The industry is mature, with relatively flat revenue. Publishers have grown mainly through acquisitions.How much demand does the company expect for electronic versions of books?E-book sales have grown significantly in recent years.How has the company utilized websites to sell directly to the public?John Wiley & Sons online book revenue, coming primarily from institutional library customers, grew 44 percent in 2010.Financial InformationCOMPANY BENCHMARK INFORMATIONNAICS: 51113 Data Period Last Update 2010 Small Company Data Sales < $1 Million Table Data Format Mean All Small Company Company Count 5484 4863 Income Statement Net Sales 100% 100% Gross Margin 56.7% 54.5% Officer Compensation 2.9% 3.4% Advertising & Sales 3.0% 2.9% Other Operating Expenses 46.6% 43.7% Operating Expenses 52.4% 50.0% Operating Income 4.3% 4.5% Net Income 2.0% 2.2%
  11. Balance Sheet Cash 6.6% 6.8% Accounts Receivable 19.7% 19.9% Inventory 15.9% 17.0% Total Current Assets 54.8% 56.9% Property, Plant & Equipment 4.4% 4.8% Other Non-Current Assets 40.8% 38.3% Total Assets 100.0% 100.0% Accounts Payable 10.4% 11.0% Total Current Liabilities 29.4% 32.4% Total Long Term Liabilities 25.9% 31.7% Net Worth 44.7% 36.0% Financial Ratios (Click on any ratio for comprehensive definitions) Quick Ratio 0.94 0.88 Current Ratio 1.86 1.76 Current Liabilities to Net Worth 65.8% 90.0% Current Liabilities to Inventory x1.85 x1.90 Total Debt to Net Worth x1.24 x1.78 Fixed Assets to Net Worth x0.10 x0.13 Days Accounts Receivable 66 67 Inventory Turnover x3.00 x2.92 Total Assets to Sales 93.1% 93.7% Working Capital to Sales 23.7% 23.0% Accounts Payable to Sales 9.6% 10.2% Pre-Tax Return on Sales 3.3% 3.6% Pre-Tax Return on Assets 3.5% 3.8% Pre-Tax Return on Net Worth 7.9% 10.6% Interest Coverage x2.13 x2.30 EBITDA to Sales 7.3% 7.6% Capital Expenditures to Sales 3.6% 3.8%Financial industry data provided by MicroBilt Corporation - Use our Integra Financial Benchmarking Data for detailed Business Valuation and analysis datafrom over 900 industries (SIC & NAICS) and 13 sales size ranges. 2010 data and historical data from 1998-2009 available by subscription or single reportpurchase at www.microbilt.com/firstresearch.ECONOMIC STATISTICS AND INFORMATIONChange in Producer Prices - Bureau of Labor Statistics
  12. VALUATION MULTIPLES Book Publishers Acquisition multiples below are calculated using at least 3 private, middle- market (valued at less than $1 billion) industry asset transactions completed between 2/1998 and 6/2009. Data updated every six months. Last updated: October 2011. Valuation MVIC/Net MVIC/Gross MVIC/EBIT MVIC/EBITDA Multiple Sales Profit Median Value 0.5 2.5 N/A N/A MVIC (Market Value of Invested Capital) = Also known as the selling price, the MVIC is the total consideration paid to the seller and includes any cash, notes and/or securities that were used as a form of payment plus any interest- bearing liabilities assumed by the buyer. Net Sales = Annual Gross Sales, net of returns and discounts allowed, if any. Gross Profit = Net Sales - Cost of Goods Sold EBIT = Operating Profit EBITDA = Operating Profit + Noncash Charges SOURCE: Pratts Stats™ (Portland, OR: Business Valuation Resources, LLC) To purchase more detailed information, please either visit www.BVMarketData.com or call 888-287-8258.Industry ForecastThe output of US book publishers is forecast to grow at an annual compounded rate of 3 percent between 2011 and2016. Data Published: October 2011Book Publishing Growth Evens
  13. First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic ResearchFund, Inc. (IERF) in College Park, MD. INFORUMs "interindustry-macro" approach to modeling the economy capturesthe links between industries and the aggregate economy.First Research Industry Growth RatingThe First Research Industry Growth Rating reflects the expected industry growth relative to other industries, based onINFORUMs forecasted average annual growth for the combined years of 2010 and 2011. INFORUM forecasts wereprepared by the Interindustry Economic Research Fund, Inc. Demand: Driven by demographics Need product development and marketing skills Risk: Low growth in some categoriesFirst Research Industry DriversChanges in the economic environment that may positively or negatively affect industry growth.Data provided by First Research analysts and reviewed annually. Consumer Spending: Change in overall level of consumer spending on goods and services Technology Innovation: Advances in science and technology, including information technologyWeb Links & AcronymsINDUSTRY WEBSITESAmerican Booksellers AssociationIndustry news.Association of American PublishersPosts weekly news.Association of American University PressesInformation about electronic publishing initiatives.Association of Canadian PublishersIndustry news.BookWireAnnual industry volume and price statistics.
  14. Publishers Weekly Industry news. The American Booksellers Foundation for Free Expression Posts news about efforts for First Amendment protection. GLOSSARY OF ACRONYMS AAP - Association of American Publishers BISG - Book Industry Study Group NEA - National Endowment for the Arts NRF - National Retail Federation“The purpose of the Profiles is for sales call preparation and general business and industry analysis. Profiles provide general background information only and arenot intended to furnish detailed information about the creditworthiness of any individual borrower or purchaser or to be used for making any loans, leases orextension of credit to any individual borrower or purchaser. First Research, Inc. is not an investment advisor, nor is it in the business of advising others as to thevalue of securities or the advisability of investing in securities, and the Profiles are not intended to be relied upon or used for investment purposes.”Copyright 2011, Hoovers, Inc., All Rights Reserved. This information cannot be copied, sold or distributed in any manner without the written permission of FirstResearch, Inc. www.firstresearch.com

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