10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, or

For the fiscal year ended December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-36166

Houghton Mifflin Harcourt Company

(Exact name of registrant as specified in its charter)

Delaware	27-1566372
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

125 High Street

Boston, MA 02110

(617) 351-5000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.01 par value	HMHC	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
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.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2020, was approximately $161.3 million.

The number of shares of common stock, par value $0.01 per share, outstanding as of February 1, 2021 was 126,121,144.

Documents incorporated by reference and made a part of this Form 10-K:

The information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated herein by reference from the Registrant’s Definitive Proxy Statement for its 2020 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2020.

Table of Contents

		Page(s)
Special Note Regarding Forward-Looking Statements		3
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	26
Item 2.	Properties	27
Item 3.	Legal Proceedings	27
Item 4.	Mine Safety Disclosures	27
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
Item 6.	Selected Financial Data	30
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 8.	Financial Statements and Supplementary Data	56
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	116
Item 9A.	Controls and Procedures	116
Item 9B.	Other Information	117
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	117
Item 11.	Executive Compensation	117
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	117
Item 13.	Certain Relationships and Related Transactions, and Director Independence	117
Item 14.	Principal Accounting Fees and Services	117
PART IV
Item 15.	Exhibits, Financial Statement Schedules	118
Item 16.	Form 10-K Summary	123
SIGNATURES		124

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The statements contained herein include forward-looking statements, which involve risks and uncertainties. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “projects,” “anticipates,” “expects,” “could,” “intends,” “may,” “will,” “should,” “forecast,” “intend,” “plan,” “potential,” “project,” “target” or, in each case, their negative, or other variations or comparable terminology. Forward-looking statements include all statements that are not statements of historical facts. They include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations; financial condition; liquidity; prospects, growth and strategies; the expected impact of the COVID-19 pandemic; our competitive strengths; the industry in which we operate; the impact of new accounting guidance and tax laws; expenses; effective tax rates; future liabilities; the outcome and impact of pending or threatened litigation; decisions of our customers; education expenditures; population growth; state curriculum adoptions and purchasing cycles; the impact of dispositions, acquisitions and other investments; the timing, structure and expected impact of our operational efficiency and cost-reduction initiatives and the estimated savings and amounts expected to be incurred in connection therewith; and potential business decisions. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. We caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are based upon information available to us on the date of this report.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that actual results may differ materially from those made in or suggested by the forward-looking statements contained herein. In addition, even if actual results are consistent with the forward-looking statements contained herein, those results or developments may not be indicative of results or developments in subsequent periods.

Important factors that could cause actual results to vary materially from expectations include, but are not limited to, those described in the “Risk Factors” section of this Annual Report on Form 10-K (this “Annual Report”).

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, except as required by law. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained herein.

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Item 1. Business

As used in this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “HMH” and the “Company” refer to Houghton Mifflin Harcourt Company, formerly known as HMH Holdings (Delaware), Inc., and its consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires.

Our Company

We are a learning technology company committed to delivering connected solutions that engage learners, empower educators and improve student outcomes. As a leading provider of Elementary and Secondary School (K–12) core curriculum, supplemental and intervention solutions, and professional learning services, we partner with educators and school districts to uncover solutions that unlock students’ potential and extend teachers’ capabilities. We estimate that we serve more than 50 million students and three million educators in 150 countries, while our award-winning children’s books, novels, non-fiction, and reference titles are enjoyed by readers throughout the world.

We are organized along two business segments: Education and HMH Books & Media (formerly referred to as Trade Publishing). Within our Education division, we focus on the kindergarten through 12th grade (“K-12”) market and, in the United States, we are a market leader. We specialize in comprehensive core curriculum, supplemental and intervention solutions, and we provide ongoing support in professional learning and coaching for educators and administrators. Our offerings are rooted in learning science, and we work with research partners, universities and third-party organizations as we design, build, implement and iterate our offerings to maximize their effectiveness. We are purposeful about innovation, leveraging technology to create engaging and immersive experiences designed to deepen learning experiences for students and to extend teachers’ capabilities so that they can focus on making meaningful connections with their students.

Our diverse portfolio enables us to help ensure that every student and teacher has the tools needed for success. We are able to build deep partnerships with school districts and leverage the scope of our offerings to provide holistic solutions at scale with the support of our far-reaching sales force and talented field-based specialists and consultants. We provide print, digital, and blended print/digital solutions that are tailored to a district’s needs, goals and technological readiness.

For nearly two centuries, our HMH Books & Media segment has brought renowned and awarded children’s, fiction, non-fiction, culinary and reference titles to readers throughout the world. Our distinguished author list includes ten Nobel Prize winners, forty-nine Pulitzer Prize winners, and twenty-six National Book Award winners. We are home to popular characters and titles such as Curious George, Carmen Sandiego, The Lord of the Rings, The Whole 30, The Best American Series, the Peterson Field Guides, CliffsNotes, and The Polar Express, and published distinguished authors such as Tim O’Brien, Temple Grandin, Tim Ferriss, Kwame Alexander, Lois Lowry, and Chris Van Allsburg. In November 2020, we announced that we were beginning to explore a potential sale of the HMH Books & Media segment. Such a sale would be intended to build on the Company’s other strategic restructuring efforts and further align its cost structure to its digital-first strategy.

Market Overview

We operate predominantly within the U.S. K-12 education market, which represents over $740 billion of total spending annually. Specifically, we focus on the U.S. market for K-12 instructional materials and services, which we estimate to be approximately $11.0 billion in size.

The U.S. Education market comprises approximately 13,000 K-12 public school districts, 130,000 public and private schools, over 3.7 million teachers and 56.4 million total student enrollment across public, private and charter schools. From Fall 2020 to Fall 2029, total elementary and secondary school enrollment, an important driver of long-term growth in the K-12 Education market, is projected to increase by 0.8% to 56.8 million students, according to the National Center for Education Statistics.

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The primary sources of funding for public schools in the U.S. are state and local tax collections, with Federal funding accounting for approximately 8% of public education spending nationally. Consequently, general or localized economic conditions as well as legislative and political decisions which affect the ability of state and school districts to raise revenue through tax collections can have a significant impact on spending and growth in the K-12 Education market. The COVID-19 pandemic has had an adverse impact on tax revenues and other financial resources in some states, which could adversely affect state and local spending on public schools, although it is expected that federal pandemic relief funding will help to mitigate those impacts. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 collectively provide $112.7 billion one-time emergency support for education through an Education Stabilization Fund, including $67.8 billion exclusively designated for public K-12 education. Public K-12 education has been, and remains, a high priority for political leaders, historically accounting for more than one-fifth of all state and local government spending.

Education policy and curriculum choices have traditionally been local prerogatives in the U.S., but Federal law and policy also play an important role. The Elementary and Secondary Education Act (“ESEA”), reauthorized in 2015 by the Every Student Succeeds Act (“ESSA”), requires that states, as a condition to receiving Federal education funds, adopt challenging academic content standards, administer annual student tests aligned to those standards, develop systems of accountability tied to specific goals for student achievement, and take measures to identify and support low performing schools. ESSA gives states more flexibility than they had under prior law, but still requires standards-based, largely assessment-driven accountability with a focus on the achievement of students in all demographic subgroups.

Title I, the largest program within ESEA, and other ESEA programs provide targeted funding for specific activities, such as early childhood education, school improvement, dropout prevention, and before- and after-school programs. The Individuals with Disabilities Education Act (“IDEA”) governs how states and public agencies provide early intervention, special education and related services to children with disabilities. Generally, school districts are permitted to spend ESEA funds on instructional materials, including core and supplemental materials, computer software, digital media, digital courseware, and online services.

Academic content standards, which are grade-level expectations for student learning, are established at the state level. States generally review and revise standards in each of the various subject areas every six to eight years, and the revision or adoption of new standards typically gives rise to the need for new instructional materials and services aligned to the new or revised standards. Content standards in English language arts and reading in many states are modeled to varying degrees after Common Core State Standards (“CCSS”) and in science after the Next Generation Science Standards (“NGSS”). Both the CCSS and NGSS are products of state-led collaborations. The promulgation of these model standards has led to greater consistency among states’ content standards but has not completely eliminated differences or the need for customized state-specific instructional materials.

Internationally, we export and sell K-12 English language education products to premium private schools that utilize the U.S. curriculum, who are located primarily in Asia, the Pacific, the Middle East, Latin America, the Caribbean and Africa. We also participate in the U.S. consumer book publishing market, which is estimated to be approximately $16.0 billion per year according to the Association of American Publishers.

Education net sales and billings are derived from Core Solutions and Extensions. Core Solutions products address the core curriculum market with grade-level, educational standards-aligned materials. Extensions products address the markets for supplemental programs, intervention programs, and professional learning. HMH Books & Media products primarily address the consumer book publishing market.

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Market Segments

Core Curriculum

Our core curriculum offerings cover state-level educational standards within a subject and include a comprehensive offering of teacher and student materials necessary to conduct grade-level instruction throughout the entire school year. Products and services include students’ print and digital resources and a variety of supporting materials such as teacher’s editions, formative assessments, whole group instruction materials, practice aids and ancillary materials.

Core curriculum programs traditionally have been the primary resource for classroom instruction in most K-12 academic subjects, and as a result, enrollment trends are a major driver of industry growth. Although economic cycles may affect short-term buying patterns, school enrollments, a driver of growth in the educational content industry, are highly predictable and are expected to trend upward over the longer term.

Demand for core curriculum programs is also affected by changes in state curriculum standards, which drive instruction, assessment, and accountability in each state. A significant change in state curriculum standards requires that assessments, teacher training programs, and instructional materials be revised or replaced to align to the new standards, which historically has driven demand for new comprehensive curriculum programs.

In the U.S., core curriculum is typically selected and purchased at the school district level and, in some cases, at the individual school level. In 19 states, before districts make their selections, programs are first evaluated at the state level for alignment to state academic standards and other criteria. These states are commonly referred to as “adoption states,” while states that do not have a state level review process are called “open states” or “open territory states.” The National Center for Education Statistics estimated the student population in adoption states represented approximately half of the U.S. public school elementary and secondary school-age population in 2020. In some adoption states, districts are required to select materials from the state-adopted list; in other adoption states, the state list serves as a recommendation, and districts are free to purchase and use any materials they choose, whether or not adopted by the state. Adoption states typically review materials in the various subject areas on a six- to eight-year cycle. School districts in those states tend to follow the state review cycle and replace core programs in the year or years immediately following state adoption. In open territory states, each individual school or school district evaluates and purchases materials independently, typically according to a five- to ten-year cycle. As a result, in individual adoption states, purchases of core instructional materials in a particular subject area tend to be clustered in a window of one to three years, while in individual open territory states they may occur over several years.

Supplemental

Supplemental resources encompass a wide variety of targeted solutions that enrich learning and support student achievement beyond core curriculum. Supplemental resources can be print and/or digital, and can include software, workbooks, test-prep materials, formative assessment, games, and apps. Newer technologies, such as artificial intelligence and machine learning, combined with more sophisticated algorithms are also driving the rise in supplemental computer-adaptive practice solutions that can both support teachers who are often time and bandwidth constrained, as well as improve personalization of learning for students.

Many teachers augment their core curriculum with supplemental resources for additional practice and personalized instruction around particular areas of need, such as Math, Reading, Writing, or Vocabulary. Supplemental materials are purchased by districts, schools, or individual teachers. These purchases are typically not tied to adoption schedules and leverage funding from local, state and federal sources. We estimate this market to be approximately $2.0 billion per year.

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Intervention

Intervention solutions are generally purchased by individual schools or districts. Demand for intervention materials is significant and growing in the United States. We estimate this market to be $1.5 billion per year. In the latest National Assessment of Educational Progress assessments conducted in 2019, more than 60 percent of public school students tested below proficiency in most grade levels in both literacy and mathematics. These students are strong candidates for intervention programs that are focused on improving outcomes and ensuring students perform at grade level. As demand for digital content and personalized learning solutions is growing, traditional distinctions between core, supplemental and intervention materials and assessments are blurring.

Intervention products and services are funded through state and local funding as well as Title I and other federal funding allocations pursuant to the ESEA and IDEA. Title I provides funding to schools and school districts with high concentrations of students from low income families and is often used to purchase intervention products and services.

Professional Learning

The professional learning market includes consulting and support services to assist individual schools and school districts in raising student achievement, implementing new programs and technology effectively, developing effective teachers, principals and leaders, as well as school and school-district turnaround and improvement solutions. We believe all districts and schools contract for some level of professional services. These services may include support for up-front training, in-classroom coaching, institutes, author workshops, professional learning communities, leadership development, technical support and maintenance, and program management.

One important source of funding for professional learning in the K-12 market is Title II, Part A of ESEA, Supporting Effective Instruction. Title II, Part A focuses on the role of the profession in improving student achievement and requires that funds be used to support professional development that is sustained, job-embedded, data-driven, and personalized. There are also significant funding opportunities for professional learning as part of state programs, especially in states that have consolidated program funding and want solutions that are evidence-based.

The professional learning market, which is relatively fragmented in the United States, is expected to grow as the transition to digital learning in classrooms increases the need for technology training and implementation support for educators. We currently estimate the professional learning market to be approximately $2.3 billion per year. We believe that the use of interim data, differentiation, teacher content knowledge (in mathematics) and the use of technology in the classroom are the areas in which teachers and leaders are most seeking support. Also, demand for teacher training and professional development opportunities tied to the implementation of new or revised standards at the state level is expected to continue. In addition, the need for new teacher development over the next several years is expected to grow as we continue to see the “greening” of the teaching force, with approximately 340,000 new teachers hired every year and approximately 44% of teachers leaving within their first five years in the profession, a trend that may accelerate as a result of the COVID-19 pandemic.

Consumer Book Publishing

The consumer book publishing market includes children’s, fiction, non-fiction, culinary and reference titles offered to consumers in print hardcover and softcover, ebook and audio formats, as well as multimedia extensions of the titles, content and intellectual property associated with these titles. Our sales in this market consist of frontlist titles (newly introduced titles, in their first year of publication) and backlist titles (current and updated copyright editions of titles sold after their first year of publication). In addition to new frontlist sales, market growth is driven by extended branding (e.g., movie tie-ins and anniversary releases of backlist titles) and new intellectual property creation (e.g., extension of characters and franchises into additional formats).

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Between 2018 and 2019, the consumer book publishing market grew 0.4% to $16.2 billion, according to the Association of American Publishers (the “AAP”). Since 2015, the same market has increased by 2.6%, or approximately $410 million, according to the AAP.

Print remains the primary format in which consumer books are produced and distributed and accounts for 74.7% of revenue. Hardback units account for 36.0% of total consumer book revenue despite representing only 24.2% of total consumer book units sold in 2019, per the AAP.

Digital formats show mixed results as downloaded audio sales grew 15.9% from 2018 to 2019 and 143.8% from 2015 to 2019; however, ebook revenue fell 4.9% from 2018 to 2019 and declined 30.8% from 2015 to 2019, according to the AAP.  

Our Products and Services

We are organized in two business segments: Education and HMH Books & Media. Our primary segment measures are net sales and Adjusted EBITDA. The Education segment is our largest business, representing approximately 81%, 87% and 85% of our total net sales for the years ended December 31, 2020, 2019 and 2018, respectively.

Education

Our Education segment provides connected solutions that engage learners, empower educators and improve student outcomes. The principal customers for our Education products are K-12 school districts, which purchase core curriculum, supplemental and intervention solutions and professional learning services.

The Education segment net sales and Adjusted EBITDA were $839.6 million and $145.9 million, $1,210.6 million and $196.9 million, and $1,122.7 million and $210.6 million for the years ended December 31, 2020, 2019 and 2018, respectively, with our 2020 financial results being adversely impacted by the COVID-19 pandemic. Our Education offerings consist of the following:

• Core Solutions: Our core curriculum offerings include education programs in disciplines including Reading, Literature, Math, Science and Social Studies that serve as primary sources of classroom instruction and represented 50% and 54% of our Education segment billings for the years ended December 31, 2020 and 2019, respectively.

• Our core programs are developed based on extensive hours of research, including educator input. Educators are the centerpiece of the classroom, but count on comprehensive core curriculum to be the backbone of their instruction. Our core solutions are created to provide educators with the resources needed to align with state standards and support students in their mastery of grade-level subject matter.

• Between 2016-2018, we launched our next generation of core programs for each of the major subject areas: English Language Arts (Reading and Literature), Mathematics, Science and Social Studies. Our Into Reading and Into Literature national programs, our Into Math national offerings for grades 3-5 and 6-8 along with the K-8 Florida version all received top “all green” scores from EdReports.org.  Science Dimensions, which was co-authored by Dr. Cary Sneider, a writer of the Next Generation Science Standards, was approved by the State Board of Education of California in 2018. HMH Social Studies, our next generation social studies program for grades 6-12, incorporates innovative technology like Google Expeditions to offer curriculum-aligned virtual reality field trips.

• Extensions: Our extensions offerings include supplemental solutions, intervention solutions, professional services, and our Heinemann brand that provides professional resources and educational services for teachers. Our extensions offerings collectively accounted for 50% and 46% of our Education segment billings for the years ended December 31, 2020 and 2019, respectively.

• The extensions category represents a notable growth opportunity. We estimate this category accounts for about $6 billion in market opportunity.

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• Through our Heinemann brand, we provide professional books, supplemental and intervention curricular resources, and professional services for teachers. Heinemann is a leading professional publisher for educators, and features well-known, respected authors and thought leaders such as Irene Fountas, Gay Su Pinnell, Lucy Calkins, and Jennifer Serravallo, who support the practice of teachers through books, videos, workshops, online courses, and curricular resources.

• Our intervention solutions also include: READ 180 Universal, one of a select number of programs that the independent, government-run What Works Clearing House has awarded its highest effectiveness ratings for improving comprehension and literacy achievement; MATH 180, a math intervention program focusing on deep understanding and mastery of essential skills and concepts enabling access to algebra and advanced mathematics; System 44, a stand-alone program with a holistic, blended learning model that delivers just-in-time intensive intervention for the most challenged readers in grades 3-12; and iRead, an adaptive technology-based solution focused on helping early learners in grades K-2 become more proficient readers using personalized learning. These solutions are called upon to help students with unique needs, such as the growing population of English language learners.

• Our professional services offerings bring together world-renowned authors and education experts to work directly with K-12 educators and administrators to build instructional excellence, cultivate leadership and provide school districts with the comprehensive support they need to raise student achievement. These offerings include ongoing curriculum support and expertise in professional development, coaching, and strategic consulting from trusted names like the International Center for Leadership in Education, Literacy Solutions, and Math Solutions.

• Our supplemental solutions include award-winning solutions like Waggle (which won the CODiE award for “Best Learning Capacity-Building Solution”), as well as artificial intelligence and state-of-the-art speech recognition-driven Amira Assessment and writing-enhancing online tool Writable that we offer through strategic partnerships. We also offer HMH Classroom Libraries, which provide individually curated collections of “just-right” books to strengthen literacy development and foster independent reading.

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By leveraging our leading position in the U.S. instructional materials market, we aim to engage our customers with solutions addressing the variety of instructional needs across the educational achievement spectrum. We believe that by integrating our solutions on a single platform, which uses a common student dataset, and by developing ongoing connections with the teachers who use our solutions, we will be well positioned to increase and sustain market share and grow our Education segment revenues.

HMH Books & Media

Founded in 1832, HMH Books & Media develops, markets and sells consumer books in print and digital formats and licenses book rights to other publishers and electronic businesses in the United States and abroad. Our principal distribution channels for this segment are retail stores (both physical and online) and wholesalers. Reference materials are also sold to schools, colleges, libraries, office supply distributors and other businesses.

HMH Books & Media offers an extensive library of general interest, young readers and reference works that include well-known characters and brands. Our award-winning general interest titles include literary fiction, culinary, and non-fiction in hardcover, ebook and paperback formats, including the Mariner Books paperback line. Among the general interest properties are the popular J.R.R. Tolkien titles, the prolific The Best American Series and major cookbook brands such as Betty Crocker and Better Homes and Gardens in addition to recent best sellers including the How to Cook Everything series and The Whole30.

In young readers publishing, our list addresses a broad age group and includes recognized characters and titles such as Curious George and Martha Speaks, Five Little Monkeys, Gossie & Friends, Polar Express, Little Blue Truck, and many more. We also publish novels for young adults, a growing genre, including titles from Lois Lowry, author of The Giver, and Kwame Alexander. Our HMH Books & Media business collaborated on the launch of a new animated series Carmen Sandiego on Netflix as part of our strategy to expand our content across media platforms. In February 2019, we also launched HMH Audio with the goal of capitalizing on the growth of downloaded audiobooks; in Fall 2019, we released new audiobook editions of many of our adult and young reader frontlist books, as well as select titles from our substantial backlist.

For the years ended December 31, 2020, 2019 and 2018, HMH Books & Media net sales and Adjusted EBITDA were approximately $191.7 million and $26.6 million, $180.0 million and $14.9 million, and $199.7 million and $21.9 million, respectively.

In November 2020, we announced that we were exploring a potential sale of the HMH Books & Media segment. Such a sale would be intended to build on the Company’s other strategic restructuring efforts and further align its cost structure to its digital-first strategy.

Seasonality

Approximately 81% of our net sales for the year ended December 31, 2020 were derived from our Education segment, which is a markedly seasonal business. Schools conduct the majority of their purchases in the second and third quarters of the calendar year in preparation for the beginning of the school year. Thus, over the latest three completed fiscal years, approximately 66% of our consolidated net sales were realized in the second and third quarters. Sales of K-12 instructional materials are also cyclical, with some years offering more sales opportunities than others based on the state adoptions calendar. The amount of funding available at the state level for educational materials also has a significant effect on year-to-year net sales. Although the loss of a single customer would not have a material adverse effect on our business, schedules of school adoptions and market acceptance of our products can materially affect year-to-year net sales performance.

Competition

We sell our products in highly competitive markets. In these markets, product quality, innovation and customer service are major differentiating factors between companies. Other factors affecting competition include: (i) competitive pricing, sampling and gratis costs; (ii) digitization and innovative delivery; and (iii) educational effectiveness of the program. In addition to national curriculum publishers, we also compete with a variety of specialized or regional publishers that focus on select disciplines and/or geographic regions in the K-12 market. There are also multiple competitors in the HMH Books & Media, supplemental and assessment markets offering

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content that school districts increasingly are using as part of their core classroom instructional materials. In addition, school districts in many states are able to spend educational funds on “instructional materials” that include core and supplemental materials, computer software, digital media, digital courseware, and online services. Our larger competitors in the educational market include Savvas Learning Co. (formerly Pearson Education, Inc.), McGraw Hill Education, Stride Inc. (formerly K-12 Inc.), Cengage Learning, Inc., Scholastic Corporation, John Wiley & Sons, Inc., Curriculum Associates, LLC, Benchmark Education, LLC, Accelerate Learning, Inc., and Amplify Education, Inc. Also competing in our market as a substitute are open educational resources. These resources are free, digital solutions that range from supplemental resources to full Core Solutions programs.

Printing and binding; raw materials

We outsource the printing and binding of our products, with approximately 49% of our printing requirements handled by a small group of suppliers. We have procurement agreements that provide volume and scheduling flexibility and price predictability. We have a longstanding relationship with these parties. Approximately 22% of our printed materials (consisting primarily of teacher’s editions and other ancillary components) are printed outside of the U.S. and approximately 78% of our printed materials (including most student editions) are printed within the U.S. Paper is one of our principal raw materials. We purchase our paper primarily through one paper merchant and also directly through suppliers for limited product types. We maintain various agreements that protect against supply availability and unbound price increases. We manage our paper supply concentration by having primary and secondary sources and staying ahead of dramatic market changes.

Distribution

We operate three distribution facilities from which we coordinate our own distribution process: one each in Indianapolis, Indiana; Geneva, Illinois; and Troy, Missouri. We also utilize select suppliers to assist us with coordinating the distribution process for a limited number of product types. Additionally, some states require us to use in-state textbook depositories for educational materials sold in that particular state. We utilize various delivery firms, such as United Parcel Service Inc., FedEx Freight, etc., to facilitate the principally ground transportation of products.

Human Capital

As of December 31, 2020, we had approximately 2,600 full-time, part-time and temporary employees, none of whom were covered by collective bargaining agreements. We consider our relationship with our employees generally to be good.

Health and Safety: The health and safety of our employees is one of our highest priorities, and this is consistent with our operating philosophy. Following Occupational Safety and Health Administration best practices in our distribution centers, we measure, document and post incident rates for safety transparency; host local employee safety committees at each distribution center; and hold quarterly distribution center safety committee meetings for cross-location collaboration.  In response to the COVID-19 pandemic, we have implemented and continue to implement additional safety measures in all our offices and facilities including: adding work from home flexibility; adjusting attendance policies to encourage those who are sick to stay home; increasing cleaning protocols across all locations; initiating regular communication regarding impacts of the COVID-19 pandemic, including health and safety protocols and procedures; implementing temperature screening of employees at our distribution facilities and offices; establishing new physical distancing procedures for employees who need to be onsite; providing additional personal protective equipment and cleaning supplies; modifying work spaces with plexiglass dividers and touchless faucets; implementing protocols to address actual and suspected COVID-19 cases and potential exposure; prohibiting all domestic and international non-essential travel for all employees; and requiring masks to be worn in all locations where permitted by local law.

Talent and Development: Successful execution of our strategy is dependent on attracting, developing and retaining key employees and members of our management team. The skills, experience and industry knowledge of our employees significantly benefit our operations and performance. We continuously evaluate, modify, and enhance our internal processes and technologies to increase employee engagement, productivity, and efficiency.  In 2020, we provided a company-wide employee engagement survey to all regular employees. We outperformed

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benchmarked peer companies with engagement among our employees in the 86th percentile. Frequent employee pulse surveys were conducted during 2020 in light of the COVID-19 pandemic, allowing us to quickly collect and respond to feedback – including with more activities and initiatives to support our employees. We additionally continue to provide all of our employees with a variety of training and development opportunities. All regular employees have access to Knowledge Network, HMH’s online learning management system offering over 6,000 on demand training courses and programs, live webinars and in-person training opportunities. More than 2,900 employees participated in training programs in 2020, including Unconscious Bias, Cybersecurity, Sales, Product and Compliance Training as well as Leadership and Management Development Workshops, with more than 15,000 corporate training hours logged.

Diversity and Inclusion: We embrace the diversity of our employees, customers and stakeholders, including their unique backgrounds, experiences, thoughts and talents. Everyone is valued and appreciated for their distinct contributions to the growth and sustainability of our business. We strive to cultivate a culture and vision that supports and enhances our ability to recruit, develop and retain diverse talent at every level. We take direct actions to attract, hire, and retain more diverse talent, nurture an inclusive workplace, and create opportunities for meaningful conversations about diversity. We aim to increase the diversity of our employee base by growing our diverse talent pipeline, including partnerships with organizations like Resilient Coders, Girls Write Now, Hacker X, and Editors of Color. We have a goal to build a highly engaged team by increasing retention year over year. As of December 31, 2020, our domestic workforce was approximately 67% female and approximately 77% white, approximately 9% Hispanic or Latino, approximately 8% Black or African American, approximately 5% Asian American, and approximately 1% two or more races or other. Additionally, as of December 31, 2020, approximately 38% of executive management roles were held by women and our executive management team was approximately 77% white, approximately 15% Black or African American, and approximately 8% Hispanic or Latino.

As a learning technology company, we are committed to ongoing opportunities for education and growth. This includes formal and informal opportunities for meaningful conversations—from roundtable discussions to company-wide unconscious bias training. Learning and unlearning are lifelong practices that we must actively foster—in our schools, communities, and workplaces. Our cross-functional DEI (“Diversity, Equity and Inclusion”) Council’s work centers around four pillars—leadership, talent, culture, and business—and promotes social justice through Employee Resource Groups (“ERGs”), DEI trainings, and discussions on how to build an anti-racist community. We have ERGs to support Black and African American, Latinx and Hispanic, LGBTQ+, Asian, disabled and neurodiverse, and female employees, in addition to ERGs focused on mental health and wellness. The ERGs hosted virtual activities throughout 2020.

 Intellectual property

Our principal intellectual property assets consist of our trademarks and copyrights in our content. Substantially all of our publications are protected by copyright, whether registered or unregistered, either in our name as the author of a work made for hire or the assignee of copyright, or in the name of an author who has licensed us to publish the work. Ownership of such copyrights secures the exclusive right to publish the work in the United States and in many countries abroad for specified periods: in the United States, in most cases, either 95 years from publication or for the author’s life plus 70 years, but in any event a minimum of 28 years for works published prior to 1978 and 35 years for works published thereafter. In most cases, the authors who retain ownership of their copyright have licensed to us exclusive rights for the full term of copyright. Under U.S. copyright law, for licenses granted by an author during or after 1978, such exclusive licenses are subject to termination by the author or certain of the author’s heirs for a five year period beginning at the end of 35 years after the date of publication of the work or 40 years after the date of the license grant, whichever term ends earlier.

We do not own any material patents, franchises or concessions, but we have registered certain trademarks and service marks in connection with our publishing businesses. We believe we have taken, and take in the ordinary course of business, appropriate available legal steps to reasonably protect our intellectual property in all material jurisdictions.

Environmental matters

We generally contract with independent printers and binders for their services, and our operations are generally not otherwise affected by environmental laws and regulations. However, as the owner and lessee of real

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property, we are subject to environmental laws and regulations, including those relating to the discharge of hazardous materials into the environment, the remediation of contaminated sites and the handling and disposal of wastes. It is possible that we could face liability, regardless of fault, and can be held jointly or severally liable, if contamination were to be discovered on the properties that we own or lease or on properties that we have formerly owned or leased. We are currently unaware of any material environmental liabilities or other material environmental issues relating to our properties or operations and anticipate no material expenditures for compliance with environmental laws or regulations.

Environmental, Social and Governance (ESG)

As a corporate citizen, we accept and promote a community responsibility to minimize our impact on the environment to ensure that we will be able to serve teachers, students and all readers for years to come. As such, we seek to make environmentally responsible choices in our business practices. We set objectives for continual improvement of our environmental and sustainability management procedures. Looking ahead, we are working to expand our company-wide sustainability efforts, setting additional goals and measuring progress in other areas material to our business.

Responsible Paper Usage

One of our on-going sustainability focus areas is our approach to how we source, use and dispose of paper related to our products. In 2019, we strengthened and updated our Paper Sourcing and Usage Policy that reflects our continuing commitments to our environment and surroundings. Key 2020 progress highlights were: 99% of HMH purchased paper for education products was manufactured with no less than 10% recycled fiber; 87% of paper we procured domestically for HMH Books & Media segment products was Forest Stewardship Council (FSC)-certified; and 86% of the paper we procured internationally for HMH Books & Media segment products was FSC-certified.

Transportation

A major aspect of our business involves the transportation of our products, and we work to promote environmentally friendly modes of such transportation. In 2020, HMH estimates that it saved 332,000 pounds of CO2 emissions by managing our carbon footprint by consolidating shipments and shipping directly from vendors to end recipients when possible.

HMH participates in the Environmental Protection Agency’s (“EPA”) SmartWay program.  The EPA’s SmartWay program helps companies advance supply chain sustainability by measuring, benchmarking, and improving freight transportation efficiency. Through this program, HMH partners with the EPA to improve our shipping operations to achieve a more sustainable transportation process that directly facilitates a reduction in our carbon footprint. In 2020, HMH estimates that it saved 130,000 pounds of CO2 emissions by participating in the SmartWay program.

Waste Management and Recycling

Whenever possible, we aim to recycle our excess product and waste generated at our Distribution Centers to avoid sending recyclable products and other waste to landfills.

•Donation is HMH’s preferred method of disposal for excess books and materials (rather than destruction) and HMH donated more than one million books to 228 organizations during 2020.

•96% of the waste generated at HMH’s Distribution Centers is recycled.

In our corporate offices, each employee has a recycling and a garbage bin.  We work to increase employee awareness regarding waste management and recycling with bins and signage.

Energy Use

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We continue to strive to reduce energy consumption at our HMH Warehouses and related offices through:

•Conversion to high efficiency fluorescent bulbs

•Conference rooms with motion sensor lighting

•Energy-efficient HVAC and Heating Units

•LED light fixtures in parking lots

In addition, the building that houses HMH’s Boston Headquarters at 125 High Street has received the LEED® (Leadership in Energy and Environmental Design) Gold Certification for Existing Buildings™, which is the second highest LEED Certification level attainable.  

Further, HMH is listed in Forbes’ “Work from Home 2019: The Top 100 Companies for Remote Jobs” due to our remote location positions across the company that contribute to the reduction in facility energy use and employee transportation fuel consumption.

Human Rights & Conduct

Our values guide every aspect of our work. We believe that respecting and protecting human rights is fundamental to our work as a responsible company. We align with the United Nations Universal Declaration of Human Rights and other international human rights laws and standards and strive to embody these values in our culture. We seek to embed respect for human rights across our business and with vendors and suppliers with whom we do business as set forth in our Supplier Code of Conduct.

Diversity, Equity and Inclusion

At HMH, we believe in social justice. The critical work to improve diversity, equity and inclusion is an inward and outward process—we are constantly seeking new ways to better our own culture as we strive to better our world. We aim to create and cultivate an employee community, company culture and business strategy that reflects the diverse demographics and perspectives of our customers. Further, we embrace the diversity of our employees, customers and stakeholders, including their unique backgrounds, experiences, thoughts and talents. We strive to cultivate a culture and vision that supports and enhances our ability to recruit, develop and retain diverse talent at every level.  We take direct actions to nurture an inclusive workplace.

In 2020, we established a DEI Council made up of a cross-functional, diverse group of employees. The DEI Council supports our company-wide DEI efforts and takes actionable steps toward reaching our DEI goals. The council supports HMH’s Employee Resource Groups, DEI trainings, and discussions on how to build HMH as a model antiracist community. In 2020, we also named a Director of Diversity, Equity and Inclusion to guide our DEI work, engaging critical stakeholders company-wide in our DEI goals and areas of focus. Last year, we provided opportunities for education and growth, including formal and informal opportunities for meaningful conversations — namely, antiracism roundtable discussions and company-wide unconscious bias training for managers.

As a learning technology company focused on empowering students and teachers, it is our responsibility to build content and provide services and resources that foster a holistic understanding of our world and honor the diverse communities we serve. As an organization, we too are always learning and growing, and we will continue to be intentional about improvements we make as part of our continuous evolution. To that end, we established a Content Review Panel – a cross-disciplinary internal advisory board that focuses on equity, inclusion, and diversity in our solutions. The panel reviews our content, striving for equitable, nonbiased, and sensitive treatment and representation for all individuals, communities, and experiences across all HMH programs, services, and platforms. In 2020, the Content Review Panel reviewed over 4,000 pages of content, including a full, proactive review of Math180 and Confronting Racism curriculum.

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As outlined in our Content, Equity, Inclusion and Diversity pledge available on our website at https://www.hmhco.com/diversity-equity-inclusion/our-world, we are committed to producing curriculum in which all students can see themselves and the possibilities for their future success. Our programs are strongest when they resonate with learners, inspire connections and spark dialogue, and honor the unique qualities and experiences of every learner.

In 2020, a cross-functional Supplier Diversity Council was formed to drive HMH’s Supplier Diversity Program forward. The council is focused on fostering meaningful partnerships with diverse suppliers in all areas of HMH’s business – aiming to establish new partnerships with small and diverse suppliers while also deepening relationships with diverse suppliers that HMH already works with. As part of our commitment to supplier diversity, HMH is a member of the National Minority Supplier Development Council and the Women’s Business Enterprise National Council.

COVID-19 Safety Initiatives

At HMH, employee safety and welfare is one of our highest priorities. The COVID-19 pandemic has required additional healthy and safety measures be implemented company-wide. Upon daily arrival at our Distribution Centers, all employees, vendors and visitors are screened by medical personnel for COVID-19 symptoms or exposures.  HMH staff and visitors wear masks to help prevent community spread. Breaks and lunches are staggered to maintain CDC-guided social distancing. Workstations are sanitized daily and shared equipment is sanitized after each use. In the event an employee is sick or under quarantine with COVID-19, they will receive full COVID-pay.  If an employee has been in a facility and has tested positive for COVID-19, the entire facility is closed for 24-48 hours and is sanitized before anyone can return.

Additional information

We are headquartered in Boston, Massachusetts. Our corporate website is www.hmhco.com. We make available our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, as well as other information, free of charge through our corporate website under the “Financial Information” link located at: ir.hmhco.com, as soon as reasonably practicable after being filed with or furnished to the Securities and Exchange Commission (the “SEC”). The information found on our website or any other website we refer to in this Annual Report on Form 10-K is not part of this Annual Report on Form 10-K or any other report we file with or furnish to the SEC.

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Item 1A. Risk Factors

Risks Related to the COVID-19 Pandemic

The ongoing COVID-19 pandemic has had, and are likely to continue to have, material adverse effects on our business, financial position, results of operations and cash flows.

Our business and financial results has been negatively impacted by the current COVID-19 pandemic which has had, and is likely to continue to have, negative impacts on our business, including causing significant volatility in demand for our products, our ability to service our customers, changes in consumer behavior and preference, disruptions in our supply chain operations and warehousing operations, limitations on our employees’ ability to work and travel, adverse impacts on third parties upon which we rely, our ability to satisfy our debt and other obligations, our liquidity, declines in state revenues and related impacts on educational budgets, and significant changes in the economic or political conditions in markets in which we operate, both near-term and potentially long-term. Moreover, significant uncertainties exist regarding the format and other safety procedures schools may follow at various points during the school year. The decisions various schools make with regards to in-person and/or remote learning and whether to deviate from a chosen format due to outbreaks will impact demand for our products and services in ways that we cannot predict and may be challenging for us to respond to. Despite our efforts to manage these risks, their ultimate impact will depend on factors beyond our knowledge or control, including the duration and severity of the current pandemic and actions taken to contain its spread and mitigate its public health effects.

Risks Related to Our Industry and Operations

Our business and results of operations may be adversely affected by changes in federal, state and local education funding, and changes in legislation and public policy.

A majority of our sales are to public school districts in the United States, most of which rely primarily on a combination of local tax revenues and state legislative appropriations for general operating funds and to pay for purchases of goods and services, including instructional materials. Funding for public schools at both the state and local levels can be affected by tax collections, which are typically sensitive to general economic conditions, and by political and policy choices made by state and local governments. A reduction in funding levels, whether due to an economic downturn or legislative action, or a failure of projected funding increases to materialize, can constrain resources available to school districts for making purchases of instructional materials and adversely affect our business and results of operations. The economic slowdown resulting from the COVID-19 pandemic has had a negative impact on tax revenues and other financial resources in some states and localities, which could adversely affect public school finances and spending in those places, including for instructional materials and professional learning services.

Some states, including most adoption states, provide dedicated state funding for the purchase of instructional content and/or classroom technology, and expenditures for instructional materials in those states tend to be highly dependent on appropriation of those funds. If dedicated funding is not appropriated, or if the amount is substantially less than anticipated or legislative action is taken to lift restrictions on the use of those funds, then purchases of instructional materials may be significantly reduced and our net sales may be adversely impacted.

In addition, many school districts, including most large urban districts, receive substantial federal funding through the Elementary and Secondary Education Act (“ESEA”), the Individuals with Disabilities Act (“IDEA”), and other federal education programs. These funds supplement state and local funding and are used primarily to serve specific populations, such as low-income students and families, students with disabilities, and English language learners as well as to support programs to improve the quality of instruction, including educator professional learning. The funding of these programs is subject to Congressional appropriation. A significant reduction in appropriation levels could have an adverse effect on our sales, particularly sales of intervention, supplemental and professional learning products and services.

Federal and state legislative and policy changes can also affect our business. At the federal level, ESEA governs to a significant degree how states approach assessment and accountability, support and improvement of low performing schools, and take into account evidence of effectiveness in adopting strategies and selecting educational products and services paid for with federal funds. Changes in ESEA and/or state legislation and administrative policy decisions on matters such as assessment and accountability, curriculum and intervention could affect demand for our products.

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State instructional materials adoptions, which account for a significant portion of our net sales of K-12 instructional materials, are highly cyclical and pose significant inherent risks that could materially impact our results of operations.

Due to the revolving and staggered nature of state adoption schedules, sales of K-12 instructional materials have traditionally been cyclical, with some years offering more and/or larger sales opportunities than others. Since a large portion of our sales are derived from state adoptions, our overall results can be materially affected from year to year by the adoption schedule, particularly in large adoption states. Our failure to secure approval for our programs or perform according to our expectations in larger new adoption opportunities could materially and adversely affect our net sales for the year of the adoption and in subsequent years.

In any state adoption, there is the inherent risk that one or more of our programs will not be approved by a particular state board of education or other adopting authority. While school districts in most adoption states are not precluded from purchasing materials that have not been approved by the state, in many cases, exclusion of a program on the state-adopted list can materially and adversely impact our ability to compete effectively at the school district level. Moreover, even if our program is approved by the state, we face significant competition and there is no guarantee that school districts will select our program or that we will be able to capture a meaningful share of the sales in such state.

State adoptions can be delayed, postponed or cancelled—sometimes with little or no warning and after we have made significant investments in anticipation of the adoption—due to various reasons, such as funding shortfalls, delays in development and approval of state academic standards and specifications, competing priorities or school readiness. In addition, individual school districts may decline to purchase new programs in accordance with the state’s adoption schedule. A substantial delay, postponement or cancellation of a large adoption opportunity can adversely affect the amount and timing of our net sales return on investment for the affected product, our business and our results of operations.

Further, the timing of the legislative appropriations process in most states is such that it is often impossible to know with certainty whether implementation of an adoption will be funded until after products have been submitted for review. By that time, investments have been made for product development and substantial expenses incurred for sales, marketing and other costs. If the legislature in a state that provides dedicated funding for instructional materials decides not to appropriate those funds or appropriates substantially less than anticipated, due to a revenue shortfall or other reasons, or if the legislature lifts restrictions on use of those funds, then implementation of that adoption could be substantially compromised or delayed and our net sales and return on investment could be adversely affected.

Changes in state academic standards could affect our market and require investment in development of new programs or modifications to our existing programs and any delays or controversies in the implementation of such standards could impact our results of operations.

States may adopt new academic standards or revise existing standards, which may affect our market and require investment in the development of new programs or modifications to our existing programs offered for sale in states that adopt such changes. Delays or controversies in the implementation of the adoption of new or revised academic standards may result in insufficient lead time before the deadline to submit instructional materials for an adoption. As a result, we have in the past and may again have to invest more than planned in order to complete product development or make the modifications in the compressed timeframe to bring our program into alignment with the new or revised standards, adversely affecting our return on investment. Alternatively, we may determine that completing product development or making the modifications within the available timeframe is not practicable, and elect not to participate in the adoption, forgoing what might have been a significant sales opportunity which could materially and adversely affect our net sales for the year of the adoption and subsequent years.

We operate in a highly competitive environment where the risks from competition are intensified due to rapid changes in our markets and industry; as a result, we must continue to adapt to remain competitive.

We operate in highly competitive markets. The risks of competition are intensified in the current environment where investment in new technology is ongoing and there are rapid changes in the products and services our customers are seeking and our competitors are offering, as well as new technologies, sales and distribution channels.

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In addition to national curriculum publishers, we compete with a variety of specialized or regional publishers that focus on select disciplines and/or geographic regions in the K-12 market. There are multiple competitors in the HMH Books & Media segment and supplemental market offering content that school districts increasingly are using as part of their core classroom instructional materials. Our larger competitors in the educational market include Savvas Learning Co. (formerly Pearson Education, Inc.), McGraw Hill Education, Stride Inc. (formerly K-12 Inc.), Cengage Learning, Inc., Scholastic Corporation, John Wiley & Sons, Inc., Curriculum Associates, LLC, Benchmark Education, LLC, Accelerate Learning, Inc., and Amplify Education, Inc. Some of these established competitors may have greater resources and less debt than us and, therefore, may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or devote greater resources to the development, promotion and sale of their products and services than we can. Also competing in our market as a substitute are open source educational resources. In addition, the market shift toward digital education solutions has induced both established technology companies and new start-up companies to enter certain segments of our market. These new competitors have the possible advantage of not needing to transition from a print business to a digital business. In addition, many established technology companies have substantial resources that they could devote to developing or acquiring digital educational products and/or content and, distributing their own and/or aggregated educational content to the K-12 market, which could negatively affect our business, financial condition and results of operations. There is also a risk of further disintermediation, which is the occurrence of state, district and other customers contracting directly with technology companies, enabling technology companies to develop direct relationships with our customers, and accordingly, have significant influence over access to and, pricing and distribution of, digital and print education materials. We may not be able to adapt as needed to remain competitive in the market given the foregoing factors.

The availability of free and low-cost open education resources could adversely affect our net sales and exert downward pressure on prices for our education products.

In the K-12 market, we face growing competition from free, openly licensed content, often referred to as open education resources (“OER”). Free or low-cost OER content is typically delivered via the internet, and in some cases print versions and related services are available for purchase. A number of states support the use of OER by providing curated resources and others, including New York, Louisiana, Michigan, Tennessee, and Texas, are funding development of OER or have done so in the past. In addition, not-for-profit organizations such as the Gates Foundation and the Hewlett Foundation have supported the development of open source educational content that can be made available to educational institutions for free or at nominal costs. The increased availability of free and low-cost OER could negatively affect our customers’ perception of the value of our content, reduce demand for our educational products, and/or exert downward pressure on prices for our products, and adversely impact our net sales.

If we fail to maintain strong relationships with our authors, illustrators and other creative talent, as well as to develop relationships with new creative talent, our net sales and results of operations could be adversely affected.

Our HMH Books & Media business and certain aspects of our K-12 business are highly dependent on maintaining strong relationships with the authors, illustrators and other creative talent who produce books and other products sold to our customers. We operate in a number of highly visible industry segments where there is intense competition for successful authors, illustrators and other creative talent. Any overall weakening of these relationships, or the failure to develop successful new relationships, could have an adverse effect on our net sales and results of operations.

If we are unable to attract, retain and focus a strong leadership team, a dynamic sales force, software engineers and other key personnel, it could have an adverse effect on our business and ability to remain competitive, financial condition and results from operations.

Our success depends, in part, on our ability to continue to attract, focus and retain a strong leadership team, a dynamic sales force, software engineers and other key personnel at economically reasonable compensation levels. We operate in highly competitive industry segments that continue to change to adapt to customer needs and technological advances and in which there is intense competition for experienced and highly effective personnel. If we are unable to timely attract and retain key personnel with relevant skills for our evolving industry segments it could adversely affect our business and ability to remain competitive, financial condition and results of operations.

In addition, our business results depend largely upon the experience and knowledge of local market dynamics and long-standing customer relationships of our sales personnel. Our inability to attract, retain and focus effective

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sales and other key personnel at economically reasonable compensation levels could materially and adversely affect our ability to operate profitably and grow our business.

We have announced our intent to explore a sale of our HMH Books & Media business, and such proposed divestiture may introduce significant risks and uncertainties.

In order to position our business to move forward with our digital first, connected K-12 strategy, we have announced our intent to explore a sale of our HMH Books & Media business. We have also divested and may in the future divest certain assets or businesses that no longer fit with our strategic direction or growth targets. Divestitures involve significant risks and uncertainties that could adversely affect our business, results of operations and financial condition. These include, among others, the inability to find potential buyers on favorable terms, disruption to our business and/or diversion of management attention from other business concerns, difficulties in separating the operations of the divested business and retention of certain liabilities related to the divested business.

Risks Related to Operations and Strategic Plans

We may not be able to execute on our long-term growth strategy or achieve expected benefits from actions taken in furtherance of our strategy, which could materially and adversely affect our business, financial condition and results of operations and/or our growth.

If we are not able to execute on our long-term growth strategy or achieve expected benefits from our actions in furtherance of our strategy, it could materially and adversely affect our business, financial condition and results of operations and/or our growth. In any event, actions taken in furtherance of our strategy, such as transitioning to new business models or entering into new market segments could adversely impact our cash flow and our business in unforeseen ways.

Our investments in new products, service offerings, platforms and/or technologies could impact our profitability.

We operate in highly competitive markets that continue to change to adapt to customer needs. These needs include an increasing demand for integrated learning solutions. In order to address these needs, we are investing in new products, new technology and infrastructure, and a new common platform to integrate our products, services and solutions. These investments may be less profitable than what we have experienced historically, may consume substantial financial resources and/or may divert management’s attention from existing operations, all of which could materially and adversely affect our business, results of operations and financial condition.

We rely on third-party software and technology development as part of our digital platform.

We rely on third parties for some of our software and technology development. For example, some of the technologies and software that compose our instruction and assessment technologies are developed by third parties. We rely on those third parties for the development of future components and modules. Thus, we face risks associated with technology and software product development and the ability of those third parties to meet our needs and their obligations under our contracts with them. In addition, we rely on third parties for our internet-based product hosting. The loss of one or more of these third-party partners, a material disruption in their business or their failure to otherwise perform in the expected manner could cause disruptions in our business that may materially and adversely affect our results of operations and financial condition.

Defects in our digital products and platforms could cause financial loss and reputational damage.

In the fast-changing digital marketplace, demand for innovative technology has generally resulted in short lead times for producing products that meet customer needs. Growing demand for innovation and additional functionality in digital products increases the risk that our digital products and platforms may contain flaws or corrupted data that may only become apparent after product launch, particularly for new products and platforms and new features for existing products and platforms that are developed and brought to market under tight time constraints. Problems with the performance of our digital products and platforms could result in liability, loss of revenue or harm to our reputation.

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Changes in product distribution channels and concentration of retailer power may restrict our ability to grow and affect our profitability in our HMH Books & Media segment.

Distribution channels such as online retailers and ecommerce sites, digital delivery platforms, expanding social media, digital discovery and marketing platforms, combined with the increased concentration of retailer power, pose threats and provide opportunities to traditional consumer publishing models of our HMH Books & Media segment, potentially impacting both sales volume and profitability. The reduction in “brick and mortar” booksellers, the resulting concentration of power held by our largest retailers, and the increased concentration of consumer book spending on best-selling titles could negatively affect our business, financial condition and results of operations.

We are dependent on a small number of third parties to print and bind our products and to supply paper, a principal material for our products. If we were to lose our relationship with our key print vendor and/or paper merchant, our business and results of operations may be materially and adversely affected.

We outsource the printing and binding of our products and currently rely on a small group of vendors that handle approximately 49% of our printing requirements, and we expect a small number of print vendors will continue to account for a substantial portion of our printing requirements for the foreseeable future. The loss of, or a significant adverse change in our relationship with our key print vendor could have a material adverse effect on our business and cost of sales.

In addition, we purchase paper, a principal raw material for our print products, primarily through one paper merchant. Further, paper merchants, including our paper merchant, rely on paper mills to produce the paper that they broker. There can be no assurance that our relationships with our print vendor and/or paper merchant will continue or that their business or operations will not be affected by disruptions in the industries that they rely on, including a disruption in the paper mill industry, major disasters or other external factors. The loss of our key print vendor and/or paper merchant, a material change in our relationship with them, a material disruption in their business or their failure to otherwise perform in the expected manner could cause disruptions in our business that may materially and adversely affect our results of operations and financial condition.

Operational disruption to our business caused by a major disaster or other external threats could restrict our ability to supply products and services to our customers.

Across all our businesses, we manage complex operational and logistical arrangements including distribution centers, data centers and large office facilities. Failure to recover from a major disaster (such as fire, flood or other natural disaster) or other external threat (such as terrorist attacks, strikes, weather, outbreaks of pandemic or contagious diseases, or political unrest or other external factors) at a key center or facility could affect our business and employees, disrupt our daily business activities and/or restrict our ability to supply products and services to our customers.

Risks Related to Information Technology Systems and Cybersecurity

We are subject to risks based on information technology systems. A major breach in security or information technology system failure could interrupt the availability of our internet-based products and services, result in corruption and/or loss of data, cause liability or reputational damage to our brands and business and/or result in financial loss.

Our business is dependent on information technology systems to support our complex operational and logistical arrangements across our businesses. We provide software and/or internet-based products and services to our customers. We also use complex information technology systems and products to support our business activities, particularly in infrastructure and as we move our products and services to an increasingly digital delivery platform.

We face several technological risks associated with software and/or internet-based product and service delivery in our educational businesses, including with respect to information technology capability, reliability and security, enterprise resource planning, system implementations and upgrades. Failures of our information technology systems and products (including because of operational failure, natural disaster, computer virus or hacker attacks)

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could interrupt the availability of our internet-based products and services, result in corruption or loss of data or breach in security and result in liability, reputational damage to our brands and/or adversely impact our operating results.

While we have policies, processes, internal controls and cybersecurity mechanisms in place intended to maintain the stability of our information technology, provide security from unauthorized access to our systems and maintain business continuity, no mechanisms are entirely free from the risk of failure and we have no guarantee that our security mechanisms will be adequate to prevent all security threats. Our brand, reputation, especially in the K-12 market, and consequently our operating results may be adversely impacted by unanticipated system failures, corruption, loss of data and/or breaches in security.

Failure to prevent or detect a malicious cyber-attack on our information technology systems could result in liability, reputational damage, loss of revenue and/or financial loss.

Cyber-attacks and hackers are becoming more sophisticated and pervasive. Our business is dependent on information technology systems to support our complex operational and logistical arrangements across our businesses. We provide software and/or internet-based products and services to our customers. We also use complex information technology systems and products to support our business activities, particularly in infrastructure and as we move our products and services to an increasingly digital delivery platform. Across our businesses we hold large volumes of personal data, including that of employees, customers and students.

Efforts to prevent cyber-attacks and hackers from entering our systems are expensive to implement and may limit the functionality of our systems. Individuals try to gain unauthorized access to our systems and data for malicious purposes, and our security measures may fail to prevent such unauthorized access. Cyber-attacks and/or intentional hacking of our systems could adversely affect the performance or availability of our products, result in loss of customer data, adversely affect our ability to conduct business, or result in theft of our funds or proprietary information, the occurrence of which could result in liability, reputational damage, loss of revenue and/or financial loss.

Risks Related to Financial Condition, Credit Facilities and Liquidity

Our operating results fluctuate on a seasonal and quarterly basis and our business has historically been dependent on our results of operations for the third quarter.

Our business is seasonal. Approximately 81% of our net sales for the year ended December 31, 2020 were derived from our Education segment, which is a markedly seasonal business. Purchases of K-12 products are typically made in the second and third quarters of the calendar year in preparation for the beginning of the school year. We typically realize a significant portion of net sales during the third quarter, making third-quarter results material to full-year performance. This sales seasonality affects operating cash flow from quarter to quarter. We typically incur a net cash deficit from all of our activities into the third quarter of the year. We cannot be sure that our second and third quarter net sales will continue to be sufficient to fund our business and meet our obligations or that they will be higher than our net sales for our other quarters or in the prior-year periods. In the event that we do not derive sufficient net sales for the second and third quarter, we may have a liquidity shortfall and be unable to fund our business and/or meet our debt service requirements and other obligations.

Our net sales, operating profit or loss and net cash provided or used by operations are impacted by the inherent seasonality of the academic calendar. As purchases of K-12 products are typically made in the second and third quarters of a given calendar year, changes in our customers’ ordering patterns may impact the comparison of results between a quarter and the same quarter of the prior year, between a quarter and the prior consecutive quarter or between a fiscal year and the prior fiscal year, which can make it difficult for us to forecast the timing of customer purchases and assess our financial performance until late in the year.

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Our history of operations includes periods of operating and net losses, and we may incur operating and net losses in the future. Such losses may impact our liquidity.

For the years ended December 31, 2020, 2019 and 2018, we generated operating losses of $429.1 million, $163.2 million, and $90.5 million, respectively, and net losses of $479.8 million, $213.8 million, and $94.2 million, respectively. If we continue to suffer operating and net losses, our liquidity may suffer and we may not be able to fund our business and/or meet our debt service requirements and other obligations. Furthermore, the market price of our common stock may decline significantly.

Our major operating costs and expenses include employee compensation as well as paper, printing and binding costs and expenses for product-related manufacturing, and a significant increase in such costs and expenses could have a material adverse effect on our profitability.

Our major operating costs and expenses include employee compensation as well as paper, printing and binding costs for product-related manufacturing.

We offer competitive salary and benefit packages in order to attract and retain the employees required to grow and expand our businesses. Compensation costs are influenced by general economic and business factors, including those affecting the cost of health insurance, payout of commissions and incentive compensation and post-retirement benefits, as well as trends specific to the employee skillsets we require.

Paper is one of our principal raw materials. Paper prices fluctuate based on the worldwide demand for and supply of paper in general and for the specific types of paper we use. The price of paper may fluctuate significantly in the future, and changes in the market supply of, or demand for paper, could affect delivery times and prices. Paper mills and other suppliers may consolidate or there may be disruptions in their industry and as a result, there may be future shortfalls in quality and quantity supplies necessary to meet the demands of the entire marketplace, including our demands. As a result, we may need to find alternative sources for paper from time to time. In addition, we have extensive printing and binding requirements. We outsource the printing and binding of our books, workbooks and other printed products to third parties, typically under multi-year contracts. Increases in any of these operating costs and expenses could materially and adversely affect our business, profitability, financial condition and results of operations. Further, higher energy costs and other factors affecting the cost of publishing, transporting and distributing our products could adversely affect our financial results.

We also have other significant operating costs, and unanticipated increases in these costs could adversely affect our operating margins. Our inability to absorb the impact of increases in paper, printing and binding costs and other costs of publishing, transporting and distributing our products or any strategic determination not to pass on all or a portion of these increases to our customers could adversely affect our business, financial condition and results of operations.

We are subject to contingent liabilities that may affect liquidity and our ability to meet our obligations.

In the ordinary course of business, we issue performance-related surety bonds and letters of credit posted as security for our operating activities, some of which obligate us to make payments if we fail to perform under certain contracts in connection with the sale of instructional materials and assessment programs. The surety bonds are partially backstopped by letters of credit. As of December 31, 2020, our contingent liability for all letters of credit was approximately $18.8 million, of which $1.1 million were issued to backstop $1.4 million of surety bonds. The letters of credit reduce the borrowing availability on our revolving credit facility, which could affect liquidity and, therefore, our ability to meet our obligations. We may increase the number and amount of contracts that require the use of letters of credit, which may further restrict liquidity and, therefore, our ability to meet our obligations in the future.

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Our substantial level of indebtedness could adversely affect our financial condition and results of operations.

As of December 31, 2020, we had approximately $667.0 million ($643.7 million, net of discount and issuance costs) of total indebtedness outstanding, comprised of $361.0 million of term loans and $306.0 million of senior secured notes. Our substantial outstanding indebtedness could have important consequences, including the following:

• our high level of indebtedness could make it more difficult for us to satisfy our obligations;

• our high level of indebtedness could adversely impact our credit rating;

• the restrictions imposed on the operation of our business under the agreements governing such indebtedness may hinder our ability to take advantage of strategic opportunities to grow our business and to make attractive investments;

• our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, restructuring, acquisitions or general corporate purposes may be impaired, which could be exacerbated by volatility in the credit markets;

• we must use a substantial portion of our cash flow from operations to pay principal and interest on our indebtedness, which will reduce the funds available to us for operations, working capital, capital expenditures and other purposes;

• our high level of indebtedness could place us at a competitive disadvantage compared to our competitors that may have proportionately less debt;

• our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate may be limited;

• our failure to satisfy our obligations under the agreements governing our indebtedness could result in an event of default, which could result in all of our debt becoming immediately due and payable and could permit our secured lenders to foreclose on our assets securing such indebtedness;

• our high level of indebtedness makes us more vulnerable to economic downturns and adverse developments in our business and industry; and

• we may be vulnerable to interest rate increases, as certain of our borrowings bear interest at variable rates. A 1% increase or decrease in the interest rate will change our interest expense by approximately $3.6 million on an annual basis for our term loan facility and $2.5 million on an annual basis for our revolving credit facility, assuming it is fully drawn.

Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, prospects and ability to satisfy our obligations. In addition, we may incur substantial additional indebtedness in the future. The terms of the agreements governing our existing indebtedness do not, and any future debt may not, fully prohibit us from doing so. If new indebtedness is added to our current indebtedness levels, the related risks that we now face could substantially intensify.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments or to refinance our debt obligations and to fund planned capital expenditures and other growth initiatives depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flow from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including our senior secured notes, or to fund our other liquidity needs.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or seek to restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to sell material assets or operations to attempt to meet our debt service and other obligations. Our senior secured term loan and revolving credit facilities have certain restrictions on our ability to use the proceeds from asset sales. We may not be able to consummate those asset sales to raise capital or sell assets at

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prices that we believe are fair and proceeds that we do receive may not be adequate to meet any debt service obligations then due.

We may record future goodwill or additional indefinite-lived intangibles impairment charges related to our reporting units, which could have a material adverse impact on our results of operations.

We test our goodwill and indefinite-lived intangibles asset balances for impairment during the fourth quarter of each year, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. In evaluating the potential for impairment of goodwill and indefinite-lived intangible assets, we make assumptions regarding estimated net sales projections, growth rates, cash flows and discount rates. Although we use consistent methodologies in developing the assumptions and estimates underlying the fair value calculations used in our impairment tests, these estimates are uncertain by nature and can vary from actual results. Declines in the future performance and cash flows of the business or small changes in other key assumptions may result in future impairment charges, which could have a material adverse impact on our results of operations. We had goodwill and indefinite-lived intangible assets of approximately $438.0 million and $161.0 million and $717.0 million and $161.0 million as of December 31, 2020 and 2019, respectively. There was a goodwill impairment charge of $279.0 million for the year ended December 31, 2020. There were no goodwill impairment charges for the years ended December 31, 2019 and 2018. There were also no impairment charges for indefinite-lived intangible assets for the years ended December 31, 2020, 2019 and 2018.

A change from up-front payment by school districts for multi-year programs and actions taken in furtherance of our long-term growth strategy could adversely affect our cash flow.

In keeping with the past practice of payments, school districts typically pay up-front when buying multi-year programs. If school districts changed their payment practices to spread their payments to us over the term of a program, our cash flow could be adversely affected. Further, as we execute on our long-term growth strategy, actions taken in furtherance of our strategy, such as transitioning to new business models could adversely impact our cash flow and our business in unforeseen ways.

The shift to sales of greater digital content or an increase in consumable print core programs may affect the comparability of our revenue to prior periods and cause increases or decreases in our sales to be reflected in our results of operations on a delayed basis.

Our customers typically pay for purchased products up-front; however, we recognize a significant portion of our time-based digital sales over their respective terms, as required by Generally Accepted Accounting Principles in the United States. As a result, an increase in the portion of our sales coming from digital sales may impact the comparison of our revenue results for a period with the same prior-year or consecutive period. Further, sales of consumable print core programs typically result in net sales being recognized over longer periods similar to time-based digital products. As more product offerings move to a consumable print format, more revenue will be deferred and recognized over a longer period of time.

Another effect of recognizing revenue from digital and consumable print core program sales over their respective terms is that any increases or decreases in sales during a particular period may not translate into proportional increases or decreases in revenue during that period. Consequently, deteriorating sales activity may be less immediately observable in our results of operations.

Risks Related to Laws and Regulations

Our ability to enforce our intellectual property and proprietary rights may be limited, which may harm our competitive position and materially and adversely affect our business and results of operations.

Our products are largely comprised of intellectual property content delivered through a variety of media, including print, digital and web-based media. We rely on a combination of copyright, trademark and other intellectual property laws and rights as well as employee agreements and other contracts to establish and protect our proprietary rights in our products and technology. However, our efforts to protect our intellectual property and proprietary rights may not be sufficient and we cannot make assurances that our proprietary rights will not be challenged, invalidated or circumvented. Moreover, we conduct business in certain other countries where the extent of effective legal protection for intellectual property rights is uncertain. It is possible we could be involved in expensive and time-consuming litigation to maintain, defend or enforce our intellectual property.

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Furthermore, despite the existence of copyright and trademark protection under applicable laws, third parties may nonetheless violate our intellectual property rights, and our ability to remedy such violations, including in certain foreign countries where we conduct or seek to conduct business, may be limited. In addition, the copying and distribution of content over the Internet creates additional challenges for us in protecting our proprietary rights. If we are unable to adequately protect and enforce our intellectual property and proprietary rights, our competitive position may be harmed, and our business and financial results could be materially and adversely affected.

Failure to comply with privacy laws or adequately protect personal data could cause financial loss and reputational damage.

Across our businesses we hold large volumes of personal data, including that of employees, customers and students. We are subject to a wide array of different privacy laws, rules, regulations and standards in the U.S. as well as in foreign jurisdictions where we conduct business, including, but not limited to (i) the Children’s Online Privacy Protection Act and state student data privacy laws in connection with personally identifiable information of students, (ii) the Payment Card Industry Data Security Standards in connection with collection of credit card information from customers, and (iii) various EU data protection and privacy laws, including a comprehensive General Data Privacy Regulation that became effective in May 2018.

There has been increased public attention regarding the use of personal information and data transfer, accompanied by legislation and regulations intended to strengthen data protection, information security and consumer and personal privacy. The law in these areas continues to develop and the changing nature of privacy laws in the U.S., the European Union and elsewhere could impact our processing of personal and sensitive information of our employees, vendors and customers.

Continued privacy concerns may result in new or amended laws and regulations. Our brands and customer relationships are important assets. Future laws and regulations with respect to the collection, compilation, use, and publication of information and consumer privacy could result in limitations on our operations, increased compliance or litigation expense, adverse publicity, reputational damage to our brands and customer relationships, potential cancellation of existing business and diminished ability to compete for future business. It is also possible that we could be prohibited from collecting or disseminating certain types of data, which could affect our ability to meet our customers’ needs.

Changes in U.S. federal, state and local or foreign tax law, interpretations of existing tax law, or adverse determinations by tax authorities, could increase our tax burden or otherwise adversely affect our financial condition or results of operations.

We are subject to taxation at the federal, state or provincial and local levels in the U.S. and various other countries and jurisdictions. The change in administration in the United States may lead to new tax legislative initiatives. As any tax reform may result in further changes in tax laws and related regulations, our financial results could be materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our financial results.

Other Risks Related to Our Business

We may not be able to identify and complete any future acquisitions or achieve the expected benefits from any future acquisitions, which could materially and adversely affect our business, financial condition and results of operations and/or our growth.

We have at times used acquisitions as a means of expanding our business and technologies and expect that we will continue to do so in the future as part of our capital allocation strategy. We may be unable to identify suitable acquisition opportunities and, even if we were able to do so, we may not be able to finance or complete any such future acquisition on terms satisfactory to us. Further, we may not be able to successfully integrate acquisitions into our existing business, achieve anticipated operating advantages and/or realize anticipated cost savings or other synergies. The acquisition and integration of businesses involve a number of risks, including: use of available cash,

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issuance of equity or debt securities, incurrence of new indebtedness or borrowings under our revolving credit facility to consummate the acquisition and/or integrate the acquired business; diversion of management’s attention from operations of our existing businesses and those of the acquired business to the integration; integration of complex systems, technologies and networks into our existing systems; difficulties in the assimilation and retention of employees; unexpected costs, delays or other risks related to transition support services provided under any transition services agreement that may be executed as part of the acquisition. These transactions may create multiple and overlapping product lines that are offered, priced and supported differently, which could cause customer confusion and delays in service. The demands on our management related to the increase in our size after an acquisition also may have potential adverse effects on our operating results.

If we are unable to finance or complete any future acquisition on terms satisfactory to us (or at all) and/or we are unable to successfully integrate any acquisitions into our existing business, achieve anticipated operating advantages and/or realize anticipated cost savings or other synergies from any such acquired business, it could materially and adversely affect our business, financial condition and results of operations.

Exposure to litigation could have a material effect on our financial position and results of operations.

In the ordinary course of business, we are involved in legal actions, claims, litigation, investigations and other matters arising from our business operations and face the risk that additional actions and claims will be filed in the future.

Litigation alleging infringement of copyrights and other intellectual property rights, particularly with respect to proprietary photographs and images, is common in the educational publishing industry. While management does not expect any of the existing legal actions and claims arising from our business operations to have a material adverse effect on our results of operations, financial position or cash flows, due to the inherent uncertainty of the litigation process, the costs of pursuing or defending against any particular legal proceeding, or the resolution of any particular legal proceeding could have a material effect on our financial position and results of operations.

We have insurance in such amounts and with such coverage and deductibles as management believes is reasonable. However, our coverage for certain product lines has been exhausted and there can be no assurance that our liability insurance for other product lines will cover all events or that the limits of such coverage will be sufficient to fully cover all potential liabilities thereunder.

We face risks of doing business abroad.

We conduct business in a number of regions outside of the U.S., including emerging markets in South America, Asia, Africa and the Middle East. Accordingly, we face exposure to the risks of doing business abroad, including, but not limited to, longer customer payment terms in certain countries; increased credit risk; difficulties in protecting intellectual property, enforcing or terminating agreements and collecting receivables under certain foreign legal systems; compliance under local privacy laws, rules, regulations and standards; the need to comply with U.S. Foreign Corrupt Practices Act and local laws, rules and regulations; and in some countries, a higher risk of political instability, economic volatility, terrorism, corruption, and social and ethnic unrest.

Although we are committed to conducting business in a legal and ethical manner in compliance with local and international statutory requirements and standards applicable to our business, there is a risk that our management, employees or representatives may take actions that violate applicable laws and regulations prohibiting the making of improper payments for the purposes of obtaining or keeping business, including laws such as the U.S. Foreign Corrupt Practices Act or the U.K. Bribery Act. Responding to investigations is costly and requires a significant amount of management’s time and attention. In addition, investigations may adversely impact our reputation, or lead to litigation and financial impacts.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

Our principal executive office is located at 125 High Street, Boston, Massachusetts 02110. The following table describes the approximate building areas in square feet, principal uses and the years of expiration on leased premises of our significant operating properties as of December 31, 2020. We believe that these properties are suitable and adequate for our present and anticipated business needs, satisfactory for the uses to which each is put, and, in general, fully utilized.

	Expiration	Approximate		Principal use	Segment
Location	year	area		of space	used by
Owned Premises:
Indianapolis, Indiana	Owned		491,779	Warehouse	Both segments
Troy, Missouri	Owned		575,000	Warehouse	Education
Leased Premises:
Boston, Massachusetts    (Corporate office)	2033		194,946	Office	Both segments
Orlando, Florida	2029		111,073	Office	Education
Evanston, Illinois	2027		60,522	Office	Education
Geneva, Illinois	2022		513,512	Office and warehouse	Education
Portsmouth, New Hampshire (a)	2021		25,352	Office	Education
New York, New York	2027		101,441	Office	Both segments
Austin, Texas	2028		87,570	Office	Education
Dublin, Ireland	2025		28,994	Office	Education
Orlando, Florida	2025		25,400	Warehouse	Both segments
St Charles, Illinois	2024		26,029	Office	Education

In addition, we lease several other offices that are not material to our operations and, in some instances, are partially or fully subleased. Portions of certain properties listed above are also subleased.

(a) HMH has entered into a new lease agreement to lease approximately 40,000 square feet with expected lease commencement in 2021 coinciding with the expiration of the current Portsmouth, New Hampshire lease.

Item 3. Legal Proceedings

We are involved in legal actions, claims, litigation and other matters incidental to our business. Litigation alleging infringement of copyrights and other intellectual property rights, particularly with respect to proprietary photographs and images, is common in the educational publishing industry.

While management believes there is a reasonable possibility we may incur a loss associated with the existing legal actions, claims and litigation, we are not able to estimate such amount, but we do not expect any of these matters to have a material adverse effect on our results of operations, financial position or cash flows. We have insurance in such amounts and with such coverage and deductibles as management believes is reasonable. However, there can be no assurance that our liability insurance will cover all events or that the limits of such coverage will be sufficient to fully cover all potential liabilities thereunder. Refer to Note 15 of the Consolidated Financial Statements included in Item 8. for a discussion of such matters.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market information. Our common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “HMHC”.

Holders. As of February 1, 2021, there were approximately six stockholders of record of our common stock, one of which was Cede & Co., a nominee for The Depository Trust Company. All of our common stock held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are considered to be held of record by Cede & Co., who is considered to be one stockholder of record. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares of common stock are held of record by banks, brokers and other financial institutions. Because such shares of common stock are held on behalf of stockholders, and not by the stockholders directly, and because a stockholder can have multiple positions with different brokerage firms, banks and other financial institutions, we are unable to determine the total number of stockholders we have.

Dividends. We have never paid or declared any cash dividends on our common stock. At present, we intend to retain our future earnings, if any, to fund operations and the growth of our business. Our future decisions concerning the payment of dividends on our common stock will depend upon our results of operations, financial condition and capital expenditure plans, as well as other factors as our board of directors, in its discretion, may consider relevant, and the extent to which the declaration or payment of dividends may be limited by agreements we have entered into or cause us to lose the benefits of certain of our agreements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

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Performance Graph. The graph below matches the cumulative return of holders of the Company’s common stock with the cumulative returns of the Nasdaq Composite index, the Russell 2000 index, and a Peer Group index of certain public companies in the educational space, comprised of Pearson PLC, Scholastic Corporation, Stride Inc. (formerly K-12 Inc.), and John Wiley & Sons, Inc. The graph assumes that the value of the investment in the Company’s common stock, in each index (including reinvestment of dividends) was $100 on December 31, 2015 and tracks it through February 1, 2021. All prices reflect closing prices on the last day of trading at the end of each period. Notwithstanding any general incorporation by reference of this Annual Report on Form 10-K into any other document, the information contained in the graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Exchange Act of 1934, as amended (the “Exchange Act”) or to the liabilities of Section 18 of the Exchange Act, except: (i) as expressly required by applicable law or regulation; or (ii) to the extent that the Company specifically requests that such information be treated as soliciting material or specifically incorporates it by reference into a filing under the Securities Act of 1933, as amended, or the Exchange Act.

The stock price performance shown on the graph is not necessarily indicative of future price performance. Information used in the graph was obtained from a source we believe to be reliable, but we do not assume responsibility for any errors or omissions in such information.

Recent sales of unregistered securities. There have been no sales of unregistered securities by the Company in the three-year period ended December 31, 2020.

Issuer Purchases of Equity Securities

There were no purchases of equity securities in the fourth quarter of 2020 and for the year ended December 31, 2020.

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Item 6. Selected Financial Data

The following table summarizes the consolidated historical financial data of Houghton Mifflin Harcourt Company. We derived the consolidated historical financial data as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019, and 2018 from our audited consolidated financial statements included in this Annual Report on Form 10-K. We derived the consolidated historical financial statement data as of December 31, 2018, 2017 and 2016 and for the years ended December 31, 2017 and 2016 from our consolidated financial statements for such years, which are not included in this Annual Report on Form 10-K. The sale of the Riverside Business on October 1, 2018 is considered a Discontinued Operation and accordingly, all results of the Riverside Business have been removed from continuing operations for all periods presented. Historical results for any prior period are not necessarily indicative of results to be expected in any future period. The data set forth in the following table should be read together with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto.

	Years Ended December 31,
	2020 (1)			2019 (1)			2018 (1)			2017			2016
Operating Data:
Net sales	$	1,031,292		$	1,390,674		$	1,322,417		$	1,327,029		$	1,291,978
Cost and expenses:
Cost of sales, excluding publishing rights and pre-publication amortization		497,816			668,108			581,467			588,518			578,317
Publishing rights amortization		20,056			26,557			34,713			46,238			61,351
Pre-publication amortization		126,180			149,515			109,257			119,908			121,866
Cost of sales		644,052			844,180			725,437			754,664			761,534
Selling and administrative		478,101			662,606			649,295			636,326			681,170
Other intangible asset amortization		25,585			25,310			26,933			29,248			26,375
Impairment charge for goodwill, pre-publication costs and intangible assets		279,000			—			—			3,980			130,205
Restructuring/severance and other charges		33,643			21,742			11,478			37,952			15,371
Gain on sale of assets		—			—			(201	)		—			—
Operating loss		(429,089	)		(163,164	)		(90,525	)		(135,141	)		(322,677	)
Other income (expense)
Retirement benefits non-service (expense) income		(856	)		167			1,280			3,486			4,253
Interest expense		(65,959	)		(48,778	)		(45,680	)		(42,805	)		(39,181	)
Interest income		899			3,157			2,550			1,338			518
Change in fair value of derivative instruments		672			(899	)		(1,374	)		1,366			(614	)
Gain on investments		2,091			—			—			—			—
Income from transition services agreement		—			4,248			1,889			—			—
Loss on extinguishment of debt		—			(4,363	)		—			—			—
Loss from continuing operations before taxes		(492,242	)		(209,632	)		(131,860	)		(171,756	)		(357,701	)
Income tax expense (benefit) for continuing operations		(12,404	)		4,201			5,597			(51,419	)		(51,556	)
Loss from continuing operations		(479,838	)		(213,833	)		(137,457	)		(120,337	)		(306,145	)
Earnings from discontinued operations, net of tax		—			—			12,833			17,150			21,587
Gain on sale of discontinued operations, net of tax		—			—			30,469			—			—
Income from discontinued operations, net of tax		—			—			43,302			17,150			21,587
Net loss	$	(479,838	)	$	(213,833	)	$	(94,155	)	$	(103,187	)	$	(284,558	)
Net loss per share attributable to common stockholders
Basic and diluted:
Continuing operations	$	(3.82	)	$	(1.72	)	$	(1.11	)	$	(0.98	)	$	(2.50	)
Discontinued operations		—			—			0.35			0.14			0.18
Net loss	$	(3.82	)	$	(1.72	)	$	(0.76	)	$	(0.84	)	$	(2.32	)
Weighted average shares outstanding: basic and diluted		125,455,487			124,152,984			123,444,943			122,949,064			122,418,474
Balance Sheet Data (as of period end):
Cash, cash equivalents and short-term investments	$	281,200		$	296,353		$	303,198		$	235,428		$	306,943
Working capital (2)		69,105			157,944			218,586			126,567			209,982
Total assets (2)		2,021,126			2,513,172			2,495,124			2,439,830			2,604,307
Debt (short-term and long-term)		643,692			657,187			763,649			768,194			772,738
Stockholders’ equity		90,463			566,360			768,470			795,193			880,040
Statement of Cash Flows Data:
Net cash provided by (used in):
Operating activities		115,248			254,975			104,084			104,748			111,785
Investing activities		(112,271	)		(96,320	)		427			(193,895	)		(106,117	)
Financing activities		(18,130	)		(115,667	)		(4,124	)		(7,330	)		(37,960	)
Other Data:
Capital expenditures:
Pre-publication capital expenditures		61,331			102,562			123,403			131,282			118,603
Property, plant, and equipment capital expenditures		50,940			37,561			53,741			55,092			103,152
Depreciation and intangible asset amortization		110,309			123,177			142,819			146,535			162,193

(1) The 2018 amounts and all following years have been impacted by the January 1, 2018 adoption of the new revenue standard.

(2) The 2020 and 2019 amounts have been impacted by the January 1, 2019 adoption of the new leases standard.  Please refer to Note 9 included in Item 8. for further details.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to facilitate an understanding of our results of operations and financial condition and should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. The following discussion and analysis of our financial condition and results of operations contains forward-looking statements about our business, operations and industry that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations and intentions. Actual results and the timing of events may differ materially from those expressed or implied in such forward-looking statements due to a number of factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. See “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Discussion and analysis of the year ended December 31, 2019 compared to the year ended December 31, 2018 is included under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on February 27, 2020.

Overview

We are a learning technology company committed to delivering connected 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, we partner with educators and school districts to uncover solutions that unlock students’ potential and extend teachers’ capabilities. We estimate that we serve more than 50 million students and three million educators in 150 countries, while our award-winning children’s books, novels, non-fiction, and reference titles are enjoyed by readers throughout the world.

For nearly two centuries, our HMH Books & Media segment has brought renowned and awarded children’s, fiction, non-fiction, culinary and reference titles to readers throughout the world. Our distinguished author list includes ten Nobel Prize winners, forty-nine Pulitzer Prize winners, and twenty-six National Book Award winners. We are home to popular characters and titles such as Curious George, Carmen Sandiego, The Lord of the Rings, The Whole 30, The Best American Series, the Peterson Field Guides, CliffsNotes, and The Polar Express, and published distinguished authors such as Tim O’Brien, Temple Grandin, Tim Ferriss, Kwame Alexander, Lois Lowry, and Chris Van Allsburg.

Recent Developments

COVID-19

Prior to the spread of COVID-19 in the United States, we experienced net sales results consistent with our historical first quarters. As we proceeded through the first quarter of 2020 and the impact of the COVID-19 pandemic progressed, schools began to close in response to federal, state and local social distancing directives resulting in a decline in net sales and sales orders in the second half of March 2020. We implemented a number of measures intended to help protect our shareholders, employees, and customers amid the COVID-19 outbreak. We also have taken actions to help mitigate some of the adverse impact of COVID-19 to our profitability and cash flow in 2020, while working proactively with schools to support them through this period of disruption with virtual learning resources.

Actions taken to mitigate the impact of COVID-19 on our business included: (1) director, executive and senior leadership salary reductions, and for the majority of employees, a four-day work week with associated labor cost reductions, in each case beginning in April 2020 and ceasing near the end of July 2020; (2) a freeze on spending not directly tied to near-term billings, including a reduction in all discretionary spending such as marketing, advertising, travel, and office supplies; (3) reduced inventory purchasing; (4) deferral of long-term capital projects not directly contributing to billings in 2020; and (5) borrowing $150 million from our asset-backed credit facility as a pre-emptive measure to mitigate against capital market disruptions.  Further, we elected to defer the payment of our employer payroll taxes allowed under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

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The majority of the HMH workforce has continued to work remotely subsequent to March 2020. The four-day work week furlough program along with director, executive, and senior leadership salary reductions that we announced in March 2020 ended by the end of July. The costs associated with ending the furlough program and the salary reductions were subsequently mitigated by the 2020 Restructuring Plan discussed below. We also repaid $50.0 million of our asset-backed credit facility at the end of June and repaid the remaining outstanding $100.0 million during July and currently have no drawn balance on our asset-backed credit facility. Further, the deferral of the payment of our employer payroll taxes allowed under the CARES Act during 2020 was repaid in full in December 2020.

Given the ongoing COVID-19 situation, our Education business will continue to be impacted during 2021, and significant uncertainty is likely to persist in the marketplace. Additionally, our HMH Books & Media business may continue to be impacted.

2020 Restructuring Plan

We are continuing to assess our cost structure amid the COVID-19 pandemic and in line with our Strategic Transformation Plan announced in the fourth quarter of 2019, discussed below, to ensure our cost structure is aligned to our net sales and long-term strategy. As part of this effort, on September 4, 2020, we finalized a voluntary retirement incentive program, which was offered to all U.S. based employees at least 55 years of age with at least five years of service. Of the eligible employees, 165 elected to participate representing approximately 5% of our workforce. The majority of the employees voluntarily retired as of September 4, 2020 with select employees leaving later in the year.  Each of the employees received or will receive separation payments in accordance with our severance policy. 

On September 30, 2020, our Board of Directors committed to a restructuring program, including a reduction in force, as part of the ongoing assessment of our cost structure amid the COVID-19 pandemic and in line with our previously disclosed Strategic Transformation Plan. The reduction in force resulted in a 22% reduction in our workforce, including positions eliminated as part of the voluntary retirement incentive program mentioned above, and net of newly created positions to support our digital-first operations. The reduction in force resulted in the departure of approximately 525 employees and was completed in October 2020. Each of the employees received or will receive separation payments in accordance with our severance policy. The total one-time, non-recurring cost incurred in connection with the 2020 restructuring program, inclusive of the voluntary retirement incentive program (collectively the “2020 Restructuring Plan”), all of which represents cash expenditures, is approximately $33.6 million. These actions are aligned with our Strategic Transformation Plan launched in the fourth quarter of 2019 to streamline the cost structure of the Company.

Strategic Transformation Plan

On October 15, 2019, our Board of Directors approved changes connected with our ongoing strategic transformation to simplify our business model and accelerate growth. This includes new product development and go-to-market capabilities, as well as the streamlining of operations company-wide for greater efficiency. These actions, which we refer to as our 2019 Restructuring Plan, resulted in the net elimination of approximately 10% of our workforce, after taking into account new strategy-aligned positions that are expected to be added, and additional operating and capitalized cost reductions, including an approximately 20% reduction in previously planned content development expenditures over the next three years. These steps are intended to further simplify our business model while delivering increased value to customers, teachers and students. The workforce reductions were completed during the first quarter of 2020.

After considering additional headcount actions, implementation of the planned actions resulted in total charges of $15.8 million which was recorded in the fourth quarter of 2019. With respect to each major type of cost associated with such activities, substantially all costs were severance and other termination benefit costs and will result in cash expenditures.

Further, as part of the strategic transformation plan, we recorded an incremental $9.8 million inventory obsolescence charge in the fourth quarter of 2019 which is recorded in cost of sales in the statement of operations.     

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Other Events

In November 2020, the Company announced that it will explore a potential sale of the HMH Books and Media segment. Such a sale would be intended to build on the Company’s other strategic restructuring efforts and further align its cost structure to its digital-first strategy.

Key Aspects and Trends of Our Operations

Business Segments

We are organized along two business segments: Education and HMH Books & Media (formerly referred to as Trade Publishing). Our Education segment is our largest segment and represented approximately 81%, 87% and 85% of our total net sales for the years ended December 31, 2020, 2019 and 2018, respectively. Our HMH Books & Media segment represented approximately 19%, 13% and 15% of our total net sales for the years ended December 31, 2020, 2019 and 2018, respectively. The Corporate and Other category represents certain general overhead costs not fully allocated to the business segments, such as legal, accounting, treasury, human resources and executive functions.

Net Sales

We derive revenue primarily from the sale of print and digital content and instructional materials, trade books, multimedia instructional programs, license fees for book rights, content, software and services, consulting and training. We primarily sell to customers in the United States. Our net sales are driven primarily as a function of volume and, to a certain extent, changes in price. Our net sales consist of our billings for products and services, less revenue that will be deferred until future recognition along with the transaction price allocation adjusted to reflect the estimated returns for the arrangement. Deferred revenues primarily derive from online interactive digital content, digital and online learning components along with undelivered work-texts, workbooks and services. The work-texts, workbooks and services are deferred until control is transferred to the customer, which often extends over the life of the contract, and our hosted online and digital content is typically recognized ratably over the life of the contract. The digitalization of education content and delivery is driving a shift in the education market. As the K-12 educational market transitions to purchasing more digital, personalized education solutions, we believe our ability now or in the future to offer embedded assessments, adaptive learning, real-time interaction and student specific personalization of educational content in a platform- and device-agnostic manner will provide new opportunities for growth. An increasing number of schools are utilizing digital content in their classrooms and implementing online or blended learning environments, which is altering the historical mix of print and digital educational materials in the classroom. As a result, our business model includes integrated solutions comprised of both print and digital offerings/products to address the needs of the education marketplace. The level of revenues being deferred can fluctuate depending upon the mix of product offering between digital and non-digital products, the length of programs and the mix of product delivered immediately or over time.

Core curriculum programs, which historically represent the most significant portion of our Education segment net sales, cover curriculum standards in a particular K-12 academic subject and include a comprehensive offering of teacher and student materials required to conduct the class throughout the school year. Products and services in these programs include print and digital offerings for students and a variety of supporting materials such as teacher’s editions, formative assessments, supplemental materials, whole group instruction materials, practice aids, educational games and professional services. The process through which materials and curricula are selected and procured for classroom use varies throughout the United States. Currently, 19 states, known as adoption states, review and approve new programs usually every six to eight years on a state-wide basis. School districts in those states typically select and purchase materials from the state-approved list. The remaining states are known as open states or open territory states. In those states, materials are not reviewed at the state level, and each individual school or school district is free to procure materials at any time, although most follow a five-to-ten year replacement cycle. The student population in adoption states represents approximately 50% of the U.S. elementary and secondary school-age population. Some adoption states provide “categorical funding” for instructional materials, which means that those state funds cannot be used for any other purpose. Our core curriculum programs typically have higher deferred sales than other parts of the business. The higher deferred sales are primarily due to the length of time that our programs are being delivered, along with greater component and digital product offerings. A significant portion of our Education segment net sales is dependent upon our ability to maintain residual sales, which are subsequent

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sales after the year of the original adoption, and our ability to continue to generate new business by developing new programs that meet our customers’ evolving needs. In addition, our market is affected by changes in state curriculum standards, which drive instruction, assessment and accountability in each state. Changes in state curriculum standards require that instructional materials be revised or replaced to align to the new standards, which historically has driven demand for core curriculum programs.

We also derive our Education segment net sales from supplemental and intervention products that target struggling learners through comprehensive intervention solutions aimed at raising student achievement by providing solutions that combine technology, content and other educational products, as well as consulting and professional development services. We also offer products targeted at assisting English language learners.

In international markets, we predominantly export and sell K-12 books to premium private schools that utilize the U.S. curriculum, which are located primarily in Asia, the Pacific, the Middle East, Latin America, the Caribbean and Africa. Our international sales team utilizes a global network of distributors in local markets around the world.

Our HMH Books & Media segment sells works of fiction and non-fiction in the General Interest and Young Reader’s categories, dictionaries and other reference works. While print remains the primary format in which trade books are produced and distributed, the market for trade titles in digital format, primarily ebooks, generally represents approximately 10% of our annual HMH Books & Media net sales. Further, HMH Books & Media licenses content to other publishers along with media companies.

Factors affecting our net sales include:

Education

• general economic conditions at the federal or state level;

• state or district per student funding levels;

• federal funding levels;

• the cyclicality of the purchasing schedule for adoption states;

• student enrollments;

• adoption of new education standards;

• state acceptance of submitted programs and participation rates for accepted programs;

• technological advancement and the introduction of new content and products that meet the needs of students, teachers and consumers, including through strategic agreements pertaining to content development and distribution; and

• the amount of net sales subject to deferrals which is impacted by the mix of product offering between digital and non-digital products, the length of programs and the mix of product delivered immediately or over time.

HMH Books & Media

• consumer spending levels as influenced by various factors, including the U.S. economy and consumer confidence;

• the publishing of bestsellers along with obtaining recognized authors;

• film and series tie-ins to our titles that spur sales of current and backlist titles, which are titles that have been on sale for more than a year; and

• market growth or contraction.

State or district per-student funding levels, which closely correlate with state and local receipts from income, sales and property taxes, impact our sales as institutional customers are affected by funding cycles. Most public school districts, the primary customers for K-12 products and services, are largely dependent on state and local funding to purchase materials.

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We monitor the purchasing cycles for specific disciplines in the adoption states in order to manage our product development and to plan sales campaigns. Our sales may be materially impacted during the years that major adoption states, such as Florida, California and Texas, are or are not scheduled to make significant purchases. For example, Texas adopted Reading/English Language Arts materials in 2018 for purchase in 2019 and 2020. California adopted history and social science materials in 2017 for purchase in 2018 and continuing through 2020 and adopted Science materials in 2018 for purchase in 2019 and continuing through 2021. Florida called for K-12 English Language Arts materials in 2020 for purchase beginning in 2021 and has called for K-12 Mathematics for review in 2021 and purchase beginning in 2022. Both Florida and Texas, along with several other adoption states, provide dedicated state funding for instructional materials and classroom technology, with funding typically appropriated by the legislature in the first half of the year in which materials are to be purchased. Texas has a two-year budget cycle, and in the 2019 legislative session appropriated funds for purchases in 2019 and 2020. California funds instructional materials in part with a dedicated portion of state lottery proceeds and in part out of general formula funds, with the minimum overall level of school funding determined according to the Proposition 98 funding guarantee. We do not currently have contracts with these states for future instructional materials adoptions and there is no guarantee that our programs will be accepted by the state.

Long-term growth in the U.S. K-12 market is positively correlated with student enrollments, which is a driver of growth in the educational publishing industry. Although economic cycles may affect short-term buying patterns, school enrollments are highly predictable and are expected to trend upward over the longer term. From 2018 to 2028, total public school enrollment, a major long-term driver of growth in the K-12 Education market, is projected to increase by 1.4% to 57.4 million students, according to the National Center for Education Statistics.

As the K-12 educational market purchases more digital solutions, we believe our ability to offer embedded assessments, adaptive learning, real-time interaction and student specific personalized learning and educational content in a platform- and device-agnostic manner will provide new opportunities for growth.

Our HMH Books & Media segment is heavily influenced by the U.S. and broader global economy, consumer confidence and consumer spending.

While print remains the primary format in which trade books are produced and distributed, the market for trade titles in digital format, primarily ebooks, has developed in the recent decade, as the industry evolved to embrace new technologies for developing, producing, marketing and distributing trade works. We continue to focus on the development of innovative new digital products which capitalize on our strong content, our digital expertise and the consumer demand for these products.

In the HMH Books & Media segment, annual results can be driven by bestselling trade titles. Furthermore, backlist titles can experience resurgence in sales when made into films or series. In past years, a number of our backlist titles such as The Hobbit, The Lord of the Rings, Life of Pi, The Handmaid’s Tale, The Polar Express, and The Giver have benefited in popularity due to movie or series releases and have subsequently resulted in increased trade sales.

We employ different pricing models to serve various customer segments, including institutions, government agencies, consumers and other third parties. In addition to traditional pricing models where a customer receives a product in return for a payment at the time of product receipt, we currently use the following pricing models:

• Pay-up-front: Customer makes a fixed payment at time of purchase and we provide a specific product/service in return; and

• Pre-pay Subscription: Customer makes a one-time payment at time of purchase, but receives a stream of goods/services over a defined time horizon; for example, we currently provide customers the option to purchase a multi-year subscription to textbooks where for a one-time charge, a new copy of the work text is delivered to the customer each year for a defined time period. Pre-pay subscriptions to online textbooks are another example where the customer receives access to an online book for a specific period of time.

Cost of sales, excluding publishing rights and pre-publication amortization

Cost of sales, excluding publishing rights and pre-publication amortization, include expenses directly attributable to the production of our products and services, including the non-capitalizable costs associated with our

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content and platform development group. The expenses within cost of sales include variable costs such as paper, printing and binding costs of our print materials, royalty expenses paid to our authors, gratis costs or products provided at no charge as part of the sales transaction, and inventory obsolescence. Also included in cost of sales are labor costs related to professional services and the non-capitalized costs associated with our content and platform development group. We also include amortization expense associated with our customer-facing software platforms. Certain products such as trade books and products associated with our renowned authors carry higher royalty costs; conversely, digital offerings usually have a lower cost of sales due to lower costs associated with their production. Also, sales to adoption states usually contain higher cost of sales. A change in the sales mix of our products or services can impact consolidated profitability.

Publishing rights and Pre-publication amortization

A publishing right is an acquired right that allows us to publish and republish existing and future works as well as create new works based on previously published materials. As part of our March 9, 2010 restructuring, we recorded an intangible asset for publishing rights and amortize such asset on an accelerated basis over the useful lives of the various copyrights involved. This amortization will continue to decrease approximately 25% annually through March of 2023.

We capitalize the art, prepress, manuscript and other costs incurred in the creation of the master copy of our content, known as the pre-publication costs. Pre-publication costs are primarily amortized from the year of sale over five years using the sum-of-the-years-digits method, which is an accelerated method for calculating an asset’s amortization. Under this method, the amortization expense recorded for a pre-publication cost asset is approximately 33% (year 1), 27% (year 2), 20% (year 3), 13% (year 4) and 7% (year 5). We utilize this policy for all pre-publication costs, except with respect to our HMH Books & Media segment’s consumer books, for which we generally expense such costs as incurred, and the acquired content of certain intervention products acquired in 2015, which we amortize over 7 years using an accelerated amortization method. The amortization methods and periods chosen best reflect the pattern of expected sales generated from individual titles or programs. We periodically evaluate the remaining lives and recoverability of capitalized pre-publication costs, which are often dependent upon program acceptance by state adoption authorities.

Selling and administrative expenses

Our selling and administrative expenses include the salaries, benefits and related costs of employees engaged in sales and marketing, fulfillment and administrative functions. Also included within selling and administrative expenses are variable costs such as commission expense, outbound transportation costs (approximately $25.6 million for the year ended December 31, 2020) and depository fees, which are fees paid to state-mandated depositories that fulfill centralized ordering and warehousing functions for specific states. Additionally, significant fixed and discretionary costs include facilities, telecommunications, professional fees, promotions, sampling and advertising along with depreciation.

Other intangible asset amortization

Our other intangible asset amortization expense primarily includes the amortization of acquired intangible assets consisting of tradenames, customer relationships, content rights and licenses. The tradenames, customer relationships, content rights and licenses are amortized over varying periods of 6 to 25 years. The expense for the year ended December 31, 2020 was $25.6 million.

Interest expense

Our interest expense includes interest accrued on our $306.0 million in aggregate principal amount of 9.0% Senior Secured Notes due 2025 (“notes”), our $380.0 million term loan credit facility (“term loan facility”) and our previous $800.0 million term loan credit facility (“previous term loan facility”) along with, to a lesser extent, our revolving credit facility, finance leases, the amortization of any deferred financing fees and loan discounts, and payments in connection with interest rate hedging agreements. Our interest expense for the year ended December 31, 2020 was $66.0 million.

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Results of Operations

Consolidated Operating Results for the Years Ended December 31, 2020 and 2019

	Year Ended			Year Ended
	December 31,			December 31,			Dollar			Percent
(dollars in thousands)	2020			2019			change			Change
Net sales	$	1,031,292		$	1,390,674		$	(359,382	)		(25.8	)%
Costs and expenses:
Cost of sales, excluding publishing rights and    pre-publication amortization		497,816			668,108			(170,292	)		(25.5	)%
Publishing rights amortization		20,056			26,557			(6,501	)		(24.5	)%
Pre-publication amortization		126,180			149,515			(23,335	)		(15.6	)%
Cost of sales		644,052			844,180			(200,128	)		(23.7	)%
Selling and administrative		478,101			662,606			(184,505	)		(27.8	)%
Other intangible asset amortization		25,585			25,310			275			1.1	%
Impairment charge for goodwill		279,000			—			279,000		NM
Restructuring/severance and other charges		33,643			21,742			11,901			54.7	%
Operating loss		(429,089	)		(163,164	)		(265,925	)	NM
Other income (expense):
Retirement benefits non-service (expense) income		(856	)		167			(1,023	)	NM
Interest expense		(65,959	)		(48,778	)		(17,181	)		(35.2	)%
Interest income		899			3,157			(2,258	)		(71.5	)%
Change in fair value of derivative instruments		672			(899	)		1,571		NM
Gain on investments		2,091			—			2,091		NM
Income from transition services agreement		—			4,248			(4,248	)	NM
Loss on extinguishment of debt		—			(4,363	)		4,363		NM
Loss before taxes		(492,242	)		(209,632	)		(282,610	)	NM
Income tax (benefit) expense		(12,404	)		4,201			(16,605	)	NM
Net loss	$	(479,838	)	$	(213,833	)	$	(266,005	)	NM

NM = not meaningful

Net sales for the year ended December 31, 2020 decreased $359.4 million, or 25.8%, from $1,390.7 million in 2019 to $1,031.3 million. The net sales decrease was driven by a $371.1 million decrease in our Education segment, offset by a $11.7 million increase in our HMH Books & Media segment. Within our Education segment, the decrease was primarily due to lower net sales in Extensions, which primarily consist of our Heinemann brand, intervention and supplemental products as well as professional services, which decreased by $252.0 million from $632.0 million in 2019 to $380.0 million. Within Extensions, net sales decreased due to lower sales of the Heinemann’s Fountas & Pinnell Classroom, Calkins and LLI Leveled Literacy products due to a difficult comparison to prior year Texas K-6 sales coupled with the impact of the COVID-19 pandemic in 2020. Also, contributing to the decrease was lower professional services with the decline of the in-person learning environment as a result of the COVID-19 pandemic. Further, there were lower net sales from Core Solutions which decreased by $119.0 million from $578.0 million in 2019 to $459.0 million, primarily due to the smaller new adoption market opportunity in Texas ELA, along with impacts of the COVID-19 pandemic. Within our HMH Books & Media segment, the increase in net sales was primarily due to $9.6 million of licensing revenue from a new production series, a $3.4 million increase in licensing revenue attributed to the Carmen Sandiego series on Netflix, and strong net sales of the frontlist titles The 99% Invisible City, Compromised and Defined Dish. Offsetting the aforementioned, was lower net sales of both Adult and Young Reader’s categories due to the closure of bookstores during the COVID-19 pandemic and the corresponding delay in releases of new frontlist titles.  

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Operating loss for the year ended December 31, 2020 unfavorably changed from a loss of $163.2 million in 2019 to a loss of $429.1 million, due primarily to the following:

• A $359.4 million decrease in net sales;

• An impairment charge for goodwill in 2020 of $279.0 million. This non-cash impairment is a direct result of the adverse impact that the COVID-19 pandemic has had on the Company;

• A $11.9 million increase in costs associated with our restructuring/severance and other charges due to $33.6 million of severance costs associated with the 2020 Restructuring Plan;

Partially offset by:

• A $184.5 million decrease in selling and administrative expenses, primarily due to lower labor costs of $77.0 million, resulting from cost savings associated with our employee furlough initiative, which began in April and ceased at the end of July, in response to COVID-19, our 2020 Restructuring Plan and a freeze on hiring. Also, there was a decrease of $52.0 million of variable expenses such as commissions and transportation due to lower billings. Further, there were lower discretionary costs of $44.0 million primarily related to travel and expense reduction measures and marketing along with lower depreciation expense of $11.0 million;

• A $170.3 million decrease in our cost of sales, excluding publishing rights and pre-publication amortization, from $668.1 million in 2019 to $497.8 million, primarily due to lower billings. Our cost of sales, excluding publishing rights and pre-publication amortization, as a percentage of sales, was essentially flat year over year; and

• A $29.6 million decrease in net amortization expense related to publishing rights, pre-publication and other intangible assets, primarily due to a decrease in pre-publication amortization attributed to the timing and large amount of 2019 major product releases and, to a lesser extent, our use of accelerated amortization methods for publishing rights amortization.

Retirement benefits non-service (expense) income for the year ended December 31, 2020 changed unfavorably by $1.0 million due to the recognition of a $1.1 million settlement charge related to the pension plan during 2020.

Interest expense for the year ended December 31, 2020 increased $17.2 million from $48.8 million in 2019 to $66.0 million, primarily due to our 2019 Refinancing during the fourth quarter of 2019. Further, there was an increase of $2.4 million of net settlement payments on our interest rate derivative instruments during 2020.

Interest income for the year ended December 31, 2020 decreased $2.3 million from $3.2 million in 2019 to $0.9 million, primarily due to lower interest rates on our money market funds in 2020.

Change in fair value of derivative instruments for the year ended December 31, 2020 favorably changed by $1.6 million due to foreign exchange forward contracts executed on the Euro that were favorably impacted by the weakening of the U.S. dollar against the Euro.

Gain on investments for the year ended December 31, 2020 was $2.1 million and was related to the fair value change in our equity interests in educational technology private partnerships.

Income from transition services agreement for the year ended December 31, 2019 was $4.2 million and was related to transition service fees under the transition services agreement with the purchaser of our Riverside Business pursuant to which we performed certain support functions through September 30, 2019. We had no income from transition services agreement for the year ended December 31, 2020.

Loss on extinguishment of debt for the year ended December 31, 2019 consisted of a $3.4 million write-off related to unamortized deferred financing fees associated with the portion of our previous term loan facility that was accounted for as an extinguishment. Further, there was a $1.0 million write off of the remaining balance of the debt discount associated with the previous term loan facility. We had no loss on extinguishment of debt for the year ended December 31, 2020.

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Income tax (benefit) expense for the year ended December 31, 2020 decreased $16.6 million, from an expense of $4.2 million in 2019, to a benefit of $12.4 million. The change was due to an income tax benefit primarily due to the impairment charge on goodwill, which reduced related deferred tax liabilities. The effective tax rate was 2.5% and (2.0%) for the years ended December 31, 2020 and 2019, respectively.   

Adjusted EBITDA

To supplement our financial statements presented in accordance with GAAP, we have presented Adjusted EBITDA, which 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 the related financial information prepared in accordance with GAAP. Management believes that the presentation of Adjusted EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted EBITDA provides an indicator of general economic performance that is not affected by debt restructurings, fluctuations in interest rates or effective tax rates, gain or losses on investments, non-cash charges and impairment charges, or levels of depreciation or amortization along with costs such as severance, separation and facility closure costs, inventory obsolescence related to our strategic transformation plan, acquisition/disposition-related activity costs, restructuring costs and integration costs. Accordingly, our management believes that this measurement is useful for comparing general operating performance from period to period. In addition, targets in Adjusted EBITDA (further adjusted to include changes in deferred revenue) are used as performance measures to determine certain compensation of management, and Adjusted EBITDA is used as the base for calculations relating to incurrence covenants in our debt agreements. Other companies may define Adjusted EBITDA differently and, as a result, our measure of Adjusted EBITDA may not be directly comparable to Adjusted EBITDA of other companies. Although we use Adjusted EBITDA as a financial measure to assess the performance of our business, the use of Adjusted EBITDA is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business. Adjusted EBITDA should be considered in addition to, and not as a substitute for, net loss/income in accordance with GAAP as a measure of performance. Adjusted EBITDA is not intended to be a measure of liquidity or free cash flow for discretionary use. You are cautioned not to place undue reliance on Adjusted EBITDA.

Below is a reconciliation of our net loss to Adjusted EBITDA for the years ended December 31, 2020 and 2019:

	Years Ended December 31,
	2020			2019
Net loss	$	(479,838	)	$	(213,833	)
Interest expense		65,959			48,778
Interest income		(899	)		(3,157	)
Provision (benefit) for income taxes		(12,404	)		4,201
Depreciation expense		50,715			61,475
Amortization expense—film asset		13,953			9,835
Amortization expense		171,821			201,382
Non-cash charges—goodwill impairment		279,000			—
Non-cash charges—stock-compensation		11,573			13,968
Non-cash charges— (gain) loss on derivative    instruments		(672	)		899
Inventory obsolescence related to strategic transformation plan		—			9,758
Fees, expenses or charges for equity offerings,    debt or acquisitions/dispositions		1,080			6,327
Restructuring/severance and other charges		33,643			21,742
Gain on investments		(2,091	)		—
Loss on extinguishment of debt		—			4,363
Adjusted EBITDA	$	131,840		$	165,738

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Segment Operating Results

Results of Operations—Comparing Years Ended December 31, 2020 and 2019

Education

							2020 vs. 2019
	Years Ended December 31,						Dollar			Percent
	2020			2019			change			change
Net sales	$	839,553		$	1,210,646		$	(371,093	)		(30.7	)%
Costs and expenses:
Cost of sales, excluding publishing rights and    pre-publication amortization		368,876			547,094			(178,218	)		(32.6	)%
Publishing rights amortization		14,800			20,611			(5,811	)		(28.2	)%
Pre-publication amortization		125,966			148,850			(22,884	)		(15.4	)%
Cost of sales		509,642			716,555			(206,913	)		(28.9	)%
Selling and administrative		360,755			520,153			(159,398	)		(30.6	)%
Impairment charge for goodwill		279,000			—			279,000		NM
Other intangible asset amortization		22,948			19,878			3,070			15.4	%
Operating loss	$	(332,792	)	$	(45,940	)	$	(286,852	)	NM
Net loss	$	(332,792	)	$	(45,940	)	$	(286,852	)	NM
Adjustments from net loss to Education segment      Adjusted EBITDA
Depreciation expense	$	35,940		$	43,749		$	(7,809	)		(17.8	)%
Amortization expense		163,714			189,340			(25,626	)		(13.5	)%
Inventory obsolescence related to strategic transformation plan		—			9,758			(9,758	)	NM
Impairment charge for goodwill		279,000			—			279,000		NM
Education segment    Adjusted EBITDA	$	145,862		$	196,907		$	(51,045	)		(25.9	)%

NM = not meaningful

Our Education segment net sales for the year ended December 31, 2020 decreased $371.1 million, or 30.7%, from $1,210.6 million in 2019 to $839.6 million. The net sales decrease was primarily due to lower net sales in Extensions, which primarily consist of our Heinemann brand, intervention and supplemental products as well as professional services, which decreased by $252.0 million from $632.0 million in 2019 to $380.0 million. Within Extensions, net sales decreased due to lower sales of the Heinemann’s Fountas & Pinnell Classroom, Calkins and LLI Leveled Literacy products due to a difficult comparison to prior year Texas K-6 sales coupled with the impact of the COVID-19 pandemic in 2020. Also, contributing to the decrease was lower professional services with the decline of the in-person learning environment as a result of the COVID-19 pandemic. Further, there were lower net sales from Core Solutions which decreased by $119.0 million from $578.0 million in 2019 to $459.0 million, primarily due to the smaller new adoption market opportunity in Texas ELA, along with the COVID-19 pandemic.

Our Education segment cost of sales for the year ended December 31, 2020 decreased $206.9 million, or 28.9%, from $716.6 million in 2019 to $509.6 million. Our cost of sales, excluding publishing rights and pre-publication amortization, decreased $178.2 million from $547.1 million in 2019 to $368.9 million, largely due to the decline in net sales. Our cost of sales, excluding publishing rights and pre-publication amortization, as a percentage of sales, decreased year over year from 45.2% to 43.9%. Pre-publication amortization decreased by $22.9 million from 2019 primarily due to the timing and large amount of 2019 major product releases, and publishing rights amortization decreased $5.8 million attributed to our use of accelerated amortization methods.

Our Education segment selling and administrative expense for the year ended December 31, 2020 decreased $159.4 million, or 30.6%, from $520.2 million in 2019 to $360.8 million. The decrease was driven by lower labor costs primarily attributed to cost savings associated with our employee furlough initiative in response to the COVID-19 pandemic and our 2020 Restructuring Plan and a freeze on hiring. Further, lower variable expenses such

40

as commissions, samples, transportation, and depository fees attributed to lower billings from the prior year and lower discretionary spending due to travel reductions and cost reductions throughout the Company.

Our Education segment other intangible asset amortization expense for the year ended December 31, 2020 increased $3.1 million from 2019, due to accelerated amortization of certain intangible assets.

Our Education segment Adjusted EBITDA for the year ended December 31, 2020 decreased $51.0 million, or 25.9%, from $196.9 million in 2019 to $145.9 million. Our Education segment Adjusted EBITDA excludes depreciation, amortization, inventory obsolescence related to our strategic transformation plan and goodwill impairment charges. The decrease is due to the identified factors impacting net sales, cost of sales and selling and administrative expenses after removing those items not included in Education segment Adjusted EBITDA.

HMH Books & Media

						2020 vs. 2019
	Years Ended December 31,					Dollar			Percent
	2020		2019			change			change
Net sales	$	191,739	$	180,028		$	11,711			6.5	%
Costs and expenses:
Cost of sales, excluding publishing    rights and pre-publication    amortization		128,940		121,014			7,926			6.5	%
Publishing rights amortization		5,256		5,946			(690	)		(11.6	)%
Pre-publication amortization		214		665			(451	)		(67.8	)%
Cost of sales		134,410		127,625			6,785			5.3	%
Selling and administrative		50,507		55,071			(4,564	)		(8.3	)%
Other intangible asset amortization		2,637		5,432			(2,795	)		(51.5	)%
Operating income (loss)	$	4,185	$	(8,100	)	$	12,285		NM
Net income (loss)	$	4,185	$	(8,100	)	$	12,285		NM
Adjustments from net income (loss) to HMH Books      & Media segment Adjusted EBITDA
Depreciation expense	$	382	$	1,131		$	(749	)		(66.2	)%
Amortization expense film asset		13,953		9,835			4,118			41.9	%
Amortization expense		8,107		12,042			(3,935	)		(32.7	)%
HMH Books & Media segment    Adjusted EBITDA	$	26,627	$	14,908		$	11,719			78.6	%

NM = not meaningful

Our HMH Books & Media segment net sales for the year ended December 31, 2020 increased $11.7 million, or 6.5%, from $180.0 million in 2019 to $191.7 million. The increase in net sales was primarily due to $9.6 million of licensing revenue from a new production series, a $3.4 million increase in licensing revenue attributed to the Carmen Sandiego series on Netflix, and strong net sales of the frontlist titles The 99% Invisible City, Compromised and Defined Dish. Offsetting the aforementioned, was lower net sales of both Adult and Young Reader’s categories due to the closure of bookstores during the COVID-19 pandemic and the corresponding delay in releases of certain new frontlist titles.

Our HMH Books & Media segment cost of sales for the year ended December 31, 2020 increased $6.8 million, or 5.3%, from $127.6 million in 2019 to $134.4 million. The majority of the increase was driven by our cost of sales, excluding publishing rights and pre-publication amortization, which increased $7.9 million due to higher net sales. Our cost of sales, excluding publishing rights and pre-publication amortization, as a percentage of net sales, remained essentially flat.

Our HMH Books & Media segment selling and administrative expense for the year ended December 31, 2020 decreased $4.6 million from $55.1 million in 2019, to $50.5 million. The decrease was due to labor savings

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associated with our employee furlough initiative in response to the COVID-19 pandemic, and our 2020 Restructuring Plan and a freeze on hiring.

Our HMH Books & Media segment other intangible asset amortization expense for the year ended December 31, 2020, decreased $2.8 million from 2019, due to certain definite-lived intangible assets being fully amortized in 2019.

Our HMH Books & Media segment Adjusted EBITDA for the year ended December 31, 2020 changed favorably from $14.9 million in 2019 to $26.6 million due to the identified factors impacting net sales, cost of sales and selling and administrative expenses after removing those items not included in our HMH Books & Media segment Adjusted EBITDA. Our HMH Books & Media segment Adjusted EBITDA excludes depreciation and amortization.

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Corporate and Other

							2020 vs. 2019
	Years Ended December 31,						Dollar			Percent
	2020			2019			change			change
Net sales	$	—		$	—		$	—		$	—
Costs and expenses:
Cost of sales, excluding publishing    rights and pre-publication    amortization		—			—			—			—
Publishing rights amortization		—			—			—			—
Pre-publication amortization		—			—			—			—
Cost of sales		—			—			—			—
Selling and administrative		66,839			87,382			(20,543	)		(23.5	)%
Restructuring/severance and other charges		33,643			21,742			11,901			54.7	%
Operating loss	$	(100,482	)	$	(109,124	)	$	8,642			7.9	%
Retirement benefits non-service (expense) income		(856	)		167			(1,023	)	NM
Interest expense		(65,959	)		(48,778	)		(17,181	)		(35.2	)%
Interest income		899			3,157			(2,258	)		(71.5	)%
Change in fair value of derivative instruments		672			(899	)		1,571		NM
Gain on investments		2,091			—			2,091		NM
Income from transition services agreement		—			4,248			(4,248	)	NM
Loss on extinguishment of debt		—			(4,363	)		4,363		NM
Loss before taxes		(163,635	)		(155,592	)		(8,043	)		(5.2	)%
Income tax (benefit) expense		(12,404	)		4,201			(16,605	)	NM
Net loss	$	(151,231	)	$	(159,793	)	$	8,562			5.4	%
Adjustments from net loss to Corporate and Other    Adjusted EBITDA
Interest expense	$	65,959		$	48,778		$	17,181			35.2	%
Interest income		(899	)		(3,157	)		2,258			71.5	%
Provision for income taxes		(12,404	)		4,201			(16,605	)	NM
Depreciation expense		14,393			16,595			(2,202	)		(13.3	)%
Non-cash charges—loss on derivative instruments		(672	)		899			(1,571	)	NM
Non-cash charges—stock compensation		11,573			13,968			(2,395	)		(17.1	)%
Fees, expenses or charges for equity offerings, debt or    acquisitions/dispositions		1,080			6,327			(5,247	)		(82.9	)%
Severance, separation costs and facility closures		33,643			21,742			11,901			54.7	%
Loss on extinguishment of debt		—			4,363			(4,363	)	NM
Gain on investments		(2,091	)		—			(2,091	)	NM
Corporate and Other Adjusted    EBITDA	$	(40,649	)	$	(46,077	)	$	5,428			11.8	%

NM= not meaningful

The Corporate and Other category represents certain general overhead costs not fully allocated to the business segments such as legal, accounting, treasury, human resources, technology and executive functions along with restructuring, severance and other non-operating costs.

Our selling and administrative expense for the Corporate and Other category for the year ended December 31, 2020 decreased $20.5 million from $87.4 million in 2019 to $66.8 million, primarily attributed to labor savings associated with our employee furlough initiative in response to the COVID-19 pandemic and our 2020 Restructuring Plan and a freeze on hiring. Additionally, selling and administrative expenses were lower due to lower stock compensation charges and depreciation.

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Our restructuring/severance and other charges for the year ended December 31, 2020 increased by $11.9 million primarily due to $33.6 million of severance costs associated with the 2020 Restructuring Plan.

Retirement benefits non-service (expense) income for the year ended December 31, 2020 changed unfavorably by $1.0 million due to the recognition of a $1.1 million settlement charge related to the pension plan during 2020. 

Interest expense for the year ended December 31, 2020 increased $17.2 million from $48.8 million in 2019 to $66.0 million, primarily due to our 2019 Refinancing during the fourth quarter of 2019. Further, there was an increase of $2.4 million of net settlement payments on our interest rate derivative instruments during 2020.

Interest income for the year ended December 31, 2020 decreased $2.3 million from $3.2 million in 2019 to $0.9 million, primarily due to lower interest rates on our money market funds in 2020.

Change in fair value of derivative instruments for the year ended December 31, 2020 favorably changed by $1.6 million due to foreign exchange forward contracts executed on the Euro that were favorably impacted by the weakening of the U.S. dollar against the Euro.

Gain on investments for the year ended December 31, 2020 was $2.1 million and was related to the fair value change in our equity interests in educational technology private partnerships.

Income from transition services agreement for the year ended December 31, 2019 was $4.2 million and was related to transition service fees under the transition services agreement with the purchaser of our Riverside Business pursuant to which we performed certain support functions through September 30, 2019. We had no income from transition services agreement for the year ended December 31, 2020.

Loss on extinguishment of debt for the year ended December 31, 2019 consisted of a $3.4 million write-off related to unamortized deferred financing fees associated with the portion of our previous term loan facility that was accounted for as an extinguishment. Further, there was a $1.0 million write off of the remaining balance of the debt discount associated with the previous term loan facility. We had no loss on extinguishment of debt for the year ended December 31, 2020.

Income tax (benefit) expense for the year ended December 31, 2020 decreased $16.6 million, from an expense of $4.2 million in 2019, to a benefit of $12.4 million. The change was due to an income tax benefit primarily due to the impairment charge on goodwill, which reduced related deferred tax liabilities. The effective tax rate was 2.5% and (2.0%) for the years ended December 31, 2020 and 2019, respectively.      

Adjusted EBITDA for the Corporate and Other category for the year ended December 31, 2020 favorably changed $5.4 million, or 11.8%, from a loss of $46.1 million in 2019 to a loss of $40.6 million. Our Adjusted EBITDA for the Corporate and Other category excludes interest, taxes, depreciation, derivative instruments charges, equity compensation charges, acquisition/disposition-related activity, gains or losses on investments, restructuring costs, and loss on extinguishment of debt. The favorable change in our Adjusted EBITDA for the Corporate and Other category was due to the factors described above after removing those items not included in Adjusted EBITDA for the Corporate and Other category.

Seasonality and Comparability

Our net sales, operating profit or loss and net cash provided by or used in operations are impacted by the inherent seasonality of the academic calendar, which typically results in a cash flow usage in the first half of the year and a cash flow generation in the second half of the year. Consequently, the performance of our businesses may not be comparable quarter to consecutive quarter and should be considered on the basis of results for the whole year or by comparing results in a quarter with results in the same quarter for the previous year. Moreover, uncertainty resulting from the COVID-19 pandemic may result in not following this historic pattern.

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Approximately 81% of our net sales for the year ended December 31, 2020 were derived from our Education segment, which is a markedly seasonal business. Schools conduct the majority of their purchases in the second and third quarters of the calendar year in preparation for the beginning of the school year. Thus, over the past three completed fiscal years, approximately 66% of our consolidated net sales were realized in the second and third quarters. Sales of K-12 instructional materials are also cyclical, with some years offering more sales opportunities than others based on the state adoption calendar. The amount of funding available at the state level for educational materials also has a significant effect on year-to-year net sales. Although the loss of a single customer would not have a material adverse effect on our business, schedules of school adoptions and market acceptance of our products can materially affect year-to-year net sales performance.

The following table is indicative of the seasonality of our business and the related results:

Quarterly Results of Operations

	First			Second			Third			Fourth			First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter			Quarter			Quarter			Quarter			Quarter
(in thousands)	2019			2019			2019			2019			2020			2020			2020			2020
Education segment	$	153,844		$	349,801		$	517,614		$	189,387		$	151,585		$	216,063		$	330,926		$	140,979
HMH Books & Media segment		40,791			39,095			48,054			52,088			38,340			35,153			55,664			62,582
Net sales		194,635			388,896			565,668			241,475			189,925			251,216			386,590			203,561
Costs and expenses:
Cost of sales, excluding publishing rights and pre-    publication amortization		96,055			190,831			246,527			134,695			90,012			124,360			182,767			100,677
Publishing rights amortization		7,605			6,271			6,341			6,340			5,825			4,709			4,761			4,761
Pre-publication amortization		33,082			35,739			39,319			41,375			30,638			31,758			31,647			32,137
Cost of sales		136,742			232,841			292,187			182,410			126,475			160,827			219,175			137,575
Selling and administrative		151,983			175,266			188,957			146,400			133,353			106,329			127,324			111,095
Impairment charge for goodwill		—			—			—			—			262,000			—			—			17,000
Other intangible asset amortization		6,524			6,612			6,383			5,791			6,273			6,272			6,274			6,766
Restructuring/severance and other charges		1,221			4,430			270			15,821			—			—			33,545			98
Operating (loss) income		(101,835	)		(30,253	)		77,871			(108,947	)		(338,176	)		(22,212	)		272			(68,973	)
Other income (expense)
Retirement benefits non-service (expense) income		42			42			41			42			61			61			61			(1,039	)
Interest expense		(11,582	)		(11,963	)		(11,597	)		(13,636	)		(16,783	)		(17,482	)		(16,168	)		(15,526	)
Interest income		1,092			97			509			1,459			766			75			32			26
Change in fair value of derivative instruments		(450	)		16			(737	)		272			(380	)		120			432			500
Gain on investments		—			—			—			—			—			—			1,738			353
Income from transition services agreement		1,826			1,851			571			—			—			—			—			—
Loss on extinguishment of debt		—			—			—			(4,363	)		—			—			—			—
(Loss) income before taxes		(110,907	)		(40,210	)		66,658			(125,173	)		(354,512	)		(39,438	)		(13,633	)		(84,659	)
Income tax expense (benefit)		6,455			403			(2,602	)		(55	)		(8,539	)		(1,270	)		(1,081	)		(1,514	)
Net (loss) income	$	(117,362	)	$	(40,613	)	$	69,260		$	(125,118	)	$	(345,973	)	$	(38,168	)	$	(12,552	)	$	(83,145	)

45

During the fourth quarter of 2020, we recorded an adjustment of $17.0 million and $1.0 million to increase both the goodwill impairment charge and income tax benefit recorded, respectively, to correct an error of the previously recorded goodwill impairment of $262.0 million and related income tax benefit in the first quarter of 2020. Management believes these adjustments are not material to the current period financial statements or any prior periods.

Liquidity and Capital Resources

	December 31,
(in thousands)	2020			2019
Cash and cash equivalents	$	281,200		$	296,353
Current portion of long-term debt		19,000			19,000
Long-term debt, net of discount and issuance costs		624,692			638,187
Revolving credit facility		—			—
Borrowing availability under revolving credit facility		104,806			161,961
	Years ended December 31,
	2020			2019
Net cash provided by operating activities	$	115,248		$	254,975
Net cash used in investing activities		(112,271	)		(96,320	)
Net cash used in financing activities		(18,130	)		(115,667	)

Operating activities

Net cash provided by operating activities was $115.2 million for the year ended December 31, 2020, a $139.7 million decrease from the $255.0 million of net cash provided by operating activities for the year ended December 31, 2019. The decrease in cash provided by operating activities was primarily driven by unfavorable changes in net operating assets and liabilities of $78.4 million primarily due to changes in deferred revenue of $143.3 million and $29.3 million of royalties related to greater billings in 2019, accounts payable of $22.8 million related to timing of disbursements and severance and other charges of $3.4 million due to the 2020 Restructuring Plan, offset by favorable period over period inventory changes of $74.9 million, favorable period over period changes in accounts receivable of $12.4 million, an increase in operating lease liabilities of $15.3 million, pension and postretirement benefits of $8.2 million, interest payable of $3.5 million due to the timing of our 2019 refinancing and other assets and liabilities of $6.1 million. Additionally, operating profit, net of non-cash items, decreased by $61.4 million.    

Investing activities

Net cash used in investing activities was $112.3 million for the year ended December 31, 2020, an increase of $16.0 million from the year ended December 31, 2019. The increase in cash used in investing activities was primarily due to lower net proceeds from sales and maturities of short-term investments of $50.0 million compared to 2019, offset by lower capital investing expenditures related to pre-publication costs and property, plant, and equipment of $27.8 million in connection with previously planned reductions in content development, and by the acquisition of a business for $5.4 million along with an investment in preferred stock of $0.8 million in 2019.

Financing activities

Net cash used in financing activities was $18.1 million for the year ended December 31, 2020, a decrease of $97.6 million from the year ended December 31, 2019. The decrease in cash used in financing activities was primarily due to a reduction in net debt principal repayments of $88.3 million in connection with the 2019 Refinancing along with payments of financing fees of $8.5 million related to our notes offering, term loan facility and revolving credit facility amendments in 2019. Additionally, there was a decrease in tax withholding payments related to net share settlements of restricted stock units of $2.0 million partially offset by lower net collections under the transition services agreement of $1.1 million.

46

Debt

Under each of the notes, the term loan facility and the revolving credit facility, Houghton Mifflin Harcourt Publishers Inc., Houghton Mifflin Harcourt Publishing Company and HMH Publishers LLC are the borrowers (collectively, the “Borrowers”), and Citibank, N.A. acts as both the administrative agent and the collateral agent.

The obligations under the senior secured notes, the term loan facility and the revolving credit facility are guaranteed by the Company and each of its direct and indirect for-profit domestic subsidiaries (other than the Borrowers) (collectively, the “Guarantors”) and are secured by all capital stock and other equity interests of the Borrowers and the Guarantors and substantially all of the other tangible and intangible assets of the Borrowers and the Guarantors, including, without limitation, receivables, inventory, equipment, contract rights, securities, patents, trademarks, other intellectual property, cash, bank accounts and securities accounts and owned real estate. The revolving credit facility is secured by first priority liens on receivables, inventory, deposit accounts, securities accounts, instruments, chattel paper and other assets related to the foregoing (the “Revolving First Lien Collateral”), and second priority liens on the collateral which secures the term loan facility on a first priority basis. The term loan facility is secured by first priority liens on the capital stock and other equity interests of the Borrowers and the Guarantors, equipment, owned real estate, trademarks and other intellectual property, general intangibles that are not Revolving First Lien Collateral and other assets related to the foregoing, and second priority liens on the Revolving First Lien Collateral.

Senior Secured Notes

On November 22, 2019, we completed the sale of $306.0 million in aggregate principal amount of 9.0% Senior Secured Notes due 2025 (the “notes”) in a private placement to qualified institutional buyers under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to persons outside the United States pursuant to Regulation S under the Securities Act. The notes mature on February 15, 2025 and bear interest at a rate of 9.0% per annum. Interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2020.  As of December 31, 2020, we had $306.0 million ($297.6 million, net of discount and issuance costs) outstanding under the notes.

We may redeem all or a portion of the notes at redemption prices as described in the notes.  

The notes do not require us to comply with financial maintenance covenants. We are currently required to meet certain incurrence based financial covenants as defined under the notes.

The notes are subject to customary events of default. If an event of default occurs and is continuing, the administrative agent may, or at the request of certain required lenders shall, accelerate the obligations outstanding under the notes.

Term Loan Facility

On November 22, 2019, we entered into a second amended and restated term loan credit agreement for an aggregate principal amount of $380.0 million (the “term loan facility”).  As of December 31, 2020, we had $361.0 million ($346.1 million, net of discount and issuance costs) outstanding under the term loan facility.    

The term loan facility matures on November 22, 2024 and the interest rate per annum is equal to, at the option of the Company, either (a) LIBOR plus a margin of 6.25% or (b) an alternate base rate plus a margin of 5.25%.  As of December 31, 2020, the interest rate on the term loan facility was 7.25%.

The term loan facility is required to be repaid in quarterly installments of approximately $4.8 million with the balance being payable on the maturity date.  

The term loan facility does not require us to comply with financial maintenance covenants. We are currently required to meet certain incurrence based financial covenants as defined under our term loan facility.

47

The term loan facility contains customary mandatory prepayment requirements, including with respect to excess cash flow, proceeds from certain asset sales or dispositions of property, and proceeds from certain incurrences of indebtedness. To the extent that we are successful in the divestiture of our Books & Media business, we plan to utilize a portion of the proceeds to reduce our outstanding indebtedness, which will increase recurring free cash flow resulting from reduced interest expense. The term loan facility permits the Company to voluntarily prepay outstanding amounts at any time without premium or penalty, other than customary breakage costs with respect to LIBOR loans; provided, however, that any voluntary prepayment in connection with certain repricing transactions that occur before the date that is twelve months after the closing of the term loan facility shall be subject to a prepayment premium of 1.00% of the principal amount of the amounts prepaid.

The term loan facility is subject to usual and customary conditions, representations, warranties and covenants, including restrictions on additional indebtedness, liens, investments, mergers, acquisitions, asset dispositions, dividends to stockholders, repurchase or redemption of our stock, transactions with affiliates and other matters. The term loan facility is subject to customary events of default. If an event of default occurs and is continuing, the administrative agent may, or at the request of certain required lenders shall, accelerate the obligations outstanding under the term loan facility.

We are subject to an excess cash flow provision under our term loan facility which is predicated upon our leverage ratio and cash flow. We were not required to make a payment under the excess cash flow provision in 2020 and 2019.  

Revolving Credit Facility

On November 22, 2019, we entered into a second amended and restated revolving credit agreement that provides borrowing availability in an amount equal to the lesser of either $250.0 million or a borrowing base that is computed monthly or weekly and comprised of the Borrowers’ and the Guarantors’ eligible inventory and receivables (the “revolving credit facility”).

The revolving credit facility includes a letter of credit subfacility of $50.0 million, a swingline subfacility of $20.0 million and the option to expand the facility by up to $100.0 million in the aggregate under certain specified conditions. The amount of any outstanding letters of credit reduces borrowing availability under the revolving credit facility on a dollar-for-dollar basis. As of December 31, 2020, there were no amounts outstanding on the revolving credit facility. As of December 31, 2020, we had approximately $18.8 million of outstanding letters of credit and approximately $104.8 million of borrowing availability under the revolving credit facility. As of February 25, 2021, there were no amounts outstanding under the revolving credit facility.

The revolving credit facility has a five-year term and matures on November 22, 2024. The interest rate applicable to borrowings under the facility is based, at our election, on LIBOR plus a margin between 1.50% and 2.00% or an alternative base rate plus a margin between 0.50% and 1.00%, which margins are based on average daily availability. The revolving credit facility may be prepaid, in whole or in part, at any time, without premium.

The revolving credit facility requires us to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 on a trailing four-quarter basis for periods in which excess availability under the revolving credit facility is less than the greater of $25.0 million and 12.5% of the lesser of the total commitment and the borrowing base then in effect, or less than $20.0 million if certain conditions are met. The minimum fixed charge coverage ratio was not applicable under the facility as of December 31, 2020, due to our level of borrowing availability.

The revolving credit facility is subject to usual and customary conditions, representations, warranties and covenants, including restrictions on additional indebtedness, liens, investments, mergers, acquisitions, asset dispositions, dividends to stockholders, repurchase or redemption of our stock, transactions with affiliates and other matters. The revolving credit facility is subject to customary events of default. If an event of default occurs and is continuing, the administrative agent may, or at the request of certain required lenders shall, accelerate the obligations outstanding under the revolving credit facility.

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General

We had $281.2 million of cash and cash equivalents and no short-term investments at December 31, 2020. We had $296.4 million of cash and cash equivalents and no short-term investments at December 31, 2019.

Our business is impacted by the inherent seasonality of the academic calendar, which typically results in a cash flow usage in the first half of the year and a cash flow generation in the second half of the year. We expect our net cash provided by operations combined with our cash and cash equivalents and borrowing availability under our revolving credit facility to provide sufficient liquidity to fund our current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months. Our primary credit facilities do not require us to comply with financial maintenance covenants.

The ability of the Company to fund planned operations is based on assumptions which involve significant judgment and estimates of future revenues, capital spend and other operating costs. Our current assumptions are that our industry will begin to recover as school districts become, or continue being, fully operational, either in-person, fully remote or hybrid, and we have performed a sensitivity analysis on these assumptions to forecast the impact of a slower-than-anticipated recovery. Based on the actions enacted in 2020, we have concluded we have sufficient liquidity to fund our current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates, assumptions and judgments by management that affect the reported amounts of assets, liabilities, net sales, expenses and related disclosure of contingent assets and liabilities in the amounts reported in the financial statements and accompanying notes. On an on-going basis, we evaluate our estimates and assumptions, including, but not limited to, book returns and variable consideration, deferred revenue and related standalone selling price estimates, allowance for bad debts, recoverability of advances to authors, valuation of inventory, financial instruments valuation, income taxes, pensions and other postretirement benefits obligations, contingencies, litigation, depreciation and amortization periods, and the recoverability of long-term assets such as property, plant and equipment, capitalized pre-publication costs, other identified intangibles, and goodwill. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. For a complete description of our significant accounting policies, see Note 2 to the consolidated financial statements. The following policies and account descriptions include those identified as critical to our business operations and the understanding of our results of operations.

The critical accounting estimates used in the preparation of the Company’s consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes.  Actual results may differ from these estimates due to the uncertainty around the magnitude and duration of the COVID-19 pandemic, as well as other factors.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of the new revenue recognition accounting standard, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

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Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. To the extent the transaction price includes variable consideration, which generally reflects estimated future product returns, we estimate the amount of variable consideration that should be included in the transaction price utilizing the expected value method to which we expect to be entitled. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based largely on all information (historical, current and forecasted) that is reasonably available. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

We estimate the collectability of contracts upon execution. For contracts with rights of return, the transaction price is adjusted to reflect the estimated returns for the arrangement on these sales and is made at the time of sale based on historical experience by product line or customer. The transaction prices allocated are adjusted to reflect expected returns and are based on historical return rates and sales patterns. Shipping and handling fees charged to customers are included in net sales.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. We do not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less. Significant financing components’ income is included in interest income.

Contracts are often modified to account for changes in contract specifications and requirements. Contract modifications exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Generally, contract modifications are for products or services that are not distinct from the existing contract due to the inability to use, consume or sell the products or services on their own to generate economic benefits and are accounted for as if they were part of that existing contract. The effect of such a contract modification on the transaction price and measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

Physical product revenue is recognized when the customer obtains control of our product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract. Revenues from static digital content commence upon delivery to the customer of the digital entitlement that is required to access and download the content and is typically recognized at a point in time. Revenues from subscription software licenses, related hosting services and product support are recognized evenly over the license term as we believe this best represents the pattern of transfer to the customer. The perpetual software licenses provide the customer with a functional license to our products and their related revenues are recognized when the customer receives entitlement to the software. Revenue associated with the digital content hosting services related to perpetual licenses is recognized evenly over the contract term. The delivery/start date is the date access to the hosted content is granted. For the technical services provided to customers in connection with the software license, we recognize revenue upon delivery of the services. As the invoices are based on each day of service, this is directly linked to the transfer of benefit to the customer.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. We enter into certain contracts that have multiple performance obligations, one or more of which may be delivered subsequent to the delivery of other performance obligations. These performance obligations may include print and digital media, professional development services, training, software licenses, access to hosted content, and various services related to the software including but not limited to hosting, maintenance and support, and implementation. We allocate the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. We determine standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions and internally approved standard pricing discounts related to the performance obligations. Generally, our performance obligations include print and digital textbooks and instructional materials, trade books, reference materials, formative assessment materials and multimedia instructional programs; licenses to book rights and content; access to hosted content; and services including professional development, consulting and training. Our contracts may also contain software performance obligations including perpetual and subscription-based licenses and software maintenance and support services.

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Deferred Revenue

Our contract liabilities consist of advance payments and billings in excess of revenue recognized and are classified as deferred revenue on our consolidated balance sheets. Our contract assets and liabilities are accounted for and presented on a net basis as either a contract asset or contract liability at the end of each reporting period. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue. In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance. If additional advances are received on those contracts in subsequent periods, we assume all revenue recognized in the reporting period first applies to the beginning contract liability as opposed to a portion applying to the new advances for the period.

Allowance for Doubtful Accounts and Reserves for Book Returns

Accounts receivable include amounts billed and currently due from customers and are recorded net of allowances for doubtful accounts and reserves for book returns. In the normal course of business, we extend credit to customers that satisfy predefined criteria. We estimate the collectability of our receivables and develop those estimates to reflect the risk of credit loss. Allowances for doubtful accounts are established through the evaluation of accounts receivable aging, prior collection experience, current conditions and reasonable and supportable forecasts of the economic conditions that will exist through the contractual life of the financial asset. We monitor our ongoing credit exposure through an active review of collection trends and specific facts and circumstances. Our activities include monitoring the timeliness of payment collection and performing timely account reconciliations. At the time we determine that a receivable balance, or any portion thereof, is deemed to be permanently uncollectible, the balance is written off. Reserves for book returns are based on historical return rates and sales patterns. We determine the required reserves by segregating our returns into the applicable product or sales channel pools. Returns in the K-12 market have been historically low. We have experienced higher returns with respect to sales to resellers, international sales and HMH Books & Media sales, which all result in a greater degree of risk and subjectivity when establishing the appropriate level of reserves for this customer base. We estimate the amount of returns using the expected value method to reduce transaction price at the time of the sale. The allowance for doubtful accounts and reserve for returns are reported as reductions of the accounts receivable balance and amounted to $4.0 million and $14.6 million, and $3.0 million and $16.7 million as of December 31, 2020 and 2019, respectively.

Inventories

Inventories are substantially stated at the lower of weighted average cost or net realizable value. The level of obsolete and excess inventory is estimated on a program or title-level basis by comparing the number of units in stock with the expected future demand. The expected future demand of a program or title is determined by the copyright year, the previous years’ sales history, the subsequent year’s sales forecast, known forward-looking trends including our development cycle to replace the title or program and competing titles or programs. A change in sales trends, or strategic direction of our product development, could affect the estimated reserve. The inventory obsolescence reserve is reported as a reduction of the inventories balance and amounted to $64.8 million and $57.4 million as of December 31, 2020 and 2019, respectively.

Pre-publication Costs

Pre-publication costs are capitalized and are primarily amortized from the year of sale over five years using the sum-of-the-years-digits method, which is an accelerated method for calculating an asset’s amortization. Under this method, the amortization expense recorded for a pre-publication cost asset is approximately 33% (year 1), 27% (year 2), 20% (year 3), 13% (year 4) and 7% (year 5). We utilize this policy for all pre-publication costs, except with respect to our HMH Books & Media young readers and general interest books, for which we expense such costs as incurred. Additionally, pre-publication costs recorded for most intervention products are amortized over 7 years on a projected sales pattern. The amortization methods and periods chosen best reflects the pattern of expected sales generated from individual titles or programs. On a quarterly basis, we evaluate the remaining lives and recoverability of capitalized pre-publication costs, which are often dependent upon program acceptance by state adoption authorities.

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Amortization expense related to pre-publication costs for the years ended December 31, 2020, 2019 and 2018 were $126.2 million, $149.5 million and $109.3 million, respectively.

 For the years ended December 31, 2020, 2019 and 2018, no pre-publication costs were deemed to be impaired.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and indefinite-lived intangible assets (certain tradenames) are not amortized, but are reviewed at least annually for impairment or earlier, if an indication of impairment exists. Goodwill is allocated entirely to our Education reporting unit. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions may include net sales growth rates and operating margins, risk-adjusted discount rates, future economic and market conditions, the determination of appropriate market comparables as well as the fair value of certain individual assets and liabilities.

We have the option of first assessing qualitative factors to determine whether it is necessary to perform a quantitative impairment test for goodwill or we can perform the quantitative impairment test without performing the qualitative assessment. In performing the qualitative assessment, we consider certain events and circumstances specific to the reporting unit and to the entity as a whole, such as macroeconomic conditions, industry and market considerations, overall financial performance and cost factors when evaluating whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If the results of the quantitative test indicate the fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of the net assets assigned to a reporting unit exceeds the fair value of a reporting unit, goodwill is deemed impaired and is written down to the extent of the difference between the fair value of the reporting unit and the carrying value.

We estimate the total fair value of the Education reporting unit by using one or more various valuation techniques including an evaluation of our market capitalization and peer company multiples depending on the best approximation of fair value of the Education reporting unit in the current social and economic environment. With regard to indefinite-lived intangible assets, which includes the Houghton Mifflin Harcourt tradename at December 31, 2020 and 2019, the recoverability is evaluated using a one-step process whereby we determine the fair value by asset and then compare it to its carrying value to determine if the asset is impaired. We estimate the fair value by preparing a relief-from-royalty discounted cash flow analysis using forward looking revenue projections. The significant assumptions used in discounted cash flow analysis include: future net sales, a long-term growth rate, a royalty rate and a discount rate used to present value future cash flows and the terminal value of the Education reporting unit. The discount rate is based on the weighted-average cost of capital method at the date of the evaluation. Adverse changes in our market capitalization or peer company multiples by an equivalent amount could give rise to an impairment.

We recorded a goodwill impairment charge of $279.0 million for the year ended December 31, 2020. Refer to Note 2 of the consolidated financial statements for a discussion of the factors and circumstances leading to the goodwill impairment.

We completed our annual goodwill impairment tests as of October 1, 2020 and 2019. The fair value of the Education reporting unit was in excess of its carrying value by approximately 18% as of October 1, 2020 and 2019. There was no goodwill impairment for the years ended December 31, 2019 and 2018. We will continue to monitor and evaluate the carrying value of goodwill. If market and economic conditions or business performance deteriorate, this could increase the likelihood of us recording an impairment charge.   

We completed our annual indefinite-lived asset impairment tests as of October 1, 2020 and 2019. No indefinite-lived intangible assets were deemed to be impaired for the years ended December 31, 2020, 2019 and 2018.

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Royalty Advances

Royalty advances to authors are capitalized and represent amounts paid in advance of the sale of an author’s product and are recovered as earned. As advances are recorded, a partial reserve may be recorded immediately based primarily upon historical sales experience to estimate the likelihood of recovery. Additionally, advances are evaluated periodically to determine if they are expected to be recovered on a title-by-title basis, with consideration given to the other titles in the author’s portfolio also earning against the outstanding advance. Any portion of a royalty advance that is not expected to be recovered is fully reserved. The reserve for royalty advances is reported as a reduction of the royalty advances to authors balance and amounted to $96.7 million and $119.7 million as of December 31, 2020 and 2019, respectively.

Impact of Inflation and Changing Prices

We believe that inflation has not had a material impact on our results of operations during the years ended December 31, 2020, 2019 and 2018. We cannot be sure that future inflation will not have an adverse impact on our operating results and financial condition in future periods. Our ability to adjust selling prices has always been limited by competitive factors and long-term contractual arrangements which either prohibit price increases or limit the amount by which prices may be increased. Further, a weak domestic economy at a time of low inflation could cause lower tax receipts at the state and local level, and the funding and buying patterns for textbooks and other educational materials could be adversely affected.

Covenant Compliance

As of December 31, 2020, we were in compliance with all of our debt covenants and we expect to be in compliance over the next twelve months.

We are currently required to meet certain incurrence-based financial covenants as defined under our term loan facility, notes and revolving credit facility. We have incurrence based financial covenants primarily pertaining to a maximum leverage ratio and fixed charge coverage ratio. A breach of any of these covenants, ratios, tests or restrictions, as applicable, for which a waiver is not obtained could result in an event of default, in which case our lenders could elect to declare all amounts outstanding to be immediately due and payable and result in a cross-default under other arrangements containing such provisions. A default would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt owed to these lenders and to terminate any commitments of these lenders to lend to us. If the lenders accelerate the payment of the indebtedness, our assets may not be sufficient to repay in full the indebtedness and any other indebtedness that would become due as a result of any acceleration. Further, in such an event, the lenders would not be required to make further loans to us, and assuming similar facilities were not established and we are unable to obtain replacement financing, it would materially affect our liquidity and results of operations.

Contractual Obligations

The following table provides information with respect to our estimated commitments and obligations as of December 31, 2020 (in thousands):

			Less than						More than
Contractual Obligations	Total		1 year		1-3 years		3-5 years		5 years
Term loan due November 22, 2024 (1)	$	361,000	$	19,000	$	38,000	$	304,000	$	—
Interest payable on term loan due November 22,    2024 (2)		92,177		25,540		46,950		19,687		—
9.0% senior secured notes due February 15, 2025		306,000		—		—		306,000		—
Interest payable on 9.0% senior secured notes due February 15, 2025		123,701		27,464		54,927		41,310		—
Revolver commitment fees		11,033		2,794		5,642		2,597		—
Operating leases (3)		295,393		30,955		64,385		68,817		131,236
Purchase obligations (4)		39,317		24,599		13,249		1,469		—
Total cash contractual obligations	$	1,228,621	$	130,352	$	223,153	$	743,880	$	131,236

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(1) The term loan facility principal amortizes at a rate of 5.0% per annum of the original $380.0 million amount.

(2) As of December 31, 2020, the interest rate was 7.25%.

(3) Represents minimum lease payments under non-cancelable operating leases.

(4) Purchase obligations are agreements to purchase goods or services that are enforceable and legally binding. These goods and services consist primarily of author advances, subcontractor expenses, information technology licenses, and outsourcing arrangements.

In addition to the payments described above, we have employee benefit obligations that require future payments. For example, we expect to make $4.8 million of contributions in 2021 relating to our pension and postretirement benefit plans. We expect to periodically draw and repay borrowings under the revolving credit facility. We believe that we will be able to meet our cash interest obligations on our outstanding debt when they are due and payable.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. We manage exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are utilized to hedge economic exposures as well as reduce our earnings and cash flow volatility resulting from shifts in market rates. As permitted, we may designate certain of these derivative contracts for hedge accounting treatment in accordance with authoritative guidance regarding accounting for derivative instruments and hedging activities. However, certain of these instruments may not qualify for, or we may choose not to elect, hedge accounting treatment and, accordingly, the results of our operations may be exposed to some level of volatility. Volatility in our results of operations will vary with the type and amount of derivative hedges outstanding, as well as fluctuations in the currency and interest rate market during the period. Periodically, we may enter into derivative contracts, including interest rate swap agreements and interest rate caps and collars to manage interest rate exposures, and foreign currency spot, forward, swap and option contracts to manage foreign currency exposures. The fair market values of all of these derivative contracts change with fluctuations in interest rates and/or currency rates and are designed so that any changes in their values are offset by changes in the values of the underlying exposures. Derivative financial instruments are held solely as risk management tools and not for trading or speculative purposes.

By their nature, all derivative instruments involve, to varying degrees, elements of market and credit risk not recognized in our financial statements. The market risk associated with these instruments resulting from currency exchange and interest rate movements is expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. Our policy is to deal with counterparties having a single A or better credit rating at the time of the execution. We manage our exposure to counterparty risk of derivative instruments by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.

We continue to review liquidity sufficiency by performing various stress test scenarios, such as cash flow forecasting, which considers hypothetical interest rate movements. Furthermore, we continue to closely monitor current events and the financial institutions that support our credit facility, including monitoring their credit ratings and outlooks, credit default swap levels, capital raising and merger activity.

As of December 31, 2020, we had $361.0 million ($346.1 million, net of discount and issuance costs) of aggregate principal amount indebtedness outstanding under our term loan facility that bears interest at a variable rate. An increase or decrease of 1% in the interest rate will change our interest expense by approximately $3.6 million on an annual basis. We also have up to $250.0 million of borrowing availability, subject to borrowing base availability, under our revolving credit facility, and borrowings under the revolving credit facility bear interest at a variable rate. As of December 31, 2020, there were no amounts outstanding on the revolving credit facility. Assuming that the revolving credit facility is fully drawn, an increase or decrease of 1% in the interest rate will change our interest expense associated with the revolving credit facility by $2.5 million on an annual basis.

Our interest rate risk relates primarily to U.S. dollar borrowings partially offset by U.S. dollar cash investments. We have historically used interest rate derivative instruments to manage our earnings and cash flow exposure to changes in interest rates. On August 17, 2015, we entered into interest rate derivative contracts with various financial institutions having an aggregate notional amount of $400.0 million to convert floating rate debt into fixed rate debt, which we designated as cash flow hedges. These contracts were effective beginning September 30, 2016 and matured on July 22, 2020. We have no outstanding interest rate derivative contracts as of December 31, 2020.

We conduct various digital development activities in Ireland, and as such, our cash flows and costs are subject to fluctuations from changes in foreign currency exchange rates. We manage our exposures to this market risk through the use of short-term foreign exchange forward and option contracts, when deemed appropriate, which were not significant as of December 31, 2020 and 2019. We do not enter into derivative transactions or use other financial instruments for trading or speculative purposes.

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Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Houghton Mifflin Harcourt Company

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Houghton Mifflin Harcourt Company and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the

consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Assessments – Education Reporting Unit

As described in Notes 2, 3, and 7 to the consolidated financial statements, the Company’s goodwill balance was $438.0 million as of December 31, 2020. Management performs an impairment test to assess the carrying value of goodwill on an annual basis (as of October 1) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. During the three months ended March 31, 2020, the Company’s stock price declined to historical lows since its 2013 initial public offering. Management determined that the significant decline in the market capitalization and broader economic downturn arising from the COVID-19 pandemic was a triggering event. Based on the interim impairment assessment as of March 31, 2020, management concluded that the goodwill, which is wholly attributed to the Education reporting unit, was impaired and, accordingly, recorded a goodwill impairment charge of $279.0 million. Additionally, as of September 30, 2020, with the continuation of the COVID-19 pandemic and the associated downward pressure on the Company’s billings, management concluded that impairment triggering events existed. Management estimated the fair value of the Education reporting unit as of September 30, 2020 and concluded that no impairment existed. Management completed their annual goodwill impairment test as of October 1, 2020 and did not identify an impairment. Management utilized an implied market value method under the market approach to calculate the fair value of the Education reporting unit for each impairment assessment. This method included the determination of the Company's overall enterprise value, from which the fair value of the HMH Books & Media reporting unit was deducted to derive the fair value of the Education reporting unit. The relevant inputs and assumptions used in the valuation of the Education reporting unit for each impairment assessment include the Company’s market capitalization as of the date of each assessment, selection of a control premium, and determination of an appropriate market multiple to value the HMH Books & Media reporting unit.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Education reporting unit is a critical audit matter are the significant judgment by management in the selection of the control premium and the determination of the fair value of the HMH Books & Media reporting unit, which in turn led to significant auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumptions relating to the selection of the control premium and the determination of the market multiple utilized to value the HMH Books & Media reporting unit. Also, the audit effort involved the use of professionals with specialized skill and knowledge.

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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the reporting units. These procedures also included, among others, testing management’s process to determine the fair value of the reporting units by (i) assessing the appropriateness of the method utilized to calculate the fair value of the Education reporting unit, (ii) testing the completeness and accuracy of the underlying data used in the method, and (iii) evaluating the significant assumptions used by management related to the selection of the control premium and the determination of the market multiple utilized to value the HMH Books & Media reporting unit. Evaluating management’s assumptions related to the control premium and the determination of the market multiple utilized to value the HMH Books & Media reporting unit involved evaluating whether the assumptions used by management were reasonable considering relevant market data and whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the Company’s implied market value method and the significant assumptions related to the control premium and the determination of the market multiple utilized to value the HMH Books & Media reporting unit.

Indefinite-Lived Intangible Asset Impairment Analyses - Trademarks and Tradenames

As described in Notes 2 and 7 to the consolidated financial statements, as of December 31, 2020, the Company’s indefinite-lived intangible asset balance was $161.0 million and relates to trademarks and tradenames. Management performs an impairment test to assess the carrying value of indefinite-lived intangible assets on an annual basis (as of October 1) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. As a result of the triggering events identified in the first and third quarters described in the critical audit matter above, management performed quantitative impairment analyses over the indefinite-lived intangible assets. The recoverability was evaluated using a one-step process whereby management determined the fair value by asset and then compared it to its carrying value to determine if the asset was impaired. Management estimated the fair value by preparing a relief-from-royalty discounted cash flow analysis using forward looking revenue projections. The significant assumptions used in the discounted cash flow analysis included: future net sales, a long-term growth rate, a royalty rate, and a discount rate.

The principal considerations for our determination that performing procedures relating to the indefinite-lived intangible asset impairment analyses for trademarks and tradenames is a critical audit matter are the significant judgment by management when developing the fair value estimates of the trademarks and tradenames, which in turn led to significant auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumptions related to future net sales, the long-term growth rate, the royalty rate, and the discount rate. Also, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s trademarks and tradenames impairment analyses, including controls over the valuation of the trademarks and tradenames. These procedures also included, among others, testing management’s process to develop the fair value of trademarks and tradenames by (i) assessing the appropriateness of management’s relief-from-royalty discounted cash flow analyses for estimating fair value of the trademarks and tradenames, (ii) testing the completeness and accuracy of the underlying data used in the analyses, and (iii) evaluating the significant assumptions used by management related to future net sales, the long-term growth rate, the royalty rate, and the discount rate. Evaluating management’s assumptions related to future net sales and the long-term growth rate involved evaluating whether the assumptions used by management were reasonable considering the past performance of the business, relevant market data, and whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the Company’s discounted cash flow analyses and significant assumptions related to the royalty rate and the discount rate.

Reserve for Royalty Advances to Authors

As described in Notes 3 and 20 to the consolidated financial statements, royalty advances to authors are capitalized and represent amounts paid in advance of the sale of an author’s product and are recovered as earned. As advances

58

are recorded, a partial reserve may be recorded immediately based primarily upon historical sales experience. Additionally, advances are evaluated periodically to determine if they are expected to be recovered on a title-by-title basis, with consideration given to the other titles in the author’s portfolio also earning against the outstanding advance. Any portion of a royalty advance that is not expected to be recovered is fully reserved. The reserve for royalty advances is reported as a reduction of the royalty advances to authors balance and was $96.7 million as of December 31, 2020.  

The principal considerations for our determination that performing procedures relating to the reserve for royalty advances to authors is a critical audit matter are the significant judgment by management to determine the reserve for royalty advances, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence relating to management’s estimate of the reserve for royalty advances to authors.  

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimate of the reserve for royalty advances to authors. These procedures also included, among others, testing management’s process to determine the reserve for royalty advances by (i) evaluating the appropriateness of management’s process for estimating its reserve for royalty advances to authors, (ii) assessing the reasonableness of significant assumptions used by management in developing the estimate related to the ability of an author’s portfolio to generate future sales, which included evaluating comparable historical sales volumes and other relevant external data, and (iii) testing the completeness and accuracy of the underlying data relating to historical sales used by management to develop their estimate. Evaluating the assumptions related to the estimate of the reserve for royalty advances to authors involved evaluating, on a sample basis, whether the assumptions used were reasonable considering the historical sales experience and the ability of an author’s portfolio to generate future sales.

/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 25, 2021

We have served as the Company’s auditor since 2003.

59

Houghton Mifflin Harcourt Company

Consolidated Balance Sheets

	December 31,
(in thousands of dollars, except share information)	2020			2019
Assets
Current assets
Cash and cash equivalents	$	281,200		$	296,353
Accounts receivable, net of allowances for bad debts and book returns of    $18.6 million and $19.7 million, respectively		152,832			184,425
Inventories		166,963			213,059
Prepaid expenses and other assets		19,931			19,257
Total current assets		620,926			713,094
Property, plant, and equipment, net		93,202			100,388
Pre-publication costs, net		203,149			268,197
Royalty advances to authors, net		42,485			44,743
Goodwill		437,977			716,977
Other intangible assets, net		428,584			474,225
Operating lease assets		126,850			132,247
Deferred income taxes		2,415			2,520
Deferred commissions		30,659			29,291
Other assets		34,879			31,490
Total assets	$	2,021,126		$	2,513,172
Liabilities and Stockholders’ Equity
Current liabilities
Current portion of long-term debt	$	19,000		$	19,000
Accounts payable		49,104			52,128
Royalties payable		50,771			72,985
Salaries, wages, and commissions payable		21,944			54,938
Deferred revenue		342,605			305,285
Interest payable		11,017			3,826
Severance and other charges		19,590			12,407
Accrued pension benefits		1,593			—
Accrued postretirement benefits		1,555			1,571
Operating lease liabilities		9,669			8,685
Other liabilities		24,973			24,325
Total current liabilities		551,821			555,150
Long-term debt, net of discount and issuance costs		624,692			638,187
Operating lease liabilities		132,014			134,994
Long-term deferred revenue		562,679			542,821
Accrued pension benefits		24,061			23,648
Accrued postretirement benefits		16,566			15,113
Deferred income taxes		16,411			30,871
Other liabilities		2,419			6,028
Total liabilities		1,930,663			1,946,812
Commitments and contingencies (Note 15)
Stockholders’ equity
Preferred stock, $0.01 par value: 20,000,000 shares authorized; no shares issued     and outstanding at December 31, 2020 and 2019		—			—
Common stock, $0.01 par value: 380,000,000 shares authorized; 150,459,034 and    148,928,328 shares issued at December 31, 2020 and 2019, respectively; 125,882,000    and 124,351,294 shares outstanding at December 31, 2020 and 2019, respectively		1,505			1,489
Treasury stock, 24,577,034 shares as of December 31, 2020 and 2019, respectively, at cost		(518,030	)		(518,030	)
Capital in excess of par value		4,918,542			4,906,165
Accumulated deficit		(4,255,830	)		(3,775,992	)
Accumulated other comprehensive loss		(55,724	)		(47,272	)
Total stockholders’ equity		90,463			566,360
Total liabilities and stockholders’ equity	$	2,021,126		$	2,513,172

The accompanying notes are an integral part of these consolidated financial statements.

60

Houghton Mifflin Harcourt Company

Consolidated Statements of Operations

	Years Ended December 31,
(in thousands of dollars, except share and per share data)	2020			2019			2018
Net sales	$	1,031,292		$	1,390,674		$	1,322,417
Costs and expenses
Cost of sales, excluding publishing rights and pre-publication    Amortization		497,816			668,108			581,467
Publishing rights amortization		20,056			26,557			34,713
Pre-publication amortization		126,180			149,515			109,257
Cost of sales		644,052			844,180			725,437
Selling and administrative		478,101			662,606			649,295
Other intangible asset amortization		25,585			25,310			26,933
Impairment charge for goodwill		279,000			—			—
Restructuring/severance and other charges		33,643			21,742			11,478
Gain on sale of assets		—			—			(201	)
Operating loss		(429,089	)		(163,164	)		(90,525	)
Other income (expense)
Retirement benefits non-service (expense) income		(856	)		167			1,280
Interest expense		(65,959	)		(48,778	)		(45,680	)
Interest income		899			3,157			2,550
Change in fair value of derivative instruments		672			(899	)		(1,374	)
Gain on investments		2,091			—			—
Income from transition services agreement		—			4,248			1,889
Loss on extinguishment of debt		—			(4,363	)		—
Loss from continuing operations before taxes		(492,242	)		(209,632	)		(131,860	)
Income tax (benefit) expense for continuing operations		(12,404	)		4,201			5,597
Loss from continuing operations		(479,838	)		(213,833	)		(137,457	)
Earnings from discontinued operations, net of tax		—			—			12,833
Gain on sale of discontinued operations, net of tax		—			—			30,469
Income from discontinued operations, net of tax		—			—			43,302
Net loss	$	(479,838	)	$	(213,833	)	$	(94,155	)
Net loss per share attributable to common stockholders
Basic and diluted:
Continuing operations	$	(3.82	)	$	(1.72	)	$	(1.11	)
Discontinued operations		—			—			0.35
Net loss	$	(3.82	)	$	(1.72	)	$	(0.76	)
Weighted average shares outstanding
Basic and diluted		125,455,487			124,152,984			123,444,943

The accompanying notes are an integral part of these consolidated financial statements.

61

Houghton Mifflin Harcourt Company

Consolidated Statements of Comprehensive Loss

	Years Ended December 31,
(in thousands of dollars)	2020			2019			2018
Net loss	$	(479,838	)	$	(213,833	)	$	(94,155	)
Other comprehensive (loss) income, net of taxes:
Foreign currency translation adjustments, net of tax		(230	)		(511	)		(156	)
Net change in pension and benefit plan liabilities, net of tax		(9,209	)		1,800			(2,056	)
Unrealized gain on short-term investments, net of tax		—			9			9
Net change in unrealized gain (loss) on derivative financial    instruments, net of tax		987			(3,386	)		3,541
Other comprehensive (loss) income, net of taxes		(8,452	)		(2,088	)		1,338
Comprehensive loss	$	(488,290	)	$	(215,921	)	$	(92,817	)

The accompanying notes are an integral part of these consolidated financial statements.

62

Houghton Mifflin Harcourt Company

Consolidated Statements of Cash Flows

	Years Ended December 31,
(in thousands of dollars)	2020			2019			2018
Cash flows from operating activities
Net loss	$	(479,838	)	$	(213,833	)	$	(94,155	)
Adjustments to reconcile net loss to net cash provided by operating activities
Earnings from discontinued operations, net of tax		—			—			(12,833	)
Gain on sale of discontinued operations, net of tax		—			—			(30,469	)
Gain on sale of assets		—			—			(201	)
Depreciation and amortization expense		236,489			272,692			250,466
Operating lease assets, amortization and impairments		5,397			15,949			—
Amortization of debt discount and deferred financing costs		6,004			4,286			4,181
Gain on investments		(2,091	)		—			—
Deferred income taxes		(14,355	)		4,535			5,140
Stock-based compensation expense		11,573			13,968			13,248
Impairment charge for goodwill		279,000			—			—
Loss on extinguishment of debt		—			4,363			—
Change in fair value of derivative instruments		(672	)		899			1,374
Changes in operating assets and liabilities, net of acquisitions		—
Accounts receivable		31,593			19,182			(11,005	)
Inventories		46,096			(28,850	)		(33,515	)
Other assets		(11,425	)		(20,155	)		3,908
Accounts payable and accrued expenses		(34,941	)		(12,136	)		16,144
Royalties payable and author advances, net		(19,956	)		9,342			(1,650	)
Deferred revenue		57,178			200,473			(7,692	)
Interest payable		7,191			3,690			(186	)
Severance and other charges		7,183			10,631			(2,823	)
Accrued pension and postretirement benefits		3,443			(4,800	)		(904	)
Operating lease liabilities		(1,996	)		(17,281	)		—
Other liabilities		(10,625	)		(7,980	)		5,056
Net cash provided by operating activities—continuing operations		115,248			254,975			104,084
Net cash provided by operating activities—discontinued operations		—			—			10,831
Net cash provided by operating activities		115,248			254,975			114,915
Cash flows from investing activities
Proceeds from sales and maturities of short-term investments		—			50,000			86,539
Purchases of short-term investments		—			—			(49,553	)
Additions to pre-publication costs		(61,331	)		(102,562	)		(123,403	)
Additions to property, plant, and equipment		(50,940	)		(37,561	)		(53,741	)
Proceeds from sale of business		—			—			140,000
Acquisition of business, net of cash acquired		—			(5,447	)		—
Investment in preferred stock		—			(750	)		(500	)
Proceeds from sale of assets		—			—			1,085
Net cash (used in) provided by investing activities—continuing operations		(112,271	)		(96,320	)		427
Net cash used in investing activities—discontinued operations		—			—			(6,832	)
Net cash used in investing activities		(112,271	)		(96,320	)		(6,405	)
Cash flows from financing activities
Proceeds from term loan, net of discount		—			364,800			—
Proceeds from senior secured notes, net of discount		—			299,880			—
Borrowings under revolving credit facility		150,000			60,000			50,000
Payments of revolving credit facility		(150,000	)		(60,000	)		(50,000	)
Payments of long-term debt		(19,000	)		(772,000	)		(8,000	)
Payments of deferred financing fees		—			(8,493	)		—
Tax withholding payments related to net share settlements of restricted stock units and awards		(48	)		(2,018	)		(1,190	)
Issuance of common stock under employee stock purchase plan		918			1,028			1,263
Net collections under transition service agreement		—			1,136			3,803
Net cash used in financing activities—continuing operations		(18,130	)		(115,667	)		(4,124	)
Net (decrease) increase in cash and cash equivalents		(15,153	)		42,988			104,386
Cash and cash equivalents at the beginning of the period		296,353			253,365			148,979
Cash and cash equivalents at the end of the period	$	281,200		$	296,353		$	253,365
Supplemental disclosure of cash flow information
Interest paid	$	52,942		$	41,059		$	41,758
Income taxes paid		1,883			671			430
Non-cash investing activities
Pre-publication costs included in accounts payable and accruals	$	5,282		$	5,480		$	13,974
Property, plant, and equipment included in accounts payable and accruals		2,002			3,039			1,908
Property, plant, and equipment acquired under finance leases		164			327			480

The accompanying notes are an integral part of these consolidated financial statements.

63

Houghton Mifflin Harcourt Company

Consolidated Statements of Stockholders’ Equity

										Capital						Accumulated
	Common Stock									in excess						Other
(in thousands of dollars, except share	Shares									of Par			Accumulated			Comprehensive
information)	Issued			Par Value			Treasury Stock			Value			Deficit			Loss			Total
Balance at December 31, 2017		147,911,466			1,479			(518,030	)		4,879,793			(3,521,527	)		(46,522	)		795,193
Net loss		—			—			—			—			(94,155	)		—			(94,155	)
Other comprehensive income, net of    tax		—			—			—			—			—			1,338			1,338
Effects of adoption of new revenue    accounting standard		—			—			—			—			52,711			—			52,711
Issuance of common stock for    employee purchase plan		175,428			2			—			1,611			—			—			1,613
Issuance of common stock for    vesting of restricted stock units		346,255			3			—			(3	)		—			—			—
Stock withheld to cover tax    withholdings requirements upon    vesting of restricted stock units		—			—			—			(1,190	)		—			—			(1,190	)
Restricted stock forfeitures and    cancellations		(268,295	)		(3	)		—			3			—			—			—
Stock-based compensation expense		—			—			—			12,960			—			—			12,960
Balance at December 31, 2018		148,164,854			1,481			(518,030	)		4,893,174			(3,562,971	)		(45,184	)		768,470
Net loss		—			—			—			—			(213,833	)		—			(213,833	)
Other comprehensive loss, net of    tax		—			—			—			—			—			(2,088	)		(2,088	)
Effects of adoption of new lease accounting standard		—			—			—			—			812			—			812
Issuance of common stock for    employee purchase plan		186,114			2			—			1,436			—			—			1,438
Issuance of common stock for    vesting of restricted stock units		577,360			6			—			(6	)		—			—			—
Stock withheld to cover tax    withholdings requirements upon    vesting of restricted stock units		—			—			—			(2,018	)		—			—			(2,018	)
Stock-based compensation expense		—			—			—			13,579			—			—			13,579
Balance at December 31, 2019		148,928,328			1,489			(518,030	)		4,906,165			(3,775,992	)		(47,272	)		566,360
Net loss		—			—			—			—			(479,838	)		—			(479,838	)
Other comprehensive loss, net of    tax		—			—			—			—			—			(8,452	)		(8,452	)
Issuance of common stock for    employee purchase plan		380,757			4			—			1,243			—			—			1,247
Issuance of common stock for    vesting of restricted stock units		1,149,949			12			—			(12	)		—			—			—
Stock withheld to cover tax    withholdings requirements upon    vesting of restricted stock units		—			—			—			(48	)		—			—			(48	)
Stock-based compensation expense		—			—			—			11,194			—			—			11,194
Balance at December 31, 2020		150,459,034		$	1,505		$	(518,030	)	$	4,918,542		$	(4,255,830	)	$	(55,724	)	$	90,463

The accompanying notes are an integral part of these consolidated financial statements.

64

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

1. Basis of Presentation

Houghton Mifflin Harcourt Company (“HMH,” “Houghton Mifflin Harcourt,” “we,” “us,” “our,” or the “Company”) is a learning technology company, committed to delivering connected solutions that engage learners, empower educators and improve student outcomes. As a leading provider of Kindergarten through 12^th grade (“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 estimates that it serves more than 50 million students and three 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.

We are organized along two business segments: Education and HMH Books & Media. Within our Education segment, we focus on the K-12 market and, in the United States, we are a market leader. We specialize in comprehensive core curriculum, supplemental and intervention solutions, and we provide ongoing support in professional learning and coaching for educators and administrators. Our offerings are rooted in learning science, and we work with research partners, universities and third-party organizations as we design, build, implement and iterate our offerings to maximize their effectiveness. We are purposeful about innovation, leveraging technology to create engaging and immersive experiences designed to deepen learning experiences for students and to extend teachers’ capabilities so that they can focus on making meaningful connections with their students.

Our diverse portfolio enables us to help ensure that every student and teacher has the tools needed for success. We are able to build deep partnerships with school districts and leverage the scope of our offerings to provide holistic solutions at scale with the support of our far-reaching sales force and talented field-based specialists and consultants. We provide print, digital, and blended print/digital solutions that are tailored to a district’s needs, goals and technological readiness.

Furthermore, for nearly two centuries, our HMH Books & Media segment has brought renowned and awarded children’s, fiction, non-fiction, culinary and reference titles to readers throughout the world. Our distinguished author list includes ten Nobel Prize winners, forty-nine Pulitzer Prize winners, and twenty-six National Book Award winners. We are home to popular characters and titles such as Curious George, Carmen Sandiego, The Lord of the Rings, The Whole30, The Best American Series, the Peterson Field Guides, CliffsNotes, and The Polar Express, and published distinguished authors such as Tim O’Brien, Temple Grandin, Tim Ferriss, Kwame Alexander, Lois Lowry, and Chris Van Allsburg.

The consolidated financial statements of HMH include the accounts of all of our wholly-owned subsidiaries as of December 31, 2020 and 2019 and for the periods ended December 31, 2020, 2019 and 2018.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our accompanying consolidated financial statements include the results of operations of the Company and our wholly-owned subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation.

We expect our net cash provided by operations combined with our cash and cash equivalents and borrowing availability under our revolving credit facility to provide sufficient liquidity to fund our current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months.

The ability of the Company to fund planned operations is based on assumptions which involve significant judgment and estimates of future revenues, capital spend and other operating costs.

65

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Seasonality and Comparability

Our net sales, operating profit or loss and net cash provided by or used in operations are impacted by the inherent seasonality of the academic calendar, which typically results in a cash flow usage in the first half of the year and a cash flow generation in the second half of the year. Consequently, the performance of our businesses may not be comparable quarter to consecutive quarter and should be considered on the basis of results for the whole year or by comparing results in a quarter with results in the same quarter for the previous year. Moreover, uncertainty resulting from the COVID-19 pandemic may result in not following this historic pattern.

Approximately 81% of our net sales for the year ended December 31, 2020 were derived from our Education segment, which is a markedly seasonal business. Schools conduct the majority of their purchases in the second and third quarters of the calendar year in preparation for the beginning of the school year. Thus, for the years ended December 31, 2020, 2019 and 2018, approximately 66% of our consolidated net sales were realized in the second and third quarters. Sales of K-12 instructional materials and customized testing products are also cyclical with some years offering more sales opportunities than others in light of the state adoption calendar. The amount of funding available at the state level for educational materials also has a significant effect on year-to-year net sales. Although the loss of a single customer would not have a material adverse effect on our business, schedules of school adoptions and market acceptance of our products can materially affect year-to-year net sales performance.

2. Impact of the COVID-19 Pandemic

The unprecedented and rapid spread of COVID-19 and the resulting social distancing measures, including business and school closures implemented by federal, state and local authorities, significantly reduced customer demand for our solutions and services, disrupted portions of our supply chain and warehousing operations and also disrupted our ability to deliver our educational solutions and services. We continue to monitor indicators of demand, including our sales pipeline, customer orders and product shipments, as well as observe the impact to state revenues and related educational budgets to ascertain an estimate of the impact; however, the length and severity of the reduction in demand due to the pandemic remains uncertain. Accordingly, our full year results for 2020 were adversely impacted compared to prior years.

While we are planning for a demand recovery, the exact timing and pace of recovery is uncertain given the significant disruption caused by the pandemic on the operations of our customers. Our expense management and liquidity measures may be modified as we obtain additional clarity on the timing of customer demand recovery.

In response to these developments, we have implemented measures to help mitigate the impact on our financial position and operations. These measures include, but are not limited to, the following:

Expense Management. With the reduction in net sales, we have, and will continue to implement cost saving initiatives, including:

• director, executive and senior leadership salary reductions, and for the majority of employees, a four-day work week with associated labor cost reductions, in each case beginning in April 2020 and ceasing near the end of July 2020. The costs associated with ending the furlough program and the salary reductions were subsequently mitigated by the 2020 Restructuring Plan discussed below;

• a freeze on spending not directly tied to near-term billings, including a reduction in all discretionary spending such as marketing, advertising, travel, and office supplies;

• executing a voluntary early retirement incentive program in September 2020, as discussed below; and

• commencing a restructuring program in September 2020 including a reduction in force, as discussed below.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Balance Sheet, Cash Flow and Liquidity. In addition to the expense management actions noted above, we have taken the following actions to increase liquidity and strengthen our financial position, including:

• reduced inventory purchasing;

• deferred long-term capital projects not directly contributing to billings in 2020; and

• deferred the payment of our employer payroll taxes allowed under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The deferred amounts under the CARES Act were repaid in full in December 2020 as a result of the success of the cash and expense mitigation efforts.

2020 Restructuring Plan.

On September 4, 2020, we completed a voluntary retirement incentive program, which was offered to all U.S. based employees at least 55 years of age with at least five years of service. Of the eligible employees, 165 elected to participate representing approximately 5% of our workforce. The majority of the employees voluntarily retired as of September 4, 2020 with select employees leaving later in the year. Each of the employees received or will receive separation payments in accordance with our severance policy.  

On September 30, 2020, we undertook a restructuring program, including a reduction in force, as part of the ongoing assessment of our cost structure amid the COVID-19 pandemic and in line with our strategic transformation plan. The reduction in force resulted in a 22% reduction in our workforce, including positions eliminated as part of the voluntary retirement incentive program mentioned above, and net of newly created positions to support our digital first operations. The reduction in force resulted in the departure of approximately 525 employees and was completed in October 2020. Each of the employees received or will receive separation payments in accordance with our severance policy. The total one-time, non-recurring cost incurred in connection with the restructuring program, inclusive of the voluntary retirement incentive program (collectively the “2020 Restructuring Plan”), all of which represents cash expenditures, is approximately $33.6 million.

Forward-looking

After reviewing our ability to meet future financial obligations over the next twelve months, including consideration of our recent actions described above, we have concluded our net cash from operations combined with our cash and cash equivalents and borrowing availability under our revolving credit facility provide sufficient liquidity to fund our current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months. Our primary credit facilities do not require us to comply with financial maintenance covenants.

The ability of the Company to fund planned operations is based on assumptions which involve significant judgment and estimates of future revenues, capital spend and other operating costs. Our current assumptions are that our industry will begin to recover as school districts become, or continue being, fully operational, either in-person, fully remote or hybrid, and we have performed a sensitivity analysis on these assumptions to forecast the impact of a slower-than-anticipated recovery. Based on the actions enacted in 2020 described earlier, we have concluded we have sufficient liquidity to fund our current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months.

Valuation of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets

We perform an impairment test to assess the carrying value of goodwill and indefinite-lived intangible assets on an annual basis (as of October 1) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. Our fourth quarter 2020 impairment tests of goodwill and indefinite-lived intangible assets did not indicate an impairment existed as the fair value exceeded our carrying values.

During the three months ended March 31, 2020, our stock price declined to historical lows since our 2013 initial public offering. We determined that the significant decline in our market capitalization and broader economic downturn arising from the COVID-19 pandemic was a triggering event. We concluded that quantitative analyses were required to be performed due to the triggering event occurring during the first quarter of 2020.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Goodwill is allocated entirely to our Education reporting unit. We utilized an implied market value method under the market approach to calculate the fair value of the Education reporting unit as of March 31, 2020, which we determined was the best approximation of fair value of the Education reporting unit in the current social and economic environment. This method included the determination of the Company's overall enterprise value, from which the fair value of the HMH Books & Media reporting unit was deducted to derive the fair value of the Education reporting unit. We have previously used a combination of the implied market value method and guideline public company method approach. The relevant inputs and assumptions used in the valuation of the Education reporting unit include our market capitalization, selection of a control premium, and the determination of an appropriate market multiple to value the HMH Books & Media reporting unit, as well as the fair value of individual assets and liabilities. Based on our interim impairment assessment, we concluded that our goodwill, which is wholly attributed to the Education reporting unit, was impaired and, accordingly, recorded a goodwill impairment charge of $279.0 million.

With the continuation of the COVID-19 pandemic and the associated downward pressure on our billings, we concluded that impairment triggering events existed as of September 30, 2020. Accordingly, we estimated the fair value of the Education reporting unit as of September 30, 2020 utilizing the implied market value method. Using consistent relative inputs and assumptions as described above with respect to the first quarter 2020 testing, we concluded that no impairment existed as of September 30, 2020. The fair value of the Education reporting unit as of September 30, 2020 exceeded its carrying value by approximately 18%. During the fourth quarter of 2020, we recorded an adjustment of $17.0 million and $1.0 million to increase both the goodwill impairment charge and income tax benefit recorded, respectively, to correct an error of the previously recorded goodwill impairment of $262.0 million and related income tax benefit in the first quarter of 2020. Management believes these adjustments are not material to the current period financial statements or any prior periods.  

Additionally, as a result of the triggering events identified in the first and third quarters, we performed quantitative impairment analyses over our indefinite-lived intangible assets and long-lived assets. With regards to indefinite-lived intangible assets, which includes the Houghton Mifflin Harcourt tradename, the recoverability was evaluated using a one-step process whereby we determined the fair value by asset and then compared it to its carrying value to determine if the asset was impaired. We estimated the fair value by preparing a relief-from-royalty discounted cash flow analysis using forward looking revenue projections. The significant assumptions used in discounted cash flow analysis included: future net sales, a long-term growth rate, a royalty rate and a discount rate used to present value future cash flows. The discount rate was based on the weighted-average cost of capital method at the date of the evaluation. The fair value of the indefinite-lived intangible assets was in excess of its carrying value by approximately 12% as of March 31, 2020 and 18% as of September 30, 2020, respectively, and substantially exceeded its carrying value as of October 1, 2019. We also performed an impairment test on our long-lived assets using an undiscounted cash flow model in determining the fair value, which was then compared to book value of the asset groups evaluated. The long-lived impairment analysis was performed over the Education reporting unit and the HMH Books & Media reporting unit. Estimates and significant assumptions included in the long-lived asset impairment analysis included identification of the primary asset in each asset group and undiscounted cash flow projections. We concluded that our indefinite-lived intangible assets and long-lived assets were not impaired based on the results of the quantitative analyses performed.

Depending on how long the economic and social conditions resulting from the COVID-19 pandemic exist and their future impact on state and local budgets with regards to educational spending, as well as discretionary consumer spending, we may be subject to further impairments in the future.   

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

3. Significant Accounting Policies and Recent Accounting Standards

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates, assumptions and judgments by management that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities in the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and assumptions including, but not limited to, book returns, deferred revenue and related standalone selling price estimates, allowance for bad debts, recoverability of advances to authors, valuation of inventory, financial instruments valuation, income taxes, pensions and other postretirement benefits obligations, contingencies, litigation, depreciation and amortization periods, and the recoverability of long-term assets such as property, plant, and equipment, capitalized pre-publication costs, other identified intangibles and goodwill. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat it, as well as the economic impact on local, regional, national and international customers and markets. Actual results may differ from those estimates.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of the new revenue recognition accounting standard, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. To the extent the transaction price includes variable consideration, which generally reflects estimated future product returns, we estimate the amount of variable consideration that should be included in the transaction price utilizing the expected value method to which we expect to be entitled. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based largely on all information (historical, current and forecasted) that is reasonably available. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

We estimate the collectability of contracts upon execution. For contracts with rights of return, the transaction price is adjusted to reflect the estimated returns for the arrangement on these sales and is made at the time of sale based on historical experience by product line or customer. The transaction prices allocated are adjusted to reflect expected returns and are based on historical return rates and sales patterns. Shipping and handling fees charged to customers are included in net sales.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. We do not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less. Significant financing components’ income is included in interest income.

Contracts are sometimes modified to account for changes in contract specifications and requirements. Contract modifications exist when the modification either creates new, or changes the existing, enforceable rights and

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

obligations. Generally, contract modifications are for products or services that are not distinct from the existing contract due to the inability to use, consume or sell the products or services on their own to generate economic benefits and are accounted for as if they were part of that existing contract. The effect of such a contract modification on the transaction price and measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

Physical product revenue is recognized when the customer obtains control of our product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract. Revenues from static digital content commence upon delivery to the customer of the digital entitlement that is required to access and download the content and is typically recognized at a point in time. Revenues from subscription software licenses, related hosting services and product support are recognized evenly over the license term as we believe this best represents the pattern of transfer to the customer. The perpetual software licenses provide the customer with a functional license to our products and their related revenues are recognized when the customer receives entitlement to the software. For the technical services provided to customers in connection with the software license, including hosting services related to perpetual licenses, we recognize revenue upon delivery of the services. As the invoices are based on each day of service, this is directly linked to the transfer of benefit to the customer.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. We enter into certain contracts that have multiple performance obligations, one or more of which may be delivered subsequent to the delivery of other performance obligations. These performance obligations may include print and digital media, professional development services, training, software licenses, access to hosted content, and various services related to the software including, but not limited to hosting, maintenance and support, and implementation. We allocate the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. We determine standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions and internally approved standard pricing discounts related to the performance obligations. Generally, our performance obligations include print and digital textbooks and instructional materials, trade books, reference materials, formative assessment materials and multimedia instructional programs; licenses to book rights and content; access to hosted content; and services including professional development, consulting and training. Our contracts may also contain software performance obligations including perpetual and subscription-based licenses and software maintenance and support services.

Accounts Receivable

Accounts receivable include amounts billed and currently due from customers and are recorded net of allowances for doubtful accounts and reserves for returns. In the normal course of business, we extend credit to customers that satisfy predefined criteria. We estimate the collectability of our receivables and develop those estimates to reflect the risk of credit loss. Allowances for doubtful accounts are established through the evaluation of accounts receivable aging, prior collection experience, current conditions and reasonable and supportable forecasts of the economic conditions that will exist through the contractual life of the financial asset. We monitor our ongoing credit exposure through an active review of collection trends and specific facts and circumstances. Our activities include monitoring the timeliness of payment collection and performing timely account reconciliations.

Contract Assets

Contract assets include unbilled amounts where revenue is recognized over time as the services are delivered to the customer based on the extent of progress towards completion and revenue recognized exceeds the amount billed to the customer, and right of payment is not subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are included in prepaid expenses and other assets on our consolidated balance sheets.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Deferred Commissions

Our incremental direct costs of obtaining a contract, which consist of sales commissions, are deferred and amortized over the period of contract performance. Applying the practical expedient, we recognize sales commission expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Amortization expense is included in selling and administrative expenses.

Deferred Revenue

Our contract liabilities consist of advance payments and billings in excess of revenue recognized and are classified as deferred revenue on our consolidated balance sheets. Our contract assets and liabilities are accounted for and presented on a net basis as either a contract asset or contract liability at the end of each reporting period. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue. In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance. If additional advances are received on those contracts in subsequent periods, we assume all revenue recognized in the reporting period first applies to the beginning contract liability as opposed to a portion applying to the new advances for the period.

Advertising Costs and Sample Expenses

Advertising costs are charged to selling and administrative expenses as incurred. Advertising costs were $12.1 million, $12.6 million and $12.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. Sample expenses are charged to selling and administrative expenses when the samples are shipped.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of cash in banks and highly liquid investment securities that have maturities of three months or less when purchased. The carrying amount of cash equivalents approximates fair value because of the short-term maturity of these investments.

Accounts Receivable

Accounts receivable are recorded net of allowances for doubtful accounts and reserves for returns. In the normal course of business, we extend credit to customers that satisfy predefined criteria. We estimate the collectability of our receivables. Allowances for doubtful accounts are established through the evaluation of accounts receivable aging and prior collection experience to estimate the ultimate collectability of these receivables. Reserves for returns are based on historical return rates and sales patterns.

Inventories

Inventories are stated at the lower of weighted-average cost or net realizable value. The level of obsolete and excess inventory is estimated on a program or title level-basis by comparing the number of units in stock with past usage and the expected future demand. The expected future demand of a program or title is determined by the copyright year, the previous year’s usage, the subsequent years’ sales forecast, and known forward-looking trends including our development cycle to replace the title or program and competing titles or programs.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost, or in the case of assets acquired in business combinations, at fair value as of the acquisition date, less accumulated depreciation. Equipment under capital lease is stated at fair value at inception of the lease, less accumulated depreciation. Maintenance and repair costs are charged to expense as incurred, and renewals and improvements that extend the useful life of the assets are capitalized. Costs associated with developing film and episodic series assets are deferred if such amounts are expected to be recovered through future revenues. Film and episodic series costs are amortized on a pro rata basis of revenue earned and total revenue expected to be earned from the film or episodic series. Depreciation on property, plant, and equipment is calculated using the straight-line method over the estimated useful lives of the assets or, in the case of assets acquired in business combinations, over their remaining lives. Equipment held under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. Estimated useful lives of property, plant, and equipment are as follows:

	Estimated Useful Life
Building and building equipment	10 to 35 years
Machinery and equipment	2 to 15 years
Capitalized software and internal-use software	3 to 5 years
Leasehold improvements	Lesser of useful life or lease term
Film and media	Revenue earned

Capitalized Internal-Use Software and Software Development Costs

Capitalized internal-use software and software is included in property, plant and equipment on the consolidated balance sheets.

We capitalize certain costs related to obtaining or developing computer software for internal use including external customer-facing websites. Costs incurred during the application development stage, including external direct costs of materials and services, and payroll and payroll related costs for employees who are directly associated with the internal-use software project, are capitalized and amortized on a straight-line basis over the expected useful life of the related software. The application development stage includes design of chosen path, software configuration and integration, coding, hardware installation and testing. Costs incurred during the preliminary project stage, as well as maintenance, training and upgrades that do not result in additional functionality subsequent to general release are expensed as incurred.

Certain computer software development costs for software that is to be sold or marketed are capitalized in the consolidated balance sheets. Capitalization of computer software development costs begins upon the establishment of technological feasibility. We define the establishment of technological feasibility as a working model. Amortization of capitalized computer software development costs is provided on a product-by-product basis using the straight-line method, beginning upon commercial release of the product and continuing over the remaining estimated economic life of the product. The carrying amounts of computer software development costs are annually compared to net realizable value and impairment charges are recorded, as appropriate, when amounts expected to be realized are lower.

We review internal-use software and software development costs for impairment. For the years ended December 31, 2020, 2019 and 2018, there was no impairment of internal-use software and software developments costs.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Pre-publication Costs

We capitalize the art, prepress, manuscript and other costs incurred in the creation of the master copy of a book or other media (the “pre-publication costs”). Pre-publication costs are primarily amortized from the year of sale over five years using the sum-of-the-years-digits method, which is an accelerated method for calculating an asset’s amortization. Under this method, the amortization expense recorded for a pre-publication cost asset is approximately 33% (year 1), 27% (year 2), 20% (year 3), 13% (year 4) and 7% (year 5). This policy is used throughout the Company, except for the HMH Books & Media young readers and general interest books, which generally expenses such costs as incurred. Additionally, pre-publication costs recorded in connection with the acquisition of the EdTech business are amortized over 7 years on a projected sales pattern. The amortization methods and periods chosen best reflects the pattern of expected sales generated from individual titles or programs. We periodically evaluate the remaining lives and recoverability of capitalized pre-publication costs, which are often dependent upon program acceptance by state adoption authorities. Amortization expense related to pre-publication costs for the years ended December 31, 2020, 2019 and 2018 were $126.2 million, $149.5 million and $109.3 million, respectively.

We review pre-publication costs for impairment.  For the years ended December 31, 2020, 2019 and 2018, there was no impairment of pre-publication costs.

Goodwill and Indefinite-lived Intangible Assets

Goodwill is the excess of the purchase price paid over the fair value of the net assets of the business acquired. Other intangible assets principally consist of branded trademarks and trade names, acquired publishing rights and customer relationships. Goodwill and indefinite-lived intangible assets (certain tradenames) are not amortized, but are reviewed at least annually for impairment or earlier, if an indication of impairment exists. Goodwill is allocated entirely to our Education reporting unit. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include our market capitalization, selection of a control premium, and the determination of appropriate market comparables as well as the fair value of certain individual assets and liabilities.

We have the option of first assessing qualitative factors to determine whether it is necessary to perform a quantitative impairment test for goodwill or we can perform the quantitative impairment test without performing the qualitative assessment. In performing the qualitative assessment, events and circumstances specific to the reporting unit and to the entity as a whole, such as macroeconomic conditions, industry and market considerations, overall financial performance and cost factors are considered when evaluating whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If the fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of the net assets assigned to a reporting unit exceeds the fair value of a reporting unit, goodwill is deemed impaired and is written down to the extent of the difference between the fair value of the reporting unit and the carrying value.

We estimate the total fair value of the Education reporting unit by using one or more of various valuation techniques including an evaluation of our market capitalization and peer company multiples depending on the best approximation of fair value of the Education reporting unit in the current social and economic environment. With regard to indefinite-lived intangible assets, which includes the Houghton Mifflin Harcourt tradename at December 31, 2020 and 2019, the recoverability is evaluated using a one-step process whereby we determine the fair value by asset and then compare it to its carrying value to determine if the asset is impaired. We estimate the fair value by preparing a relief-from-royalty discounted cash flow analysis using forward looking revenue projections. The significant assumptions used in discounted cash flow analysis include: future net sales, a long-term growth rate, a royalty rate and a discount rate used to present value future cash flows and the terminal value of the Education reporting unit. The discount rate is based on the weighted-average cost of capital method at the date of the evaluation. Adverse changes in our market capitalization or peer company multiples by an equivalent amount could give rise to an impairment.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

We completed our annual goodwill impairment test as of October 1, 2020 using consistent methodologies and assumptions with those described during our event-driven tests and did not identify an impairment. The fair value of the Education reporting unit was in excess of its carrying value by approximately 18% as of October 1, 2020 and 2019. We recorded a goodwill impairment charge of $279.0 million for the year ended December 31, 2020. Refer to Note 2 for a discussion of the factors and circumstances leading to the goodwill impairment. There was no goodwill impairment for the years ended December 31, 2019 and 2018. We will continue to monitor and evaluate the carrying value of goodwill. If market and economic conditions or business performance deteriorate, this could increase the likelihood of us recording an impairment charge.   

We completed our annual indefinite-lived asset impairment tests as of October 1, 2020 and 2019. No indefinite-lived intangible assets were deemed to be impaired for the years ended December 31, 2020, 2019 and 2018.

Publishing Rights

A publishing right is an acquired right that allows us to publish and republish existing and future works as well as create new works based on previously published materials. We determined the fair market value of the publishing rights arising from business combinations by discounting the after-tax cash flows projected to be derived from the publishing rights and titles to their net present value using a rate of return that accounts for the time value of money and the appropriate degree of risk. The useful life of the publishing rights is based on the lives of the various copyrights involved. We calculate amortization using the percentage of the projected operating income before taxes derived from the titles in the current year as a percentage of the total estimated operating income before taxes over the remaining useful life. Acquired publication rights, as well as customer-related intangibles with definitive lives, are primarily amortized on an accelerated basis over periods ranging from 3 to 20 years.  We review our publishing rights for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable.  No publishing rights were deemed to be impaired for the years ended December 31, 2020, 2019 and 2018.  

Impairment of Other Long-lived Assets

We review our other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the future undiscounted cash flows are less than their book value, impairment exists. The impairment is measured as the difference between the book value and the fair value of the underlying asset. Fair value is normally determined using an undiscounted cash flow model.

Severance

We accrue postemployment benefits if the obligation is attributable to services already rendered, rights to those benefits accumulate, payment of benefits is probable, and amount of benefit is reasonably estimated. Postemployment benefits include severance benefits.

Subsequent to recording such accrued severance liabilities, changes in market or other conditions may result in changes to assumptions upon which the original liabilities were recorded that could result in an adjustment to the liabilities.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Royalty Advances

Royalty advances to authors are capitalized and represent amounts paid in advance of the sale of an author’s product and are recovered as earned. As advances are recorded, a partial reserve may be recorded immediately based primarily upon historical sales experience. Additionally, advances are evaluated periodically to determine if they are expected to be recovered on a title-by-title basis, with consideration given to the other titles in the author’s portfolio also earning against the outstanding advance. Any portion of a royalty advance that is not expected to be recovered is fully reserved. The reserve for royalty advances is reported as a reduction of the royalty advances to authors balance. Cash payments for royalty advances are included within cash flows from operating activities, under the caption “Royalties payable and author advances, net,” in our consolidated statements of cash flows.

Leases

On January 1, 2019, we adopted the new lease accounting standard using the modified retrospective method. We applied the guidance to each lease as of January 1, 2019 with a cumulative effect adjustment to the opening balance of accumulated deficit as of that date. The standard requires lessees to recognize a lease liability and a right of use asset on the balance sheet for operating leases. Right of use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Right of use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Accounting for finance leases is substantially unchanged.  Prior comparative periods were not adjusted.

We elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to not reassess whether any expired or existing contracts are or contain leases, carry forward the historical lease classification and to not reassess initial direct costs for any existing leases. We did not elect the hindsight practical expedient to determine the lease term for existing leases. Upon implementation of the new guidance, we have elected the practical expedients to combine lease and non-lease components, and to not recognize right of use assets and lease liabilities for short-term leases. The adoption of this guidance impacted our consolidated balance sheets due to the recognition of the lease rights and obligations related to our office space, automobile fleet and office equipment leases as assets and liabilities of approximately $148.0 million and $161.0 million, respectively. The adjustment to accumulated deficit of approximately $0.8 million related to a previously recorded deferred gain on the sale leaseback of a warehouse. The impact on our results of operations and cash flows was not material.

Under the new lease accounting standard, we determine if an arrangement is a lease at inception. Right of use assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, we consider only payments that are fixed and determinable at the time of commencement. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our incremental borrowing rate is a hypothetical rate based on our understanding of what our credit rating would be. The right of use asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. When determining the probability of exercising such options, we consider contract-based, asset-based, entity-based, and market-based factors. Our lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes or other costs. Variable lease costs are expensed as incurred on our consolidated statements of operations. Our lease agreements generally do not contain any residual value guarantees or restrictive covenants.

Operating leases are included in operating lease assets and operating lease liabilities on our consolidated balance sheets. Finance leases are included in property, plant, and equipment, and other liabilities on our consolidated balance sheets.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Income Taxes

We record income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax basis, and operating loss and tax credit carryforwards. Our consolidated financial statements contain certain deferred tax assets which have arisen primarily as a result of interest expense limitations, as well as other temporary differences between financial and tax accounting. We establish a valuation allowance if the likelihood of realization of the deferred tax assets is reduced based on an evaluation of objectively verifiable evidence. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against those deferred tax assets. We evaluate the weight of all available evidence to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

We also evaluate any uncertain tax positions and only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon settlement. We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Any change in judgment related to the expected ultimate resolution of uncertain tax positions is recognized in earnings in the period in which such change occurs. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense.

Stock-Based Compensation

Certain employees and directors have been granted stock options, restricted stock and restricted stock units in our common stock. Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant service period. We estimate the fair value of each stock-based award on the measurement date using the current market price based on the target value of the award for restricted stock and restricted stock units, the Monte Carlo simulation for market-based restricted stock units and the Black-Scholes valuation model for stock options. We recognize stock-based compensation expense over the awards requisite service period on a straight-line basis for time-based stock options, restricted stock and restricted stock units and on a graded basis for restricted stock and restricted stock units that are contingent on the achievement of performance conditions.

Comprehensive Loss

Comprehensive loss is defined as changes in the equity of an enterprise except those resulting from stockholder transactions. The amounts shown on the consolidated statements of stockholders’ equity and comprehensive loss relate to the cumulative effect of changes in pension and postretirement liabilities, foreign currency translation gain and loss adjustments, unrealized gains and losses on short-term investments and gains and losses on derivative instruments.

Foreign Currency Translation

The functional currency for each of our subsidiaries is the currency of the primary economic environment in which the subsidiary operates, generally defined as the currency in which the entity generates and expends cash. Foreign currency denominated assets and liabilities are translated into United States dollars at current rates as of the balance sheet date and the revenue, costs and expenses are translated at the average rates established during each reporting period. Cumulative translation gains or losses are recorded in equity as an element of accumulated other comprehensive income.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Financial Instruments

Derivative financial instruments are employed to manage risks associated with interest rate exposures and are not used for trading or speculative purposes. We recognize all derivative instruments in our consolidated balance sheets at fair value. Changes in the fair value of derivatives are recognized periodically either in earnings or in stockholders’ equity as a component of accumulated other comprehensive loss, depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value hedge or a cash flow hedge. Gains and losses on derivatives designated as hedges, to the extent they are effective, are recorded in other comprehensive loss, and subsequently reclassified to earnings to offset the impact of the hedged items when they occur. Changes in the fair value of derivatives not qualifying as hedges are reported in earnings. During 2020, 2019 and 2018, our interest rate swaps were designated as hedges and the majority qualified for hedge accounting. The interest rate derivative contracts matured on July 22, 2020. We recorded an unrealized loss of $3.4 million and an unrealized gain of $3.5 million in our statements of comprehensive loss to account for the changes in fair value of these derivatives during the periods ended December 31, 2019 and 2018, respectively. The corresponding $1.0 million hedge liability was included within current other liabilities in our consolidated balance sheet as of December 31, 2019. Our foreign exchange forward contracts did not qualify for hedge accounting because we did not contemporaneously document our hedging strategy upon entering into the hedging arrangements.

Treasury Stock

We account for treasury stock under the cost method. When shares are reissued or retired from treasury stock they are accounted for at an average price. Upon retirement the excess over par value is charged against capital in excess of par value.

Net Loss per Share

Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. Except where the result would be anti-dilutive, net loss per share is computed using the treasury stock method for the exercise of stock options. For periods in which the Company has reported net losses, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders for the years ended December 31, 2020, 2019 and 2018.

Recent Accounting Standards

Recent accounting pronouncements, not included below, are not expected to have a material impact on our consolidated financial position or results of operations.

Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles, including simplification of areas such as franchise taxes, step-up in tax basis of goodwill, intraperiod allocations, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The standard will be effective in 2021, with early adoption permitted. We do not expect it to have a material impact on our consolidated financial statements.  

Recently Adopted Accounting Standards

In August 2018, the FASB issued new guidance on a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract). Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement to develop or obtain internal use software. Accordingly, the guidance requires a customer to determine the stage of a project that the implementation activity relates to and the nature of the associated costs in

77

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

order to determine whether those costs should be expensed as incurred or capitalized. The guidance also requires the customer to amortize the capitalized implementation costs as an expense over the term of the hosting arrangement. We adopted the guidance on January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued updated guidance to simplify the test for goodwill impairment by the elimination of Step 2 in the determination on whether goodwill should be considered impaired. The annual assessments are still required to be completed. We adopted the guidance on January 1, 2020.  

In June 2016, the FASB issued new guidance that requires credit losses on financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, not based on incurred losses, as well as additional disclosures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. We adopted the guidance on January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

We are exposed to credit losses primarily through our accounts receivable. We develop estimates to reflect the risk of credit loss which are based on an evaluation of accounts receivable aging, prior collection experience, current conditions and reasonable and supportable forecasts of the economic conditions that will exist through the contractual life of the financial asset. We write off the asset when it is no longer deemed collectible. We monitor our ongoing credit exposure through an active review of collection trends. Our activities include monitoring the timeliness of payment collection and performing timely account reconciliations. At December 31, 2020, we reported allowances for doubtful accounts of $4.0 million, compared to $3.0 million at December 31, 2019, reflecting an increase of $1.6 million, prior to write-offs of $0.6 million for the year ended December 31, 2020.

We are also exposed to losses on our royalty advances. Royalty advances to authors are capitalized and represent amounts paid in advance of the sale of an author’s product and are recovered as earned. As advances are recorded, a partial reserve may be recorded immediately based primarily upon historical sales experience. Additionally, advances are evaluated periodically to determine if they are expected to be recovered on a title-by-title basis. Any portion of a royalty advance that is not expected to be recovered is fully reserved. At December 31, 2020, we reported a reserve for royalty advances of $96.7 million, compared to $119.7 million at December 31, 2019, reflecting a decrease of $23.0 million for the year ended December 31, 2020.

In February 2016, the FASB issued guidance that primarily requires lessees to recognize most leases on their balance sheets but record expenses on their income statements in a manner similar to current accounting. We adopted the guidance on January 1, 2019 using the modified retrospective method and did not adjust comparative periods or modify disclosures in those comparative periods.

In May 2014, the FASB issued new guidance related to revenue recognition. This new accounting standard replaced most current U.S. GAAP guidance on this topic and eliminated most industry-specific guidance. We adopted the guidance on January 1, 2018 applying the modified retrospective method.

4. Acquisitions

On January 14, 2019, we completed the acquisition of certain assets of PV Waggle LLC, which comprised a web-based adaptive learning solution providing Math and English Language Arts (“ELA”) instruction for students in grades 2-8 for a total purchase price of approximately $5.4 million. The transaction was accounted for under the acquisition method of accounting. Goodwill, other intangible assets and other liabilities recorded as part of the acquisition totaled approximately $0.9 million, $5.2 million and $0.7 million, respectively. The other intangible assets represent developed technology and were valued using a replacement cost approach. Pro forma financial information and measurement period adjustments were not material.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

5. Discontinued Operations

On October 1, 2018, we completed the sale of all the assets, including intellectual property, used primarily in our Riverside clinical and standardized testing business (“Riverside Business”) for cash consideration received of $140.0 million and the purchaser’s assumption of all liabilities relating to the Riverside Business subject to specified exceptions. Net proceeds from the sale after the payment of transaction costs were approximately $135.0 million with a post-tax book gain on sale of approximately $30.5 million. The gain was recorded in the fourth quarter of 2018 as the transaction closed on October 1, 2018. The tax gain on the sale was offset by 2018 losses. The results of the Riverside Business were previously reported in our Education segment. In connection with the sale of the Riverside Business, we entered into a Transition Services Agreement with the purchaser whereby we performed certain support functions through September 30, 2019. 

Upon the signing of the asset purchase agreement on September 12, 2018, the Riverside Business qualified as a discontinued operation, and goodwill originally included in the Education reportable segment was transferred to the Riverside Business. The amount of transferred goodwill was $67.0 million and was determined using the relative fair value method. The relative fair value was determined based on the purchase price of the Riverside Business compared to the Education reportable segment fair value. The Education reportable segment fair value was based primarily on the market value of the overall Company at the date that the Riverside Business qualified as a discontinued operation. The allocation also required the assessment for impairment for each of the Riverside Business and Education reportable segment’s goodwill and indefinite-lived intangible assets carrying values. No impairment was deemed to exist.

Selected financial information of the Riverside Business included in discontinued operations is as follows:

	For the Year
	Ended December 31,
	2018
Net sales	$	56,562
Costs		37,714
Amortization		4,954
Earnings from discontinued operations before taxes		13,894
Income tax expense		1,061
Earnings from discontinued operations, net of tax	$	12,833

6. Balance Sheet Information

Account Receivable

Accounts receivable at December 31, 2020 and 2019 consisted of the following:

	2020			2019
Accounts receivable	$	171,395		$	204,119
Allowance for bad debt		(3,989	)		(3,015	)
Reserve for book returns		(14,574	)		(16,679	)
	$	152,832		$	184,425

As of December 31, 2020 and 2019, one individual customer comprised more than 10% of our accounts receivable, net balance.  We believe that our accounts receivable credit risk exposure is limited and we have not experienced significant write-downs in our accounts receivable balances.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Inventories

Inventories at December 31, 2020 and 2019 consisted of the following:

	2020		2019
Finished goods	$	155,759	$	203,103
Raw materials		11,204		9,956
Inventories	$	166,963	$	213,059

Property, Plant, and Equipment

Balances of major classes of assets and accumulated depreciation and amortization at December 31, 2020 and 2019 were as follows:

	2020			2019
Land and land improvements	$	4,939		$	4,939
Building and building equipment		11,160			10,239
Machinery and equipment		14,985			12,970
Capitalized software and internal-use software		641,027			598,317
Leasehold improvements		24,266			22,974
Film and media		29,845			22,055
		726,222			671,494
Less: Accumulated depreciation and amortization		(633,020	)		(571,106	)
Property, plant, and equipment, net	$	93,202		$	100,388

For the years ended December 31, 2020, 2019 and 2018, depreciation and amortization expense related to property, plant, and equipment were $64.7 million, $71.3 million and $81.2 million, respectively.

Property, plant, and equipment at December 31, 2020 and 2019 included approximately $0.1 million and $0.3 million, respectively, acquired under finance lease agreements, of which the majority is included in machinery and equipment. The future minimum lease payments required under non-cancelable capital leases as of December 31, 2020 are $0.1 million in 2021.

Included within property, plant, and equipment on our consolidated balance sheets are film and media assets. Our film and media assets are comprised of the cost to develop our animated series Carmen Sandiego and other production series. These assets will be amortized proportionally to the revenues recognized relative to the total estimated revenue consistent with the guidance over episodic television series development. We recorded amortization expense of $14.0 million, $9.8 million and $6.1 million for the years ended December 31, 2020, 2019 and 2018, respectively, against this asset, which is included within cost of sales, excluding publishing rights and pre-publication amortization, in the statement of operations.

Substantially all property, plant, and equipment are pledged as collateral under our term loan and revolving credit facility.

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Contract Assets, Contract Liabilities and Contract Costs

Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional. Contract assets are included in prepaid expenses and other assets on our consolidated balance sheets. Contract liabilities consist of deferred revenue (current and long-term). The following table presents changes in contract assets and contract liabilities during the year ended December 31, 2020:

	December 31,		December 31,
	2020		2019		$ Change		% Change
Contract assets	$	580	$	109	$	471		432.11	%
Contract liabilities (deferred revenue)	$	905,284	$	848,106	$	57,178		6.74	%

The $56.7 million increase in our net contract liabilities from December 31, 2019 to December 31, 2020 was primarily due to the non-satisfaction of performance obligations related to physical and digital products, and services during the period in excess of recognition from deferred revenue.

During the years ended December 31, 2020, 2019 and 2018, we recognized the following net sales as a result of changes in the contract assets and contract liabilities balances:

	Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,
	2020		2019		2018
Net sales recognized in the period from:
Amounts included in contract liabilities at the beginning of the period	$	295,675	$	229,557	$	220,769

As of December 31, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligations, which includes deferred revenue and open orders, was $970.3 million, and we will recognize approximately 73% to net sales over the next 1 to 3 years.

We capitalize incremental commissions paid to sales representatives for obtaining product sales as well as service contracts unless the capitalization and amortization of such costs are not expected to have a material impact on the financial statements. Applying the practical expedient within the accounting guidance, we recognize sales commission expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. We had deferred commissions in the amount of $30.7 million and $29.3 million at December 31, 2020 and 2019, respectively, and amortized $12.9 million, $13.2 million and $10.5 million during the years ended December 31, 2020, 2019 and 2018, respectively. The amortization is included in selling and administrative expenses.

Costs to fulfill a contract are directly related to a contract that will be used to satisfy a performance obligation in the future and are expected to be recovered. These costs are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. Our assets associated with incremental costs to fulfill a contract were $14.7 million and $5.6 million at December 31, 2020 and 2019, respectively, and are included within prepaid expenses and other assets (current) and other assets (long term) on our consolidated balance sheet. We recorded amortization of $3.8 million and $4.6 million during the years ended December 31, 2020 and 2019, respectively. The amortization is included in cost of sales, excluding publishing rights and pre-publication amortization.

81

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

7. Goodwill and Other Intangible Assets

The change in the carrying amount of goodwill, which all relates to the Education segment, for the year ended December 31, 2020 is as follows:

Balance at December 31, 2019	$	716,977
Impairment		(279,000)
Balance at December 31, 2020	$	437,977

In accordance with the provisions of the accounting standard for goodwill and other intangible assets, goodwill and certain indefinite-lived tradenames are not amortized but rather are assessed for impairment on an annual basis. Accumulated impairment losses on goodwill as of December 31, 2020 was $279.0 million. Refer to Note 2 for a discussion of the valuation of goodwill, indefinite-lived intangible assets and long-lived assets along with the triggering event which resulted in a goodwill impairment of $279.0 million during the year ended December 31, 2020. There was no impairment charge recorded in the years ended December 31, 2019 and 2018.

Other intangible assets consisted of the following:

	December 31, 2020							December 31, 2019
			Accumulated							Accumulated
	Cost		Amortization			Total		Cost		Amortization			Total
Trademarks and tradenames: indefinite-    Lived	$	161,000	$	—		$	161,000	$	161,000	$	—		$	161,000
Trademarks and tradenames: definite-    Lived		164,130		(53,610	)		110,520		164,130		(38,948	)		125,182
Publishing rights		1,180,000		(1,159,482	)		20,518		1,180,000		(1,139,426	)		40,574
Customer related and other		449,840		(313,294	)		136,546		449,840		(302,371	)		147,469
Other intangible assets, net	$	1,954,970	$	(1,526,386	)	$	428,584	$	1,954,970	$	(1,480,745	)	$	474,225

   During 2019, we acquired certain assets of PV Waggle LLC and recorded an intangible asset of $5.2 million. Refer to Note 4.

Amortization expense for definite-lived intangible assets, publishing rights and customer related and other intangibles were $45.6 million, $51.9 million and $61.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Estimated aggregate amortization expense expected for each of the next five years related to intangibles subject to amortization is as follows:

	Trademarks				Other
	and		Publishing		Intangible
	Tradenames		Rights		Assets
2021		14,408		11,642		10,333
2022		10,608		7,569		10,134
2023		6,808		1,307		9,954
2024		6,715		—		8,503
2025		6,437				8,315
Thereafter		65,544		—		89,307
	$	110,520	$	20,518	$	136,546

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Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

8. Debt

Our debt consisted of the following:

	December 31,			December 31,
	2020			2019
$380,000 term loan due November 22, 2024 interest    payable quarterly (net of discount and    issuance costs)	$	346,091		$	361,294
$306,000 senior secured notes due February 15, 2025    interest payable semi-annually (net of discount and    issuance costs)		297,601			295,893
		643,692			657,187
Less: Current portion of long-term debt		(19,000	)		(19,000	)
Total long-term debt, net of discount and issuance    Costs	$	624,692		$	638,187
Revolving credit facility	$	—		$	—

Long-term debt repayments due in each of the next five years and thereafter is as follows:

Year
2021		19,000
2022		19,000
2023		19,000
2024		304,000
2025		306,000
	$	667,000

Senior Secured Notes

On November 22, 2019, we completed the sale of $306.0 million in aggregate principal amount of 9.0% Senior Secured Notes due 2025 (the “notes”) in a private placement to qualified institutional buyers under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to persons outside the United States pursuant to Regulation S under the Securities Act.  The notes mature on February 15, 2025 and bear interest at a rate of 9.0% per annum. Interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2020.

The notes were issued at a discount equal to 2.0% of the outstanding borrowing commitment.

The transaction was accounted for under the guidance for debt modifications and extinguishments. We incurred approximately $5.4 million of third-party fees for the transaction, of which approximately $4.1 million were capitalized as deferred financing fees and approximately $1.3 million was recorded to expense and included in the selling and administrative line item in our consolidated statements of operations for the year ended December 31, 2019.  

We may redeem all or a portion of the notes at redemption prices as described in the notes.  

The notes do not require us to comply with financial maintenance covenants. We are currently required to meet certain incurrence based financial covenants as defined under our notes. The notes are subject to restrictions on our ability to incur additional indebtedness, issue certain preferred stock, redeem, purchase or retire subordinated debt, make certain investments, pay dividends or other amounts, enter into certain transactions with affiliates, merge or consolidate with another person, sell or otherwise dispose of all or substantially all of our assets, sell certain assets, including capital stock, designate our subsidiaries as unrestricted subsidiaries, redeem or repurchase capital stock or make other restricted payments, and incur certain liens.  The notes are subject to customary events of

83

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

default. If an event of default occurs and is continuing, the administrative agent may, or at the request of certain required lenders shall, accelerate the obligations outstanding under the notes.

Term Loan Facility

On November 22, 2019, we entered into a second amended and restated term loan credit agreement for an aggregate principal amount of $380.0 million (the “term loan facility”).  The term loan facility is required to be repaid in quarterly installments of approximately $4.8 million with the balance being payable on the maturity date.  The term loan facility matures on November 22, 2024 and the interest rate per annum is equal to, at the option of the Company, either (a) LIBOR plus a margin of 6.25% or (b) an alternate base rate plus a margin of 5.25%.  As of December 31, 2020, the interest rate on the term loan facility was 7.25%.  

On July 27, 2017, the U.K. Financial Conduct Authority (the “FCA”) announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021. Our term loan facility provides that the administrative agent may determine that (i) adequate and reasonable means do not exist for ascertaining the LIBOR rate or (ii) the FCA or the government authority having jurisdiction over the administrative agent has made a public statement identifying a specific date after which the LIBOR rate shall no longer be used for determining interest rates for loans. If the administrative agent determines that (i) or (ii) above is unlikely to be temporary then the administrative agent and the Company will agree to transition to an alternate base rate or amend the term loan facility to establish an alternate rate of interest to LIBOR that gives due consideration to the then-prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time.

The term loan facility was issued at a discount equal to 4.0% of the outstanding borrowing commitment.

The transaction was accounted for under the guidance for debt modifications and extinguishments. We incurred approximately $7.2 million of third-party fees for the transaction, of which approximately $2.9 million were capitalized as deferred financing fees and approximately $4.3 million was recorded to expense and included in the selling and administrative line item in our consolidated statements of operations for the year ended December 31, 2019.

The term loan facility contains customary mandatory prepayment requirements, including with respect to excess cash flow, proceeds from certain asset sales or dispositions of property, and proceeds from certain incurrences of indebtedness. The term loan facility permits the Company to voluntarily prepay outstanding amounts at any time without premium or penalty, other than customary breakage costs with respect to LIBOR loans; provided, however, that any voluntary prepayment in connection with certain repricing transactions that occur before the date that is twelve months after the closing of the term loan facility shall be subject to a prepayment premium of 1.00% of the principal amount of the amounts prepaid.

The term loan facility does not require us to comply with financial maintenance covenants. We are currently required to meet certain incurrence based financial covenants as defined under our term loan facility. The term loan facility is subject to usual and customary conditions, representations, warranties and covenants, including restrictions on additional indebtedness, liens, investments, mergers, acquisitions, asset dispositions, dividends to stockholders, repurchase or redemption of our stock, transactions with affiliates and other matters. The term loan facility is subject to customary events of default. If an event of default occurs and is continuing, the administrative agent may, or at the request of certain required lenders shall, accelerate the obligations outstanding under the term loan facility.

We are subject to an excess cash flow provision under our term loan facility which is predicated upon our leverage ratio and cash flow. We were not required to make a payment under the excess cash flow provision in 2020 and 2019.

On November 22, 2019, in connection with the notes and term loan facility described above, we paid off the remaining outstanding balance of our previous $800.0 million term loan facility. The transaction was accounted for under the guidance for debt modifications and extinguishments. We incurred a loss on extinguishment of debt of approximately $4.4 million related to the write off of the portion of the unamortized deferred financing fees and discount associated with the portion of the previous term loan accounted for as an extinguishment

84

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Interest Rate Hedging

On August 17, 2015, we entered into interest rate derivative contracts with various financial institutions having an aggregate notional amount of $400.0 million to convert floating rate debt into fixed rate debt. We assessed at inception, and re-assess on an ongoing basis, whether the interest rate derivative contracts are highly effective in offsetting changes in the fair value of the hedged variable rate debt. The interest rate derivative contracts matured on July 22, 2020.  

These interest rate swaps were designated as cash flow hedges and qualified for hedge accounting under the accounting guidance related to derivatives and hedging. Accordingly, we recorded an unrealized loss of $3.4 million and an unrealized gain of $3.5 million in our statements of comprehensive loss to account for the changes in fair value of these derivatives during the periods ended December 31, 2019 and 2018, respectively. The corresponding $1.0 million hedge liability is included within current other liabilities in our consolidated balance sheet as of December 31, 2019.  We reclassified $1.9 million from other comprehensive loss to earnings during the year ended December 31, 2020.

In connection with the term loan facility on November 22, 2019, we incurred a change in the mix of floating rate debt versus fixed rate debt. As a result, the aggregate notional of our active interest rate derivative contracts designated as cash flow hedges exceeded the outstanding floating rate debt notional by approximately $29.5 million. To accommodate for this notional shortfall, we partially de-designated one of our active interest rate derivative contracts. This involved splitting the notional amount with one portion remaining designated under cash flow hedge accounting, and the remaining portion, with a $29.5 million notional amount, left undesignated. There were no changes made to the interest rate derivative contracts from an economic perspective; the notional split is accounting in nature only.

Beginning on November 22, 2019, the fair value changes on the undesignated portion of the swap flow through earnings, as opposed to being deferred as unrealized gains or losses in other comprehensive income (loss). The impact of this change was less than $0.1 million and was recorded in our consolidated statements of operations for each year ended December 31, 2020 and 2019.  We had no interest rate derivative contracts outstanding as of December 31, 2020.  

Revolving Credit Facility

On November 22, 2019, we entered into a second amended and restated revolving credit agreement that provides borrowing availability in an amount equal to the lesser of either $250.0 million or a borrowing base that is computed monthly or weekly and comprised of the Borrowers’ and the Guarantors’ (as such terms are defined below) eligible inventory and receivables (the “revolving credit facility”). The revolving credit facility includes a letter of credit subfacility of $50.0 million, a swingline subfacility of $20.0 million and the option to expand the facility by up to $100.0 million in the aggregate under certain specified conditions. The revolving credit facility may be prepaid, in whole or in part, at any time, without premium.  The transaction was accounted for under the accounting guidance for modifications to or exchanges of revolving debt arrangements. We incurred approximately $1.1 million of creditor and third-party fees which were capitalized as deferred financing fees.

85

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

The revolving credit facility requires the Company to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 on a trailing four-quarter basis only during certain periods commencing when excess availability under the revolving credit facility is less than certain limits prescribed by the terms of the revolving credit facility. The revolving credit facility is subject to usual and customary conditions, representations, warranties and covenants, including restrictions on additional indebtedness, liens, investments, mergers, acquisitions, asset dispositions, dividends to stockholders, repurchase or redemption of our stock, transactions with affiliates and other matters. The revolving credit facility is subject to customary events of default.  If an event of default occurs and is continuing, the administrative agent may, or at the request of certain required lenders shall, accelerate the obligations outstanding under the revolving credit facility. As of December 31, 2020, no amounts are outstanding under the revolving credit facility.

As of December 31, 2020, the minimum fixed charge coverage ratio covenant under our revolving credit facility was not applicable, due to our level of borrowing availability. The minimum fixed charge coverage ratio, which is only tested in limited situations, is 1.0 to 1.0 through the end of the facility.

Guarantees

Under each of the notes, the term loan facility and the revolving credit facility, Houghton Mifflin Harcourt Publishers Inc., Houghton Mifflin Harcourt Publishing Company and HMH Publishers LLC are the borrowers (collectively, the “Borrowers”), and Citibank, N.A. acts as both the administrative agent and the collateral agent.

The obligations under the notes, the term loan facility and the revolving credit facility are guaranteed by the Company and each of its direct and indirect for-profit domestic subsidiaries (other than the Borrowers) (collectively, the “Guarantors”) and are secured by all capital stock and other equity interests of the Borrowers and the Guarantors and substantially all of the other tangible and intangible assets of the Borrowers and the Guarantors, including, without limitation, receivables, inventory, equipment, contract rights, securities, patents, trademarks, other intellectual property, cash, bank accounts and securities accounts and owned real estate. The revolving credit facility is secured by first priority liens on receivables, inventory, deposit accounts, securities accounts, instruments, chattel paper and other assets related to the foregoing (the “Revolving First Lien Collateral”), and second priority liens on the collateral which secures the term loan facility on a first priority basis. The term loan facility is secured by first priority liens on the capital stock and other equity interests of the Borrowers and the Guarantors, equipment, owned real estate, trademarks and other intellectual property, general intangibles that are not Revolving First Lien Collateral and other assets related to the foregoing, and second priority liens on the Revolving First Lien Collateral.

9. Leases

We lease property and equipment under finance and operating leases. We have operating leases for various office space and facilities, warehouse equipment, automobile fleet and office equipment that expire at various dates through 2033. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the lease term. Many of our leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. For leases beginning in 2019 and later, we account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) as combined with the non-lease components (e.g., common-area maintenance costs). Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We sublease certain real estate office space to third parties. Our sublease portfolio consists of operating leases.

When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. We give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.

86

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Lease Position as of December 31, 2020

The table below presents the lease assets and liabilities recorded on the balance sheet.

Leases	Classification	December 31, 2020				December 31, 2019
Assets
Operating lease assets	Operating lease assets	$		126,850		$		132,247
Total leased assets		$		126,850		$		132,247
Liabilities
Current
Operating	Operating lease liabilities	$		9,669		$		8,685
Noncurrent
Operating	Operating lease liabilities			132,014				134,994
Total lease liabilities		$		141,683		$		143,679
Weighted average remaining lease term Operating leases		8.2 Years				9.6 Years
Weighted average discount rate Operating leases (1)			12.56		%		12.46		%

(1) Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

Lease costs

Operating lease cost and sublease income totaled $34.9 million and $2.1 million and $39.9 million and $2.3 million for the years ended December 31, 2020 and 2019, respectively. The net lease cost of $32.8 million and $37.6 million for years ended December 31, 2020 and 2019, respectively, is included in the selling and administrative line item in our consolidated statements of operations. Operating lease cost includes short term leases and variable lease costs, which are not material.

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the balance sheet.

	Operating
Maturity of Lease Liabilities	Leases
2021		24,143
2022		25,395
2023		27,838
2024		29,034
2025		28,370
Thereafter		110,993
Total lease payments	$	245,773
Less: interest		(104,090	)
Present value of lease liabilities	$	141,683

During the third quarter of 2019, we executed a lease agreement on new office space in Portsmouth, New Hampshire. We plan to relocate our employees from the existing location in Portsmouth, New Hampshire to this new office space upon the completion of the building. The lease term specified in the agreement is 10 years with an option to renew for an additional five years. Our estimated fixed lease payments over the 10 year initial lease term

87

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

is $9.8 million. We currently expect to relocate to the space in the second quarter of 2021, but this timing as well as when we are required to begin making payments and recognize rental and other expenses under the new lease, is dependent on when the space is available for use.

Other Information

The table below presents supplemental cash flow information related to leases during the years ended December 31, 2020 and 2019.

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases – 2020	$	28,639
Operating cash flows for operating leases – 2019	$	31,245

10. Restructuring, Severance and Other Charges

2020 Restructuring Plan

On September 4, 2020, we finalized a voluntary retirement incentive program, which was offered to all U.S. based employees at least 55 years of age with at least five years of service. Of the eligible employees, 165 elected to participate representing approximately 5% of our workforce. The majority of the employees voluntarily retired as of September 4, 2020 with select employees leaving later in the year.  Each of the employees received or will receive separation payments in accordance with our severance policy.  

On September 30, 2020, we undertook a restructuring program, including a reduction in force, as part of the ongoing assessment of our cost structure amid the COVID-19 pandemic and in line with our strategic transformation plan. The reduction in force resulted in a 22% reduction in our workforce, including positions eliminated as part of the voluntary retirement incentive program mentioned above, and net of newly created positions to support our digital first operations. The reduction in force will result in the departure of approximately 525 employees and was completed in October 2020. Each of the employees received or will receive separation payments in accordance with our severance policy. The total one-time, non-recurring cost incurred in connection with the restructuring program, inclusive of the voluntary retirement incentive program, (collectively the “2020 Restructuring Plan”) all of which represents cash expenditures, is approximately $33.6 million.

The following table provides a summary of our total costs associated with the 2020 Restructuring Plan, included in the restructuring/severance and other charges line item within our consolidated statements of operations, for the year ended December 31, 2020, by major type of cost:

	Year Ended		Total Amount
	December 31,		Incurred
Type of Cost	2020		to Date
Restructuring charges: (1)
Severance and termination benefits	$	33,643	$	33,643
	$	33,643	$	33,643

(1) All restructuring charges are included within Corporate and Other.

88

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Our restructuring liabilities are comprised of accruals for severance and termination benefits. The following is a rollforward of our liabilities associated with the 2020 Restructuring Plan:

	2020
	Restructuring						Restructuring
	accruals at						accruals at
	December 31,				Cash		December 31,
	2019		Charges		payments		2020
Severance and termination benefits	$	—	$	33,643	$	(14,332)	$	19,311
	$	—	$	33,643	$	(14,332)	$	19,311

2019 Restructuring Plan

On October 15, 2019, our Board of Directors approved changes connected with our ongoing strategic transformation to simplify our business model and accelerate growth. This includes new product development and go-to-market capabilities, as well as the streamlining of operations company-wide for greater efficiency. These actions (the “2019 Restructuring Plan”) resulted in the net elimination of approximately 10% of our workforce, after taking into account new strategy-aligned positions that are expected to be added, and additional operating and capitalized cost reductions, including an approximately 20% reduction in previously planned content development expenditures over the next three years. These steps are intended to further simplify our business model while delivering increased value to customers, teachers and students. The workforce reductions were completed in the first quarter of 2020.

After considering additional headcount actions, implementation of the planned actions resulted in total charges of $15.8 million which was recorded in the fourth quarter of 2019. With respect to each major type of cost associated with such activities, substantially all costs were severance and other termination benefit costs and will result in cash expenditures.

Further, as part of such strategic transformation plan, we recorded an incremental $9.8 million inventory obsolescence charge which is recorded in cost of sales in the statement of operations.

The following tables provide a summary of our total costs associated with the 2019 Restructuring Plan, included in the restructuring line item within our consolidated statements of operations, for the year ended December 31, 2019, by major type of cost:

	Year Ended		Total Amount
	December 31,		Incurred
Type of Cost	2019		to Date
Restructuring charges: (1)
Severance and termination benefits	$	15,820	$	15,820
	$	15,820	$	15,820

(1) All restructuring charges are included within Corporate and Other.

Our restructuring liabilities are primarily comprised of accruals for severance and termination benefits. The following is a rollforward of our liabilities associated with the 2019 Restructuring Plan:

	2020
	Restructuring							Restructuring
	accruals at							accruals at
	December 31,				Cash			December 31,
	2019		Charges		payments			2020
Severance and termination benefits	$	11,649	$	—	$	(11,370	)	$	279
	$	11,649	$	—	$	(11,370	)	$	279

89

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

	2019
	Restructuring							Restructuring
	accruals at							accruals at
	December 31,				Cash			December 31,
	2018		Charges		payments			2019
Severance and termination benefits	$	—	$	15,820	$	(4,171	)	$	11,649
	$	—	$	15,820	$	(4,171	)	$	11,649

Severance and Other Charges

2020

Exclusive of the 2020 Restructuring Plan and the 2019 Restructuring Plan, during the year ended December 31, 2020, $0.8 million of severance payments were made to employees whose employment ended in 2019 and prior years.

A summary of the significant components of the severance costs, which are not allocated to our segments and instead are included in the Corporate and Other category, is as follows:

	2020
	Severance/ other accruals at December 31, 2019		Severance/ other expense		Cash payments			Severance/ other accruals at December 31, 2020
Severance costs	$	758	$	—	$	(758	)	$	—
	$	758	$	—	$	(758	)	$	—

90

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

2019

Exclusive of the 2019 Restructuring Plan, during the year ended December 31, 2019, $3.2 million of severance payments were made to employees whose employment ended in 2019 and prior years, and we recorded an expense in the amount of $2.5 million to reflect costs for severance. We also recorded an expense in the amount of $3.4 million for real estate consolidation costs, which is reflected as a reduction in operating lease assets in our consolidated balance sheet as of December 31, 2019.

	2019
	Severance/								Severance/
	other								other
	accruals at			Severance/					accruals at
	December 31,			other		Cash			December 31,
	2018			expense		payments			2019
Severance costs	$	1,420		$	2,534	$	(3,196	)	$	758
Other accruals		270	(1)		—		—			—
	$	1,690		$	2,534	$	(3,196	)	$	758

(1)In connection with the adoption of the new leasing standard on January 1, 2019, the restructuring liabilities related to office space consolidation were reclassed on the balance sheet as a reduction of operating lease assets.

2018

During the year ended December 31, 2018, $5.7 million of severance payments were made to employees whose employment ended in 2018 and prior years and $1.0 million of net payments were made for office space no longer utilized by the Company as a result of prior savings initiatives. Further, we recorded an expense in the amount of $6.8 million to reflect costs for severance, which have been fully paid.

A summary of the significant components of the severance/restructuring and other charges, which are not allocated to our segments and included in Corporate and Other, is as follows:

	2018
	Severance/							Severance/
	other							other
	accruals at		Severance/					accruals at
	December 31,		other		Cash			December 31,
	2017		expense		payments			2018
Severance costs	$	341	$	6,821	$	(5,742	)	$	1,420
Other accruals		1,299		—		(1,029	)		270
	$	1,640	$	6,821	$	(6,771	)	$	1,690

The current portion of the severance and other charges was $19.6 million and $12.4 million (inclusive of the 2019 Restructuring Plan and 2020 Restructuring Plan) as of December 31, 2020 and 2019, respectively.

91

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

11. Income Taxes

The components of loss before taxes by jurisdiction are as follows:

	For			For			For
	the Year			the Year			the Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
U.S.	$	(494,456	)	$	(213,541	)	$	(134,884	)
Foreign		2,214			3,909			3,024
Loss before taxes	$	(492,242	)	$	(209,632	)	$	(131,860	)

Total income taxes by jurisdiction are as follows:

	For			For			For
	the Year			the Year			the Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Income tax expense (benefit)
U.S.	$	(12,691	)	$	4,273		$	3,701
Foreign		287			(72	)		1,896
	$	(12,404	)	$	4,201		$	5,597

Significant components of the (benefit) expense for income taxes attributable to loss from continuing operations consist of the following:

	For the			For the			For the
	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Current
Foreign	$	182		$	(730	)	$	1,562
U.S.—Federal		—			0			(63	)
U.S.—State and other		1,769			396			(1,042	)
Total current		1,951			(334	)		457
Deferred
Foreign		105			658			334
U.S.—Federal		(5,505	)		1,908			2,329
U.S.—State and other		(8,955	)		1,969			2,477
Total deferred		(14,355	)		4,535			5,140
Income tax (benefit) expense	$	(12,404	)	$	4,201		$	5,597

92

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

The reconciliation of the income tax rate computed at the statutory tax rate to the reported income tax expense (benefit) attributable to continuing operations is as follows:

	For the			For the			For the
	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Statutory rate		21.0	%		21.0	%		21.0	%
Permanent items		(0.9	)		(3.6	)		(2.6	)
Foreign rate differential		—			—			(0.1	)
State and local taxes		2.0			(7.9	)		6.8
Cancellation of debt income		—			(1.3	)		—
Increase in valuation allowance		(15.5	)		(10.0	)		(26.6	)
Tax credits		(0.2	)		(0.2	)		(2.7	)
Goodwill impairment		(3.9	)		—			—
Effective tax rate		2.5	%		(2.0	)%		(4.2	)%

The significant components of the net deferred tax assets and liabilities are shown in the following table:

	2020			2019
Tax assets related to
Net operating loss and other carryforwards	$	326,504		$	272,378
Returns reserve/inventory expense		39,095			41,824
Pension benefits		6,879			6,624
Postretirement benefits		4,480			4,475
Deferred interest (1)		226,227			259,375
Deferred revenue		141,775			113,029
Stock-based compensation		2,806			3,298
Deferred compensation		6,525			6,152
Research and development		12,435			10,302
Operating lease liabilities		33,963			35,890
Other, net		8,263			6,769
Valuation allowance		(662,569	)		(583,505	)
	$	146,383		$	176,611

	2020			2019
Tax liabilities related to
Indefinite-lived intangible assets		(53,400	)		(89,879	)
Definite-lived intangible assets		(21,578	)		(25,503	)
Depreciation and amortization expense		(45,279	)		(48,984	)
Operating lease assets		(30,245	)		(32,887	)
Other, net		(9,877	)		(7,709	)
		(160,379	)		(204,962	)
Net deferred tax liabilities	$	(13,996	)	$	(28,351	)

(1) The deferred interest tax asset represents disallowed interest deductions under Section 163(j) (Limitation on Deduction for interest on Certain Indebtedness) of the Internal Revenue Code of 1986, as amended (“IRC”) for the current and prior years. At December 31, 2020 and 2019, we had gross deferred interest deductions totaling $900.2 million and $984.5 million, respectively. The disallowed interest is able to be carried forward indefinitely and utilized in future years pursuant to IRC Section 163(j). A full valuation allowance has been provided against deferred tax assets, excluding $2.4 million of foreign deferred tax assets which are expected to be realized, net of deferred tax liabilities resulting from indefinite-lived intangibles.

93

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

The net deferred tax liability balance is stated at prevailing statutory income tax rates. Deferred tax assets and liabilities are reflected on our consolidated balance sheets as follows:

	2020			2019
Non-current deferred tax assets	$	2,415		$	2,520
Non-current deferred tax liabilities		(16,411	)		(30,871	)
	$	(13,996	)	$	(28,351	)

A reconciliation of the gross amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows:

Balance at December 31, 2017	$	15,680
Reductions based on tax positions related to the prior    year		—
Additions based on tax positions related to the    prior year		—
Balance at December 31, 2018		15,680
Reductions based on tax positions related to the prior    year		—
Additions based on tax positions related to the prior    year		—
Balance at December 31, 2019		15,680
Reductions based on tax positions related to the prior    year		—
Additions based on tax positions related to the prior    year		—
Balance at December 31, 2020	$	15,680

  We are currently open for audit under the statute of limitation for Federal, state and foreign jurisdictions for years 2017 to 2020. However, carryforward attributes from prior years may still be adjusted upon examination by tax authorities if they are used in a future period.

We report penalties and tax-related interest expense on unrecognized tax benefits as a component of the provision for income taxes in the accompanying consolidated statement of operations. At December 31, 2020 and 2019, accrued interest and penalties in the accompanying consolidated balance sheet and interest and penalties included in the provision for income taxes for the years ended December 31, 2020, 2019 and 2018 were immaterial.

As of December 31, 2020, we have approximately $1,058.8 million of Federal tax loss carryforwards, of which $612.5 million will expire between 2034 and 2037. The Company has approximately $446.3 million of post-tax reform Federal tax loss carryforwards which have an indefinite life, though are limited in their use by 80% of taxable income. The Company has approximately $1,419.5 million of state tax loss carryforwards, which will expire between 2021 and 2040. In addition, we have foreign tax credit carryforwards of $7.3 million and research and development credit carryforwards of $4.2 million, which will expire between 2021 and 2036. The Company’s Irish net operating losses of $142.6 million, which are reduced by a reserve for uncertain tax positions of $123.6 million, are not subject to expiration. The Canadian Federal losses of $0.7 million will expire between 2033 and 2037. The Puerto Rico alternative minimum tax credit carryforwards of $2.8 million are not subject to expiration.

Under Section 382 of the IRC, substantial changes in the Company’s ownership may limit the amount of net operating loss and Section 163(j) carryforwards that could be utilized annually in the future to offset taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. Any such annual limitation may significantly reduce the utilization of net operating loss carryforwards before they expire. The Company performed an analysis through December 31, 2020, and determined any potential ownership change under Section 382 during the year would not have a material impact on the future utilization of U.S. net operating losses and tax credits. However, future transactions in the Company’s

94

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

common stock could trigger an ownership change for purposes of Section 382, which could limit the amount of net operating loss carryforwards and other attributes that could be utilized annually in the future to offset taxable income, if any. Any such limitation, whether as the result of sales of common stock by our existing stockholders or sales of common stock by the Company, could have a material adverse effect on results of operations in future years.

U.S. income taxes on the undistributed earnings of the Company’s non-U.S. subsidiaries have not been provided for as the Company currently plans to indefinitely reinvest these amounts and has the ability to do so. There are no cumulative undistributed and untaxed foreign earnings at December 31, 2020 and 2019.

Based on our assessment of historical pre-tax losses and the fact that we did not anticipate sufficient future taxable income in the near term to assure utilization of certain deferred tax assets, the Company recorded a valuation allowance at December 31, 2020 and 2019 of $662.6 million and $583.5 million, respectively. We have increased our valuation allowance by $79.1 million in 2020 with $76.7 million as a component of operations and $2.4 million as a component of other comprehensive income.

12. Retirement and Postretirement Benefit Plans

Retirement Plan

We have a noncontributory, qualified defined benefit pension plan (the “Retirement Plan”), which covers certain employees. The Retirement Plan is a cash balance plan, which accrues benefits based on pay, length of service, and interest. The funding policy is to contribute amounts subject to minimum funding standards set forth by the Employee Retirement Income Security Act of 1974 and the IRC. The Retirement Plan’s assets consist principally of common stocks, fixed income securities, investments in registered investment companies, and cash and cash equivalents. We also have a nonqualified defined benefit plan, or nonqualified plan, that previously covered employees who earned over the qualified pay limit as determined by the Internal Revenue Service. The nonqualified plan accrues benefits for the participants based on the cash balance plan calculation. The nonqualified plan is not funded. We use a December 31 date to measure the pension and postretirement liabilities. In 2007, both the qualified and nonqualified pension plans eliminated participation in the plans for new employees hired after October 31, 2007.

We recognize the funded status of defined benefit pension and other postretirement plans as an asset or liability in the balance sheet and are required to recognize actuarial gains and losses and prior service costs and credits in other comprehensive income and subsequently amortize those items in the statement of operations.

95

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

The following table summarizes the Accumulated Benefit Obligations (“ABO”), the change in Projected Benefit Obligation (“PBO”), and the funded status of our plans as of and for the financial statement period ended December 31, 2020 and 2019:

	2020			2019
ABO at end of period	$	179,408		$	169,364
Change in PBO
PBO at beginning of period	$	169,364		$	162,096
Interest cost on PBO		4,388			6,045
Plan settlements		(4,990	)		—
Actuarial loss (gain)		18,447			12,507
Benefits paid		(7,801	)		(11,284	)
PBO at end of period	$	179,408		$	169,364
Change in plan assets
Fair market value at beginning of period	$	145,716		$	132,776
Actual return		16,060			22,955
Company contribution		4,769			1,269
Plan settlements		(4,990	)		—
Benefits paid		(7,801	)		(11,284	)
Fair market value at end of period	$	153,754		$	145,716
Unfunded status	$	(25,654	)	$	(23,648	)

Amounts recognized in the consolidated balance sheets at December 31, 2020 and 2019 consist of:

	2020			2019
Current liabilities	$	(1,593	)	$	—
Noncurrent liabilities		(24,061	)		(23,648	)
Net amount recognized	$	(25,654	)	$	(23,648	)

Additional year-end information for pension plans with ABO in excess of plan assets at December 31, 2020 and 2019 consist of:

	2020		2019
PBO	$	179,408	$	169,364
ABO		179,408		169,364
Fair value of plan assets		153,754		145,716

Weighted average assumptions used to determine the benefit obligations (both PBO and ABO) at December 31, 2020 and 2019 are:

	2020			2019
Discount rate		2.2	%		3.1	%
Increase in future compensation	N/A			N/A

96

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Net periodic pension (income) cost includes the following components:

	For the			For the			For the
	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Interest cost on projected benefit obligation	$	4,388		$	6,045		$	5,300
Expected return on plan assets		(7,419	)		(7,659	)		(7,985	)
Amortization of net loss		2,325			1,028			1,420
Settlement loss recognized		1,100			—			—
Net pension (income) expense recognized for    the period	$	394		$	(586	)	$	(1,265	)

Significant actuarial assumptions used to determine net periodic pension cost at December 31, 2020, 2019 and 2018 are:

	2020			2019			2018
Discount rate		3.1	%		4.2	%		3.6	%
Increase in future compensation	N/A			N/A			N/A
Expected long-term rate of return on assets		5.5	%		5.5	%		5.5	%

Assumptions on Expected Long-Term Rate of Return as Investment Strategies

We employ a building block approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-term relationships between equities and fixed income are preserved congruent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return is established via a building block approach and proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed for reasonability and appropriateness. We regularly review the actual asset allocation and periodically rebalances investments to a targeted allocation when appropriate. The current targeted asset allocation is 34% with equity managers, 56% with fixed income managers, 5% with real-estate investment trust managers and 5% with hedge fund managers. For 2021, we will use a 5.50% long-term rate of return for the Retirement Plan. We will continue to evaluate the expected rate of return assumption, at least annually, and will adjust as necessary.

Plan Assets

Plan assets for the U.S. tax qualified plans consist of a diversified portfolio of fixed income securities, equity securities, real estate, and cash equivalents. Plan assets do not include any of our securities. The U.S. pension plan assets are invested in a variety of funds within a Collective Trust (“Trust”). The Trust is a group trust designed to permit qualified trusts to comingle their assets for investment purposes on a tax-exempt basis.

Investment Policy and Investment Targets

The tax qualified plans consist of the U.S. pension plan and the U.K. pension scheme (prior to May 28, 2014). We fund amounts for our qualified pension plans at least sufficient to meet minimum requirements of local benefit and tax laws. The investment objectives of our pension plan asset investments are to provide long-term total growth and return, which includes capital appreciation and current income. The nonqualified noncontributory defined benefit pension plan is generally not funded. Assets were invested among several asset classes.

97

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

The percentage of assets invested in each asset class at December 31, 2020 and 2019 is shown below.

	2020			2019
	Percentage			Percentage
	in Each			in Each
Asset Class	Asset Class			Asset Class
Equity		33.5	%		32.6	%
Fixed income		52.7			54.5
Real estate investment trust		7.0			8.0
Other		6.8			4.9
		100.0	%		100.0	%

Fair Value Measurements

The fair value of our pension plan assets by asset category at December 31 were as follows:

	December 31,		Not subject
	2020		to leveling (1)
Cash and cash equivalents	$	1,914	$	1,914
Equity securities
U.S. equity		27,765		27,765
Non-US equity		15,544		15,544
Emerging markets equity		8,259		8,259
Fixed income
Government bonds		28,855		28,855
Corporate bonds		46,228		46,228
Mortgage-backed securities		9		9
Asset-backed securities		810		810
Commercial mortgage-backed securities		604		604
International fixed income		4,485		4,485
Alternatives
Real estate		10,689		10,689
Hedge funds		8,228		8,228
Other		364		364
	$	153,754	$	153,754

(1) Investments that are valued using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

98

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

	December 31,		Not subject
	2019		to leveling (1)
Cash and cash equivalents	$	1,413	$	1,413
Equity securities
U.S. equity		28,993		28,993
Non-US equity		12,474		12,474
Emerging markets equity		5,537		5,537
Fixed income
Government bonds		20,316		20,316
Corporate bonds		37,925		37,925
Mortgage-backed securities		7,943		7,943
Asset-backed securities		3,255		3,255
Commercial mortgage-backed securities		1,930		1,930
International fixed income		5,741		5,741
Alternatives
Real estate		11,609		11,609
Hedge funds		7,043		7,043
Other		1,537		1,537
	$	145,716	$	145,716

We recognize that risk and volatility are present to some degree with all types of investments. However, high levels of risk are minimized through diversification by asset class, and by style of each fund.

Estimated Future Benefit Payments

The following benefit payments are expected to be paid.

Fiscal Year Ended	Pension
2021	$	14,030
2022		12,817
2023		12,581
2024		12,789
2025		13,356
2026–2030		61,944

Expected Contributions

We expect to contribute $3.3 million in 2021.

Postretirement Benefit Plan

We also provide postretirement medical benefits to retired full-time, nonunion employees hired before April 1, 1992, who have provided a minimum of five years of service and attained age 55.

99

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

The following table summarizes the Accumulated Postretirement Benefit Obligation (“APBO”), the changes in plan assets, and the funded status of our plan as of and for the financial statement periods ended December 31, 2020 and 2019.

	2020			2019
Change in APBO
APBO at beginning of period	$	16,684		$	15,812
Service cost (benefits earned during the period)		67			58
Interest cost on APBO		426			582
Employee contributions		184			66
Actuarial loss (gain)		2,857			1,878
Benefits paid		(2,097	)		(1,712	)
APBO at end of period	$	18,121		$	16,684
Change in plan assets
Fair market value at beginning of period	$	—		$	—
Company contributions		1,913			1,646
Employee contributions		184			66
Benefits paid		(2,097	)		(1,712	)
Fair market value at end of period	$	—		$	—
Unfunded status	$	(18,121	)	$	(16,684	)

Amounts for postretirement benefits accrued in the consolidated balance sheets at December 31, 2020 and 2019 consist of:

	2020			2019
Current liabilities	$	(1,555	)	$	(1,571	)
Noncurrent liabilities		(16,566	)		(15,113	)
Net amount recognized	$	(18,121	)	$	(16,684	)

Amounts not yet reflected in net periodic benefit cost and recognized in accumulated other comprehensive (loss) income at December 31, 2020 and 2019 consist of:

	2020			2019
Net (loss) gain	$	(1,050	)	$	1,771
Prior service cost		(384	)		(426	)
Accumulated other comprehensive (loss) income	$	(1,434	)	$	1,345

Weighted average actuarial assumptions used to determine APBO at year-end December 31, 2020 and 2019 are:

	2020			2019
Discount rate		2.2	%		3.1	%
Health care cost trend rate assumed for next year		5.5	%		5.8	%
Rate to which the cost trend rate is assumed to    decline (ultimate trend rate)		4.5	%		4.5	%
Year that the rate reaches the ultimate trend rate	2038			2038

100

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Net periodic postretirement benefit cost included the following components:

	2020			2019			2018
Service cost	$	67		$	58		$	128
Interest cost on APBO		426			582			672
Amortization of unrecognized prior service cost		42			42			(690	)
Amortization of net (gain) loss		(7	)		(164	)		—
Net periodic postretirement benefit expense	$	528		$	518		$	110

Significant actuarial assumptions used to determine postretirement benefit cost at December 31, 2020, 2019 and 2018 are:

	2020			2019			2018
Discount rate		3.1	%		4.2	%		3.6	%
Health care cost trend rate assumed for next year		5.8	%		6.1	%		6.3	%
Rate to which the cost trend rate is assumed to    decline (ultimate trend rate)		4.5	%		4.5	%		4.5	%
Year that the rate reaches the ultimate trend rate	2038			2038			2038

Assumed health care trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects on the expense recorded in 2020 and 2019 for the postretirement medical plan:

	2020			2019
One-percentage-point increase
Effect on total of service and interest cost    components	$	2		$	8
Effect on postretirement benefit obligation		87			85
One-percentage-point decrease
Effect on total of service and interest cost    components		(2	)		(7	)
Effect on postretirement benefit obligation		(77	)		(76	)

The following table presents the change in other comprehensive loss for the year ended December 31, 2020 related to our pension and postretirement obligations.

	Pension			Postretirement
	Plans			Benefit Plan			Total
Sources of change in accumulated other    comprehensive loss
Net loss arising during the period	$	(9,807	)	$	(2,814	)	$	(12,621	)
Amortization of prior service credit		—			42			42
Amortization of net gain (loss)		3,377			(7	)		3,370
Total accumulated other comprehensive    loss recognized during the period	$	(6,430	)	$	(2,779	)	$	(9,209	)

101

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Estimated amounts that will be amortized from accumulated other comprehensive income (loss) over the next fiscal year.

	Pension			Postretirement
	Plans			Benefit Plan
Prior service credit (cost)	$	—		$	(42	)
Net gain (loss)		(3,389	)		—
	$	(3,389	)	$	(42	)

Amounts not yet reflected in net periodic benefit cost for pension plans and postretirement plan and recognized in accumulated other comprehensive income at December 31, 2020 and 2019 consist of:

	2020			2019
Net actuarial loss	$	(44,219	)	$	(35,010	)
Accumulated other comprehensive loss	$	(44,219	)	$	(35,010	)

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, are expected to be paid:

	Postretirement
Fiscal Year Ended	Benefit Plan
2021	$	1,555
2022		1,488
2023		1,437
2024		1,389
2025		1,320
2026-2030		5,686

Expected Contribution

We expect to contribute approximately $1.6 million in 2021.

Defined Contribution Retirement Plan

We maintain a defined contribution retirement plan, the Houghton Mifflin 401(k) Savings Plan, which conforms to Section 401(k) of the IRC and covers substantially all of our eligible employees. Participants may elect to contribute up to 50.0% of their compensation subject to an annual limit. We provide a matching contribution in amounts up to 3.0% of employee contributions. The 401(k) contribution expense amounted to $6.8 million, $7.4 million and $7.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. We did not make any additional discretionary contributions in 2020, 2019 and 2018.

13. Stock-Based Compensation

Total compensation expense related to grants of stock options, restricted stock units, and purchases under the employee stock purchase plan recorded in the years ended December 31, 2020, 2019 and 2018 was approximately $11.6 million, $14.0 million and $13.3 million, respectively, and is included in selling and administrative expense.

102

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

2015 Omnibus Incentive Plan

Our Board of Directors adopted the 2015 Omnibus Incentive Plan (“Plan”) in February 2015, which became effective on May 19, 2015 following stockholder approval. The Plan initially provided to grant up to an aggregate of 4,000,000 shares of our common stock plus 2,615,476 shares of our common stock that were reserved for issuance under the 2012 Management Incentive Plan (“2012 MIP”) as of May 19, 2015 but were not issuable pursuant to any outstanding awards. There were 10,604,071 additional shares underlying outstanding awards under the 2012 MIP as of May 19, 2015 that could have otherwise become available again for grants under the 2012 MIP in the future (by potential forfeiture, withholding or otherwise) which will instead become reserved for issuance under the Plan in the event such shares become available for future grants. On December 13, 2019, our Board of Directors approved an amendment to the Plan to allow employees to have the share withholding increased from the minimum statutory rate to a higher rate, not to exceed the maximum statutory rate. On May 19, 2020, our shareholders approved an amended and restated Plan which increased the authorization of the number of shares available for grant under the Plan by 3,630,000 shares of our common stock.  

Our Compensation Committee may grant awards of nonqualified stock options, incentive (qualified) stock options or cash, stock appreciation rights, restricted stock awards, restricted stock units, performance compensation awards, other stock-based awards or any combination of the foregoing. Certain employees, directors, officers, consultants or advisors who have been selected by the Compensation Committee and who enter into an award agreement with respect to an award granted to them under the Plan are eligible for awards under the 2015 Omnibus Incentive Plan. The stock option awards will be granted at a strike price equal to or greater than the fair value per share of common stock as of the date of grant. The stock related to award forfeitures and stock withheld to cover tax withholding requirements upon vesting of restricted stock units remains outstanding and may be reallocated to new recipients. The purpose of the Plan is to help us attract and retain key personnel by providing them the opportunity to acquire an equity interest in our Company.

As of May 19, 2015, there were 6,615,476 shares authorized and available for issuance under the Plan plus any amount that could have otherwise become available again for grants under the 2012 MIP in the future by forfeiture, withholding or otherwise. As of December 31, 2020, there were 6,996,290 shares authorized and available for future issuance under the Plan. The vesting terms for equity awards generally range from 1 to 4 years over equal annual installments and generally expire seven years after the date of grant.

Stock Options

The following table summarizes option activity for certain employees in our stock options:

				Weighted
	Number of			Average
	Shares			Exercise Price
Balance at December 31, 2019		2,765,826		$	13.10
Forfeited		(868,614	)		13.40
Balance at December 31, 2020		1,897,212		$	12.95
Vested and expected to vest at December 31, 2020		1,883,100		$	12.97
Exercisable at December 31, 2020		1,521,524		$	13.65

As of December 31, 2020, the range of exercise prices is $5.25 to $22.80 with a weighted average remaining contractual life of 3.3 years for options outstanding. The weighted average remaining contractual life for options vested and expected to vest and exercisable was 3.3 years and 3.1 years, respectively. The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option as of the balance sheet date. The intrinsic value of options outstanding, options vested and expected to vest, and options exercisable was zero at December 31, 2020. The intrinsic value of options outstanding, options vested and expected to vest, and options exercisable was $0.1 million, $0.1 million and zero at December 31, 2019, respectively.            

We estimate the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected volatility of our

103

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and our expected annual dividend yield.

The fair value of each option granted was estimated on the grant date using the Black-Scholes valuation model with the following assumptions:

	For the
	Year Ended
	December 31,
	2018
Expected term (years) (a)		4.75
Expected dividend yield	0.00%
Expected volatility (b)	35.30%
Risk-free interest rate (c)	2.84%

(a) The expected term is the number of years that we estimate that options will be outstanding prior to exercise. During 2018, we have used the simplified method for estimating the expected term as we do not have sufficient stock option exercise experience to support a reasonable estimate of the expected term. The simplified method represents the best estimate of the expected term.

(b) During 2018, we estimated volatility for options granted based on our historical volatility.

(c) The risk-free interest rate is based on the U.S. Treasury yield for a period commensurate with the expected life of the option.

We estimate forfeitures at the time of grant and periodically revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense is recorded only for those awards expected to vest using estimated forfeiture rates based on historical forfeiture data.

As of December 31, 2020, there remained approximately $0.6 million of unearned compensation expense related to unvested stock options to be recognized over a weighted average term of 0.8 years.

The weighted average grant date fair value was $1.82 for options granted in 2018. 

Restricted Stock Units

The following table summarizes restricted stock activity for grants to certain employees and independent members of the board of directors in our restricted stock units:

	Restricted Stock Units
				Weighted
				Average
	Numbers of			Grant Date
	Units			Fair Value
Balance at December 31, 2019		3,846,608		$	8.03
Granted		3,716,974			3.94
Vested		(1,149,957	)		8.50
Forfeited		(723,816	)		7.41
Balance at December 31, 2020		5,689,809		$	5.34

104

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

During 2020 and 2019, we granted market-based restricted stock units to certain members of our senior management team. The number of shares ultimately issued to the recipient is based on the total shareholder return (“TSR”) of our common stock as compared to the TSR of the common stock of a peer group comprised of each member of the Russell 2000 Small Cap Market Index over a three-year performance measurement period. In addition, award recipients must remain employed by us throughout the three-year performance measurement period to attain the full amount of the market-based units that satisfy the market performance criteria. We determined the fair value of the 2020 and 2019 market-based restricted stock units to be approximately $2.9 million and $3.1 million, respectively. We determined the fair value based on a Monte-Carlo simulation as of the date of grant, utilizing the following assumptions: the stock price on the date of grant of $4.21 for 2020, and $7.75, $6.71 and $6.53 for 2019, a three-year performance measurement period, and a risk-free rate of 0.40% and 2.51% for 2020 and 2019, respectively. We recognize the expense on these awards on a straight-line basis over the three-year performance measurement period.

As of December 31, 2020, there remained approximately $11.9 million of unearned compensation expense related to unvested restricted stock units to be recognized over a weighted average term of 1.5 years. The restricted stock units include a combination of time-based and performance-based vesting.

Employee Stock Purchase Plan

Our Board of Directors adopted an Employee Stock Purchase Plan (“ESPP”) in February 2015, which became effective on May 19, 2015 following stockholder approval. The ESPP provides for up to an aggregate of 1.3 million shares of our common stock may be made available for sale under the plan to eligible employees. At the beginning of each six-month offering period under the ESPP each participant is deemed to have been granted an option to purchase shares of our common stock equal to the amount of their payroll deductions during the period, but in any event not more than five percent of the employee’s eligible compensation, subject to certain limitations. Such options may be exercised only to the extent of accumulated payroll deductions at the end of the offering period, at a purchase price per share equal to 85% of the fair market value of our common stock at the beginning or end of each offering period, whichever is less. On December 10, 2020, the Compensation Committee of the Board of Directors determined we would not start a new offering period for the ESPP until we have an opportunity to seek shareholder approval of an amended and restated ESPP. As of December 31, 2020, there were a de minimis number of shares available for future issuance under the ESPP.

Information related to shares issued or to be issued in connection with the ESPP based on employee contributions and the range of purchase prices is as follows:

	December 31,		December 31,
	2020		2019
Shares issued or to be issued		516,563		212,476
Range of purchase prices	$1.54 - $1.56		$4.73 - $4.90

We record stock-based compensation expense related to the discount provided to participants. Also, we use the Black-Scholes option-pricing model to calculate the grant-date fair value of shares issued under the employee stock purchase plan. We recognize expense related to shares purchased through the employee stock purchase plan ratably over the offering period. We recognized $0.4 million in expense associated with our ESPP for each of the years ended December 31, 2020 and 2019, respectively.

105

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

14. Fair Value Measurements

The accounting standard for fair value measurements, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. The accounting standard establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1 Observable input such as quoted prices in active markets for identical assets or liabilities;

Level 2 Observable inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3 Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of three valuation techniques identified in the tables below. Where more than one technique is noted, individual assets or liabilities were valued using one or more of the noted techniques. The valuation techniques are as follows:

(a)  Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;

(b)  Cost approach: Amount that would be currently required to replace the service capacity of an asset (current replacement cost); and

(c)  Income approach: Valuation techniques to convert future amounts to a single present amount based on market expectations (including present value techniques).

On a recurring basis, we measure certain financial assets and liabilities at fair value, including our money market funds, foreign exchange forward contracts, and interest rate derivatives contracts. The accounting standard for fair value measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty and its credit risk in its assessment of fair value.

Financial Assets and Liabilities

The following tables present our financial assets and liabilities measured at fair value on a recurring basis at December 31, 2020 and 2019:

			Quoted Prices		Significant
			in Active		Other
			Markets for		Observable
			Identical Assets		Inputs		Valuation
	2020		(Level 1)		(Level 2)		Technique
Financial assets
Money market funds	$	262,135	$	262,135	$	—	(a)
Foreign exchange derivatives		466		—		466	(a)
	$	262,601	$	262,135	$	466

106

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

			Quoted Prices		Significant
			in Active		Other
			Markets for		Observable
			Identical Assets		Inputs		Valuation
	2019		(Level 1)		(Level 2)		Technique
Financial assets
Money market funds	$	276,654	$	276,654	$	—	(a)
	$	276,654	$	276,654	$	—
Financial liabilities
Interest rate derivatives	$	986	$	—	$	986	(a)
Foreign exchange derivatives		127		—		127	(a)
	$	1,113	$	—	$	1,113

Our money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices in active markets for identical instruments. In addition to $262.1 million and $276.7 million invested in money market funds as of December 31, 2020 and 2019, respectively, we had $19.1 million and $19.7 million of cash invested in bank accounts as of December 31, 2020 and 2019, respectively.

Our foreign exchange derivatives consist of forward contracts and are classified within Level 2 of the fair value hierarchy because they are valued based on observable inputs and are available for substantially the full term of our derivative instruments. We use foreign exchange forward contracts to fix the functional currency value of forecasted commitments, payments and receipts. The aggregate notional amount of the outstanding foreign exchange forward contracts was $14.9 million and $15.2 million at December 31, 2020 and 2019, respectively. Our foreign exchange forward contracts contain netting provisions to mitigate credit risk in the event of counterparty default, including payment default and cross default. At December 31, 2020 and 2019, the fair value of our counterparty default exposure was less than $1.0 million and spread across several highly rated counterparties.

Our interest rate derivatives are classified within Level 2 of the fair value hierarchy because they are valued based on observable inputs and are available for substantially the full term of our derivative instruments. Our interest rate risk relates primarily to U.S. dollar borrowings, partially offset by U.S. dollar cash investments. We have historically used interest rate derivative instruments to manage our earnings and cash flow exposure to changes in interest rates by converting floating-rate debt into fixed-rate debt. There were no aggregate notional amounts outstanding of the interest rate derivative instruments as of December 31, 2020. We designate these derivative instruments either as fair value or cash flow hedges under the accounting guidance related to derivatives and hedging. We record changes in the value of fair value hedges in interest expense, which is generally offset by changes in the fair value of the hedged debt obligation. Interest payments made or received related to our interest rate derivative instruments are included in interest expense. We record the effective portion of any change in the fair value of derivative instruments designated as cash flow hedges as unrealized gains or losses in other comprehensive loss, net of tax, until the hedged cash flow occurs, at which point the effective portion of any gain or loss is reclassified to earnings. In the event the hedged cash flow does not occur, or it becomes no longer probable that it will occur, we reclassify the amount of any gain or loss on the related cash flow hedge to interest expense at that time.

We believe we do not have significant concentrations of credit risk arising from our interest rate derivative instruments, whether from an individual counterparty or a related group of counterparties. We manage the concentration of counterparty credit risk on our interest rate derivatives instruments by limiting acceptable counterparties to a diversified group of major financial institutions with investment grade credit ratings, limiting the amount of credit exposure to each counterparty, and actively monitoring their credit ratings and outstanding fair values on an ongoing basis. Furthermore, none of our derivative transactions contain provisions that are dependent on our credit ratings from any credit rating agency.

107

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

We also employ master netting arrangements that reduce our counterparty payment settlement risk on any given maturity date to the net amount of any receipts or payments due between us and the counterparty financial institution. Thus, the maximum loss due to counterparty credit risk is limited to the unrealized gains in such contracts net of any unrealized losses should any of these counterparties fail to perform as contracted. Although these protections do not eliminate concentrations of credit risk, as a result of the above considerations, we do not consider the risk of counterparty default to be significant.

Non-Financial Assets and Liabilities

Our non-financial assets, which include goodwill, other intangible assets, property, plant, and equipment, and pre-publication costs, are not required to be measured at fair value on a recurring basis. However, if certain trigger events occur, or if an annual impairment test is required, we evaluate the non-financial assets for impairment. If an impairment did occur, the asset is required to be recorded at the estimated fair value. An impairment analysis was performed for the preparation of the first quarter report, as there were triggering events for the three months ended March 31, 2020 related to the decline in our stock price attributed to the market environment, which resulted in a goodwill impairment. There were no non-financial liabilities that were required to be measured at fair value on a nonrecurring basis during 2020, 2019 and 2018.

The following table presents our nonfinancial assets measured at fair value on a nonrecurring basis during 2020:

			Significant
			Unobservable
			Inputs		Total		Valuation
	December 31, 2020		(Level 3)		Impairment		Technique
Nonfinancial assets
Goodwill	$	437,977	$	437,977	$	279,000	(c)
	$	437,977	$	437,977	$	279,000

In evaluating goodwill for impairment, we first compare our reporting unit’s fair value to its carrying value. We estimate the fair values of our reporting units by considering our market capitalization and other judgements. Impairment recorded for goodwill for the year ended December 31, 2020 was $279.0 million. There was no impairment recorded for goodwill for the years ended December 31, 2019 and 2018. 

We perform an impairment test for our other intangible assets by comparing the assets fair value to its carrying value. Fair value is estimated based on recent market transactions, where available, and projected discounted cash flows, if reasonably estimable. There was no impairment of other intangible assets for the years ended December 31, 2020, 2019 and 2018.

Non-Marketable Investments

At December 31, 2020 and 2019, the carrying value of our non-marketable investments, which were comprised of equity interests in educational technology private partnerships, was $4.4 million and $2.3 million, respectively. The amounts are included in other assets in our consolidated balance sheets. Our non-marketable investments are accounted for using the cost method and are adjusted for observable transactions as appropriate. Gains from non-marketable investments were $2.1 million for the year ended December 31, 2020 and are included in gain on investments in our consolidated statements of operations.

108

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

Fair Value of Debt

The following table presents the carrying amounts and estimated fair market values of our debt at December 31, 2020 and 2019. The fair value of debt is deemed to be the amount at which the instrument could be exchanged in an orderly transaction between market participants at the measurement date.

	December 31, 2020				December 31, 2019
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
$380,000 Term loan	$	346,091	$	331,382	$	361,294	$	360,391
$306,000 Senior secured notes		297,601	$	304,297		295,893		301,441

The fair market values of our debt were estimated based on quoted market prices on a private exchange for those instruments that are traded and are classified as Level 2 within the fair value hierarchy at December 31, 2020 and 2019. The fair market values require varying degrees of management judgment. The factors used to estimate these values may not be valid on any subsequent date. Accordingly, the fair market values of the debt presented may not be indicative of their future values.

15. Commitments and Contingencies

We are involved in ordinary and routine litigation and matters incidental to our business, including claims alleging breach of contract and seeking royalty payments. Litigation alleging infringement of copyrights and other intellectual property rights is also common in the educational publishing industry. There have been various settled, pending and threatened litigation that allege we exceeded the print run limitation or other restrictions in licenses granted to us to reproduce photographs in our textbooks.   

While we may incur a loss associated with certain pending or threatened litigation, we are not able to estimate such amount, if any, but we do not expect any of these matters to have a material adverse effect on our results of operations, financial position or cash flows. We have insurance over such amounts and with coverage and deductibles as management believes is reasonable. There can be no assurance that our liability insurance will cover all events or that the limits of coverage will be sufficient to fully cover all liabilities.

In April 2019, we were notified of an unasserted claim by the Commonwealth of Puerto Rico with regards to payments in the amount of approximately $33.0 million that we received in the normal course of business during the four year period prior to the May 3, 2017 bankruptcy petition of the Commonwealth public instrumentalities. Management believes, based on discussions with its legal counsel, that we have meritorious defenses against such unasserted claim. The Company will vigorously defend this matter if such claim is asserted.

In September 2019, we were notified of an unasserted claim by Riverside Assessments LLC (“Riverside”) with regard to purported breaches of the Asset Purchase Agreement between the Company and Riverside dated September 12, 2018 (“APA”) and the Transition Services Agreement between the Company and Riverside dated October 1, 2018. Management believes, based on discussions with its legal counsel, that we have meritorious defenses against such unasserted claim. With regard to the alleged breaches of the APA, the APA provides that the Company may be liable only for that portion of Riverside’s damages that exceeds $1.4 million, and in an amount that shall not exceed $1.4 million, which we believe would be the maximum exposure. For damages above $2.8 million, Riverside obtained a representation and warranty insurance policy as required by the APA. The Company will vigorously defend this matter if such claim is asserted.

109

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

In January 2018, Vanderbilt University (“Vanderbilt”) filed a complaint against the Company and others in connection with a license agreement originally entered into between Vanderbilt and Scholastic Inc. in 1997 and subsequently assigned to the Company as part of our acquisition of Scholastic’s Educational Technology and Services business pursuant to the stock and asset purchase agreement dated April 23, 2015. Vanderbilt alleges entitlement to additional royalties in connection with READ 180 and other products acquired from Scholastic and alleges trademark infringement in the marketing of these products. The Company is vigorously defending this matter. The case is scheduled for trial in August 2021.

In connection with an agreement with a development content provider, we agreed to act as guarantor to that party’s loan to finance such development. Such guarantee is expected to remain until 2022. Under the guarantee, we believe the maximum future payments to approximate $10.1 million. In the unlikely event that we are required to make payments on behalf of the development content provider, we would have recourse against the development content provider.

We were contingently liable for $1.4 million and $2.5 million of performance-related surety bonds for our operating activities as of December 31, 2020 and 2019, respectively. An aggregate of $18.8 million and $23.7 million of letters of credit existed each year at December 31, 2020 and 2019, respectively, of which $1.1 million and $0.7 million backed the aforementioned performance-related surety bonds each year in 2020 and 2019, respectively.

We routinely enter into standard indemnification provisions as part of license agreements involving use of our intellectual property. These provisions typically require us to indemnify and hold harmless licensees in connection with any infringement claim by a third-party relating to the intellectual property covered by the license agreement. Although the term of these provisions and the maximum potential amounts of future payments we could be required to make is not limited, we have never incurred any costs to defend or settle claims related to these types of indemnification provisions. We therefore believe the estimated fair value of these provisions is inconsequential and have no liabilities recorded for them as of December 31, 2020 and 2019.

16. Stockholders’ Equity

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consisted of the following at December 31, 2020, 2019 and 2018:

	2020			2019			2018
Net change in pension and benefit plan liabilities	$	(48,966	)	$	(39,757	)	$	(41,557	)
Foreign currency translation adjustments		(6,650	)		(6,420	)		(5,909	)
Unrealized loss on short-term investments		(90	)		(90	)		(99	)
Net change in unrealized loss on derivative    instruments		(18	)		(1,005	)		2,381
	$	(55,724	)	$	(47,272	)	$	(45,184	)

Amounts reclassified from accumulated other comprehensive loss for the years ended December 31, 2020, 2019 and 2018 relating to the amortization of defined benefit pension and postretirement benefit plans totaled approximately $(2.4) million, $(0.9) million and $(0.9) million, respectively, and affected the selling and administrative line item in the consolidated statement of operations. These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost.

17. Related Party Transactions

There were no related party transactions during 2020 and 2018.

In November 2019, Anchorage Capital Group, L.L.C. (“Anchorage”), a significant stockholder in the Company at the time and a former partner of which was serving on the Company’s board of directors, participated as a lender in the refinancing of the Company’s debt, acquiring $20.0 million out of the $306.0 million in aggregate principal amount of 9.000% Senior Secured Notes due 2025 (the “Notes”) issued by the Company and becoming a lender under the Company’s second amended and restated term loan credit agreement (the “Term Loan Credit Agreement”) with a commitment of $15.0 million out of the $380.0 million in initial principal amount of the term

110

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

loan. As of December 10, 2020, Anchorage no longer had an ownership interest in the Company. Anchorage’s participation in the refinancing was on the same terms as all the other lenders. Refer to note 8 for additional information about the Notes and the Term Loan Credit Agreement.

18. Net Loss Per Share

The following table sets forth the computation of basic and diluted earnings per share (“EPS”):

	For the Year			For the Year			For the Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Numerator
Loss from continuing operations	$	(479,838	)	$	(213,833	)	$	(137,457	)
Earnings from discontinued operations,    net of tax		—			—			12,833
Gain on sale of discontinued operations,    net of tax		—			—			30,469
Income from discontinued operations, net    of tax		—			—			43,302
Net loss attributable to common stockholders	$	(479,838	)	$	(213,833	)	$	(94,155	)
Denominator
Weighted average shares outstanding
Basic and diluted		125,455,487			124,152,984			123,444,943
Net loss per share attributable to common    Stockholders
Basic and diluted:
Continuing operations	$	(3.82	)	$	(1.72	)	$	(1.11	)
Discontinued operations		—			—			0.35
Net loss	$	(3.82	)	$	(1.72	)	$	(0.76	)

As we incurred a net loss in each of the periods presented above, all outstanding stock options and restricted stock units for those periods have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding. Accordingly, basic and diluted weighted average shares outstanding are equal for such periods.

The following table summarizes our weighted average outstanding common stock equivalents that were anti-dilutive attributable to common stockholders during the periods, and therefore excluded from the computation of diluted EPS:

	For the Year		For the Year		For the Year
	Ended		Ended		Ended
	December 31,		December 31,		December 31,
	2020		2019		2018
Stock options		1,897,212		2,765,826		3,406,171
Restricted stock units		4,133,531		3,342,923		2,793,680

19. Segment Reporting

As of December 31, 2020, we had two reportable segments (Education and HMH Books & Media). Our Education segment provides educational products, technology platforms and services to meet the diverse needs of today’s classrooms. These products and services include print and digital content in the form of textbooks, digital courseware, instructional aids, educational assessment and intervention solutions, which are aimed at improving achievement and supporting learning for students who are not keeping pace with peers, professional development and school reform services. Our HMH Books & Media segment primarily develops, markets and sells consumer books in print and digital formats and licenses book rights to other publishers and electronic businesses in the United

111

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

States and abroad. The principal distribution channels for HMH Books & Media products are retail stores, both physical and online, and wholesalers.

We measure and evaluate our reportable segments based on net sales and segment Adjusted EBITDA from continuing operations. We exclude from our segments certain corporate-related expenses, as our corporate functions do not meet the definition of a segment, as defined in the accounting guidance relating to segment reporting. In addition, certain transactions or adjustments that our Chief Operating Decision Maker considers to be non-operational, such as amounts related to goodwill and other intangible asset impairment charges, derivative instruments charges, acquisition/disposition-related activity, restructuring, severance costs, equity compensation charges, gains or losses from investments, gains or losses from divestitures, amortization and depreciation expenses, as well as interest and taxes, are excluded from segment Adjusted EBITDA from continuing operations. Although we exclude these amounts from segment Adjusted EBITDA from continuing operations, they are included in reported consolidated net loss and are included in the reconciliation below.

	Year Ended December 31,
			HMH		Corporate/
(in thousands)	Education		Books & Media		Other
2020
Net sales	$	839,553	$	191,739	$	—
Segment Adjusted EBITDA		145,862		26,627		(40,649	)
2019
Net sales	$	1,210,646	$	180,028	$	—
Segment Adjusted EBITDA		196,907		14,908		(46,077	)
2018
Net sales	$	1,122,689	$	199,728	$	—
Segment Adjusted EBITDA		210,604		21,942		(40,418	)

The following table disaggregates our net sales by major source:

	Year Ended December 31, 2020
			HMH
(in thousands)	Education		Books & Media		Consolidated
Core solutions (1)	$	459,350	$	—	$	459,350
Extensions businesses (2)		380,203		—		380,203
Books & Media		—		191,739		191,739
Net sales	$	839,553	$	191,739	$	1,031,292

	Year Ended December 31, 2019
			HMH
(in thousands)	Education		Books & Media		Consolidated
Core solutions (1)	$	578,675	$	—	$	578,675
Extensions businesses (2)		631,971		—		631,971
Books & Media		—		180,028		180,028
Net sales	$	1,210,646	$	180,028	$	1,390,674

112

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

	Year Ended December 31, 2018
			HMH
(in thousands)	Education		Books & Media		Consolidated
Core solutions (1)	$	538,166	$	—	$	538,166
Extensions businesses (2)		584,523		—		584,523
Books & Media		—		199,728		199,728
Net sales	$	1,122,689	$	199,728	$	1,322,417

(1) Comprehensive solutions primarily for reading, literature, math, science and social studies programs.

(2) Primarily consists of our Heinemann brand, intervention, supplemental and professional services.

Reconciliation of Segment Adjusted EBITDA to the consolidated statements of operations is as follows:

	Years Ended December 31,
(in thousands)	2020			2019			2018
Education Adjusted EBITDA	$	145,862		$	196,907		$	210,604
HMH Books & Media Adjusted EBITDA		26,627			14,908			21,942
Total Segment Adjusted EBITDA		172,489			211,815			232,546
Corporate/Other Adjusted EBITDA		(40,649	)		(46,077	)		(40,418	)
Interest expense		(65,959	)		(48,778	)		(45,680	)
Interest income		899			3,157			2,550
Depreciation expense		(50,715	)		(61,475	)		(75,116	)
Amortization expense—film asset		(13,953	)		(9,835	)		(6,057	)
Amortization expense		(171,821	)		(201,382	)		(170,903	)
Non-cash charges—stock compensation		(11,573	)		(13,968	)		(13,248	)
Non-cash charges—loss on derivative instruments		672			(899	)		(1,374	)
Non-cash charges—asset impairment charges		(279,000	)		—			—
Inventory obsolescence related to strategic transformation plan		—			(9,758	)		—
Fees, expenses or charges for equity offerings, debt    or acquisitions/dispositions		(1,080	)		(6,327	)		(2,883	)
Restructuring/severance and other charges		(33,643	)		(21,742	)		(11,478	)
Gain on investments		2,091			—			—
Gain on sale of assets		—			—			201
Loss on extinguishment of debt		—			(4,363	)		—
Loss before taxes		(492,242	)		(209,632	)		(131,860	)
(Provision) benefit for income taxes		12,404			(4,201	)		(5,597	)
Net loss from continuing operations	$	(479,838	)	$	(213,833	)	$	(137,457	)

Segment information as of December 31, 2020 and 2019 is as follows:

(in thousands)	2020		2019
Total assets—Education segment	$	1,520,504	$	1,971,553
Total assets—HMH Books & Media segment		175,710		186,318
Total assets—Corporate and Other		324,912		355,301
Total consolidated assets	$	2,021,126	$	2,513,172

113

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

The following represents long-lived assets (property, plant, and equipment) outside of the United States, which are substantially in Ireland. All other long-lived assets are located in the United States.

(in thousands)	2020		2019
Long-lived assets—International	$	228	$	113

The following is a schedule of net sales by geographic region:

(in thousands)
Year Ended December 31, 2020
Net sales—U.S.	$	997,178
Net sales—International		34,114
Total net sales	$	1,031,292
Year Ended December 31, 2019
Net sales—U.S.	$	1,327,833
Net sales—International		62,841
Total net sales	$	1,390,674
Year Ended December 31, 2018
Net sales—U.S.	$	1,249,568
Net sales—International		72,849
Total net sales	$	1,322,417

20. Valuation and Qualifying Accounts

	Balance at								Balance at
	Beginning					Utilization of			End
	of Year		Net Charges			Allowances			of Year
2020
Allowance for doubtful accounts	$	3,015	$	1,589		$	(615	)	$	3,989
Reserve for returns		16,679		33,847			(35,952	)		14,574
Reserve for royalty advances		119,695		16,552			(39,592	)		96,655
Deferred tax valuation allowance		583,505		81,475			(2,412	)		662,568
2019
Allowance for doubtful accounts	$	2,173	$	1,909		$	(1,067	)	$	3,015
Reserve for returns		18,559		41,654			(43,534	)		16,679
Reserve for royalty advances		117,797		16,500			(14,602	)		119,695
Deferred tax valuation allowance		562,392		23,707			(2,594	)		583,505
2018
Allowance for doubtful accounts	$	2,508	$	128		$	(463	)	$	2,173
Reserve for returns		20,580		36,395			(38,416	)		18,559
Reserve for royalty advances		103,606		17,301			(3,110	)		117,797
Deferred tax valuation allowance		571,653		(7,667	)		(1,594	)		562,392

114

Houghton Mifflin Harcourt Company

Notes to Consolidated Financial Statements

(in thousands of dollars, except share and per share information)

21. Quarterly Results of Operations (Unaudited)

	Three Months Ended
	March 31,			June 30,			September 30,			December 31,
2020:
Net sales	$	189,925		$	251,216		$	386,590		$	203,561
Gross profit		63,450			90,389			167,415			65,986
Operating (loss) income		(338,176	)		(22,212	)		272			(68,973	)
Net loss		(345,973	)		(38,168	)		(12,552	)		(83,145	)
Net loss per share attributable to    common stockholders
Basic:
Net loss	$	(2.77	)	$	(0.30	)	$	(0.10	)	$	(0.66	)
Diluted:
Net loss	$	(2.77	)	$	(0.30	)	$	(0.10	)	$	(0.66	)
2019:
Net sales	$	194,635		$	388,896		$	565,668		$	241,475
Gross profit		57,893			156,055			273,481			59,065
Operating (loss) income		(101,835	)		(30,253	)		77,871			(108,947	)
Net (loss) income		(117,362	)		(40,613	)		69,260			(125,118	)
Net (loss) income per share attributable to    common stockholders
Basic:
Net (loss) income	$	(0.95	)	$	(0.33	)	$	0.56		$	(1.01	)
Diluted:
Net (loss) income	$	(0.95	)	$	(0.33	)	$	0.55		$	(1.01	)

Our net sales, operating profit or loss and net cash provided by or used in operations are impacted by the inherent seasonality of the academic calendar. Consequently, the performance of our businesses may not be comparable quarter to consecutive quarter and should be considered on the basis of results for the whole year or by comparing results in a quarter with results in the same quarter for the previous year.

During the fourth quarter of 2020, we recorded an adjustment of $17.0 million and $1.0 million to increase both the goodwill impairment charge and income tax benefit recorded, respectively, to correct an error of the previously recorded goodwill impairment of $262.0 million and related income tax benefit in the first quarter of 2020. Management believes these adjustments are not material to the current period financial statements or any prior periods.

115

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and our Executive Vice President and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020 pursuant to Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”). Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures as of December 31, 2020 were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and the information required to be disclosed by us is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or dispositions of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making this assessment, the Company’s management used the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on our assessment and the aforementioned criteria, management concluded that, as of December 31, 2020, the Company’s internal control over financial reporting was effective.

116

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein in Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting in the quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Item 10. Directors, Executive Officers and Corporate Governance

Except to the extent provided below, the information required by this Item shall be set forth in the sections titled “Corporate Governance” and “Executive Officers” in our Proxy Statement for our 2021 Annual Meeting of Stockholders, to be filed with the SEC within 120 days of December 31, 2020, and is incorporated into this Annual Report on Form 10-K by reference.

We have adopted a Code of Conduct that applies to our principal executive officer, principal financial officer and principal accounting officer or any person performing similar functions, which we post on our website in the “Corporate Governance” link located at: ir.hmhco.com. We intend to publish any amendment to, or waiver from, the Code of Conduct on our website. We will provide any person, without charge, a copy of such Code of Conduct upon written request, which may be mailed to 125 High Street, Boston, MA 02110, Attn: Corporate Secretary.

Item 11. Executive Compensation

The information required by this Item shall be set forth in the sections titled “Executive Compensation” and “Director Compensation” in our Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2020, and is incorporated into this Annual Report on Form 10-K by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters

The information required by this Item shall be set forth in the section titled “Security Ownership and Other Matters” in our Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2020, and is incorporated into this Annual Report on Form 10-K by reference.

Item 13. Certain Relationships and Related Transactions

The information required by this Item shall be set forth in the section titled “Corporate Governance – Review and Approval of Transactions with Related Persons” in our Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2020, and is incorporated into this Annual Report on Form 10-K by reference.

Item 14. Principal Accounting Fees and Services

The information required by this Item shall be set forth in the section titled “Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm” in our Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2020, and is incorporated into this Annual Report on Form 10-K by reference.

117

Item 15. Exhibits, Financial Statement Schedules

(a) Documents filed as part of the report.

(1) Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	56
Consolidated Balance Sheets as of December 31, 2020 and 2019	60
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018	61
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020, 2019 and 2018	62
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018	63
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018	64
Notes to Consolidated Financial Statements	65
(2) Financial Statement Schedules.
Schedule II—“Valuation and Qualifying Accounts” is included herein as Note 20 in the Notes to Consolidated Financial Statements.
(3) Exhibits.	119
See the Exhibit Index.

118

EXHIBIT INDEX

Exhibit No.	Description
2.1	Prepackaged Joint Plan of Reorganization of the Debtors Under Chapter 11 of the Bankruptcy Code by and among Houghton Mifflin Harcourt Publishing Company, Houghton Mifflin Harcourt Publishers Inc., HMH Publishers, LLC, Houghton Mifflin Holding Company, Inc., Houghton Mifflin, LLC, Houghton Mifflin Finance, Inc., Houghton Mifflin Holdings, Inc., HM Publishing Corp., Riverdeep Inc., A Limited Liability Company, Broderbund LLC, RVDP, Inc., HRW Distributors, Inc., Greenwood Publishing Group, Inc., Classroom Connect, Inc., Achieve! Data Solutions, LLC, Steck-Vaughn Publishing LLC, HMH Supplemental Publishers Inc., HMH Holdings (Delaware), Inc., Sentry Realty Corporation, Houghton Mifflin Company International, Inc., The Riverside Publishing Company, Classwell Learning Group Inc., Cognitive Concepts, Inc., Edusoft And Advanced Learning Centers, Inc. (incorporated herein by reference to Exhibit No. 2.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1, filed September 13, 2013 (File No. 333-190356)).
2.2	Stock and Asset Purchase Agreement dated as of April  23, 2015, by and among Houghton Mifflin Harcourt Publishing Company, as Purchaser, Scholastic Corporation, as Parent Seller, and Scholastic Inc., as Seller (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed April 24, 2015 (File No. 001-36166)).
2.3	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 herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed September 12, 2018 (File No. 001-36166)).
2.4	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 (incorporated herein by reference to Exhibit 2.1b to the Company’s Current Report on Form 8-K, filed October 5, 2018 (File No. 001-36166)).
3.1	Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit No. 3.1 to Amendment No.  4 to the Company’s Registration Statement on Form S-1, filed October 25, 2013 (File No. 333-190356)).
3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit No.  3.2 to Amendment No. 4 to the Company’s Registration Statement on Form S-1, filed October 25, 2013 (File No. 333-190356)).
3.3	Amended and Restated By-laws of the Registrant, as amended, effective September 20, 2020 (incorporated herein by reference to Exhibit No.  3.1 to the Company’s Current Report on Form 8-K, filed October 6, 2020 (File No. 001-36166)).
4.1	Investor Rights Agreement, dated as of June 22, 2012, by and among HMH Holdings (Delaware), Inc. and the stockholders party thereto (incorporated herein by reference to Exhibit No. 4.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1, filed September  13, 2013 (File No. 333-190356)).
4.2	Specimen Common Stock Certificate (incorporated herein by reference to Exhibit No. 4.3 to Amendment No.  4 to the Company’s Registration Statement on Form S-1, filed October 25, 2013 (File No. 333-190356)).
4.3	Form of Warrant Certificate (incorporated herein by reference to Exhibit No. 4.4 to Amendment No.  2 to the Company’s Registration Statement on Form S-1, filed October 4, 2013 (File No. 333-190356)).
4.4	Warrant Agreement, dated as of June  22, 2012, among HMH Holdings (Delaware), Inc., Computershare Inc. and Computershare Trust Company, N.A. (incorporated herein by reference to Exhibit No. 4.5 to Amendment No.  2 to the Company’s Registration Statement on Form S-1, filed October 4, 2013 (File No. 333-190356)).

119

Exhibit No.	Description
4.5	Indenture, dated as of November 22, 2019, among Houghton Mifflin Harcourt Company, Inc., Houghton Mifflin Harcourt Publishers Inc., Houghton Mifflin Harcourt Publishing Company and HMH Publishers LLC, the subsidiary guarantors party thereto, U.S. Bank National Association, as trustee, and Citibank N.A., as collateral agent (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed November 25, 2019 (File No. 001-36166)).
4.6	Form of 9.000% Senior Secured Notes due 2025 (incorporated herein by reference to Exhibit A to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed November 25, 2019) (File No. 001-36166)).
4.7	Description of Registrant’s Common Stock (incorporated herein by reference to Exhibit 4.7 to the Company’s Annual Report on Form 10-K, filed February 27, 2020 (File No. 36166)).
10.1	Nomination Agreement, effective December  21, 2016, by and among Houghton Mifflin Harcourt Company and certain affiliates of Anchorage Capital Group, L.L.C. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed December  22, 2016 (File No. 001-36166)).
10.2†	Form of Indemnification Agreement (incorporated herein by reference to Exhibit No. 10.12 to Amendment No.  1 to the Company’s Registration Statement on Form S-1, filed September 13, 2013 (File No. 333-190356)).
10.3	Amended and Restated Term Loan Credit Agreement, dated as of May  29, 2015, by and among Houghton Mifflin Harcourt Company, Houghton Mifflin Harcourt Publishers Inc., HMH Publishers LLC, Houghton Mifflin Harcourt Publishing Company, certain other subsidiaries of Houghton Mifflin Harcourt Company, as subsidiary guarantors, the lenders party thereto and Citibank, N.A., as administrative agent and collateral agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed May 29, 2015 (File No. 001-36166)).
10.4	Amended and Restated Term Facility Guarantee and Collateral Agreement, dated as of May  29, 2015, by and among Houghton Mifflin Harcourt Company, Houghton Mifflin Harcourt Publishers Inc., HMH Publishers LLC, Houghton Mifflin Harcourt Publishing Company, the subsidiaries of Houghton Mifflin Harcourt Company from time to time party thereto and Citibank, N.A., as collateral agent (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed May 29, 2015 (File No. 001-36166)).
10.5	Amended and Restated Revolving Credit Agreement, dated as of July  22, 2015, by and among Houghton Mifflin Harcourt Company, Houghton Mifflin Harcourt Publishers Inc., HMH Publishers LLC, Houghton Mifflin Harcourt Publishing Company, certain other subsidiaries of Houghton Mifflin Harcourt Company, as subsidiary guarantors, the lenders party thereto and Citibank, N.A., as administrative agent and collateral agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed July 23, 2015 (File No. 001-36166)).
10.6	Amended and Restated Revolving Facility Guarantee and Collateral Agreement, dated as of July  23, 2015, by and among Houghton Mifflin Harcourt Company, Houghton Mifflin Harcourt Publishers Inc., HMH Publishers LLC, Houghton Mifflin Harcourt Publishing Company, the subsidiaries of Houghton Mifflin Harcourt Company from time to time party thereto and Citibank, N.A., as collateral agent (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed July 22, 2015 (File No. 001-36166)).
10.7	First Amendment to Credit Agreement, First Amendment to Guarantee and Collateral Agreement and Consent to Release of Mortgages, dated as of June 28, 2019 and effective as of July 1, 2019, by and among Houghton Mifflin Harcourt Company, Houghton Mifflin Harcourt Publishers Inc., HMH Publishers LLC, Houghton Mifflin Harcourt Publishing Company, certain other subsidiaries of Houghton Mifflin Harcourt Company, as subsidiary guarantors, the lenders party thereto and Citibank, N.A., as administrative agent and collateral agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed July 1, 2019 (File No. 001-36166)).

120

Exhibit No.	Description
10.8	Second Amended and Restated Term Loan Credit Agreement, dated as of November 22, 2019, among Houghton Mifflin Harcourt Company, Inc., Houghton Mifflin Harcourt Publishers Inc., Houghton Mifflin Harcourt Publishing Company and HMH Publishers LLC, the subsidiary guarantors party thereto, Citibank N.A., as administrative agent and collateral agent, Citigroup Global Market Inc., Morgan Stanley Senior Funding, Inc., BofA Securities, Inc. and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners, and Citizens Bank, N.A., as co-manager (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 25, 2019 (File No. 001-36166)).
10.9	Second Amended and Restated Revolving Credit Agreement, dated as of November 22, 2019, among Houghton Mifflin Harcourt Company, Inc., Houghton Mifflin Harcourt Publishers Inc., Houghton Mifflin Harcourt Publishing Company and HMH Publishers LLC, the subsidiary guarantors party thereto, Citibank N.A., as administrative agent and collateral agent, Citigroup Global Market Inc., Morgan Stanley Senior Funding, Inc., BofA Securities, Inc. and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners, and Citizens Bank, N.A., as co-manager (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed November 25, 2019 (File No. 001-36166)).
10.10†	HMH Holdings (Delaware), Inc. Change in Control Severance Plan (incorporated herein by reference to Exhibit No.  10.5 to Amendment No. 1 to the Company’s Registration Statement on Form S-1, filed September 13, 2013 (File No. 333-190356)).
10.11†	Houghton Mifflin Harcourt Publishing Company ELT Severance Plan (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed November 5, 2015 (File No. 001-36166)).
10.12†	Houghton Mifflin Harcourt Severance Plan, amended and restated as of March 31, 2016 (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed May 4, 2016 (File No. 001-36166)).
10.13†	Form of Director Compensation Letter (incorporated herein by reference to Exhibit No. 10.11 to Amendment No.  1 to the Company’s Registration Statement on Form S-1, filed September 13, 2013 (File No. 333-190356)).
10.14†	Houghton Mifflin Harcourt Company Non-Employee Director Deferred Compensation Plan (incorporated herein by reference to Exhibit No.  10.50 to the Company’s Annual Report on Form 10-K, filed February 25, 2016 (File No. 001-36166)).
10.15†	Houghton Mifflin Harcourt Company Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-8, filed May 29, 2015 (File No. 333-204519)).
10.16†	HMH Holdings (Delaware), Inc. 2012 Management Incentive Plan (incorporated herein by reference to Exhibit No.  10.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1, filed September 13, 2013 (File No. 333-190356)).
10.17†	HMH Holdings (Delaware), Inc. 2012 Management Incentive Plan Form of Stock Option Award Notice (incorporated herein by reference to Exhibit No. 10.2a to Amendment No. 1 to the Company’s Registration Statement on Form S-1, filed September 13, 2013 (File No. 333-190356)).
10.18†	HMH Holdings (Delaware), Inc. 2012 Management Incentive Plan Time-Based Restricted Stock Unit Award Notice (incorporated herein by reference to Exhibit No. 10.32 to the Company’s Annual Report on Form 10-K, filed February 26, 2015 (File No. 001-36166)).
10.19†	HMH Holdings (Delaware), Inc. 2012 Management Incentive Plan Performance-Based Restricted Stock Award Notice (incorporated herein by reference to Exhibit No. 10.33 to the Company’s Annual Report on Form 10-K, filed February 26, 2015 (File No. 001-36166)).
10.20†	HMH Holdings (Delaware), Inc. 2012 Management Incentive Plan Performance-Based Restricted Stock Unit Award Notice (incorporated herein by reference to Exhibit No. 10.34 to the Company’s Annual Report on Form 10-K, filed February 26, 2015 (File No. 001-36166)).

121

Exhibit No.	Description
10.21†	HMH Holdings (Delaware), Inc. 2012 Management Incentive Plan Time-Based Restricted Stock Award Notice (incorporated herein by reference to Exhibit No. 10.35 to the Company’s Annual Report on Form 10-K, filed February 26, 2015 (File No. 001-36166)).
10.22†	Houghton Mifflin Harcourt Company 2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-8, filed May 29, 2015 (File No. 333-204519)).
10.23†	Houghton Mifflin Harcourt Company 2015 Omnibus Incentive Plan Form of Time-Based Restricted Stock Unit Award Notice (Employees) (incorporated herein by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-8, filed May 29, 2015 (File No. 333-204519)).
10.24†	Houghton Mifflin Harcourt Company 2015 Omnibus Incentive Plan Form of Performance-Based Restricted Stock Unit Award Notice (Employees) (incorporated herein by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-8, filed May 29, 2015 (File No. 333-204519)).
10.25†	Houghton Mifflin Harcourt Company 2015 Omnibus Incentive Plan Form of Time-Based Restricted Stock Unit Award Notice (Directors) (incorporated herein by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q, filed August 6, 2015 (File No. 001-36166)).
10.26†	Houghton Mifflin Harcourt Company 2015 Omnibus Incentive Plan Form of Stock Option Award Notice (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q, filed August 6, 2015 (File No. 001-36166)).
10.27†	Houghton Mifflin Harcourt Company Form of Restricted Stock Unit Award Notice (with Deferral Feature—Directors) (incorporated herein by reference to Exhibit No. 10.51 to the Company’s Annual Report on Form 10-K, filed February 25, 2016 (File No. 001-36166)).
10.28†	Houghton Mifflin Harcourt Company Form of Performance-Based Restricted Stock Unit Award Notice (TSR/Billings—Employees) (incorporated herein by reference to Exhibit No. 10.1 to the Company’s Current Report on Form 8-K, filed May 4, 2016 (File No. 001-36166)).
10.29†	Houghton Mifflin Harcourt Company 2015 Omnibus Incentive Plan New Hire Stock Option Award Notice dated May 9, 2017 by and between Houghton Mifflin Harcourt Company and John J. Lynch, Jr. (incorporated herein by reference to Exhibit No. 10.27 to the Company’s Annual Report on Form 10-K, filed February 22, 2018) (File No. 001-36166)).
10.30†	Houghton Mifflin Harcourt Company 2015 Omnibus Incentive Plan New Hire Time-Based Restricted Stock Unit Award Notice dated May 9, 2017 by and between Houghton Mifflin Harcourt Company and John J. Lynch, Jr. (incorporated herein by reference to Exhibit No. 10.28 to the Company’s Annual Report on Form 10-K, filed February 22, 2018) (File No. 001-36166)).
10.31†	William Bayers Offer Letter dated April 10, 2007, as amended on May  14, 2009 (incorporated herein by reference to Exhibit No. 10.9 to Amendment No. 1 to the Company’s Registration Statement on Form S-1, filed September 13, 2013 (File No. 333-190356)).
10.34†	Joseph Abbott Offer Letter dated as of March 10, 2016 (incorporated herein by reference to Exhibit No.  201-5 10.3 to the Company’s Current Report on Form 8-K, filed March 10, 2016 (File No. 001-36166)).
10.35†	Letter Agreement, effective September 22, 2016, by and between Houghton Mifflin Harcourt Company and L. Gordon Crovitz (incorporated herein by reference to Exhibit No. 10.1 to the Company’s Quarterly Report on Form 10-Q, filed November 3, 2016 (File No. 001-36166)).
10.36†	John J. Lynch Offer Letter dated February 10, 2017 (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 15, 2017 (File No. 001-36166)).
10.41	Amendment No. 1 to the Houghton Mifflin Harcourt Company 2015 Omnibus Incentive Plan dated December 13, 2019 (incorporated herein by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K filed on February 27, 2020 (File No. 001-36166))
21.1*	List of Subsidiaries of the Registrant.

122

Exhibit No.	Description
23.1*	Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.
31.1*	Certification of CEO Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of CFO Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of CEO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	The instance document does not appear in the interactive file because its XBRL tags are embedded within the inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

† Identifies a management contract or compensatory plan or arrangement.

* Filed herewith.

** This certification shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that section. Furthermore, this certification shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing.

Item 16. Form 10-K Summary

None.

123

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Houghton Mifflin Harcourt Company (Registrant)
By:		/s/ John J. Lynch, Jr.
	John J. Lynch, Jr.
	President, Chief Executive Officer
	(On behalf of the registrant)

February 25, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ John J. Lynch, Jr. John J. Lynch, Jr.	President, Chief Executive Officer (Principal Executive Officer) and Director	February 25, 2021
/s/ Joseph P. Abbott, Jr. Joseph P. Abbott, Jr.	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	February 25, 2021
/s/ Michael J. Dolan Michael J. Dolan	Senior Vice President and Corporate Controller (Principal Accounting Officer)	February 25, 2021
/s/ Lawrence K. Fish Lawrence K. Fish	Chairman of the Board of Directors	February 25, 2021
/s/ Daniel M. Allen Daniel M. Allen	Director	February 25, 2021
/s/ L. Gordon Crovitz L. Gordon Crovitz	Director	February 25, 2021
/s/ Jean S. Desravines Jean S. Desravines	Director	February 25, 2021
/s/ Jill A. Greenthal Jill A. Greenthal	Director	February 25, 2021
/s/ John F. Killian John F. Killian	Director	February 25, 2021
/s/ John R. McKernan, Jr. John R. McKernan, Jr.	Director	February 25, 2021
/s/ Tracey D. Weber Tracey D. Weber	Director	February 25, 2021

124

EX-21.1

Exhibit 21.1

Houghton Mifflin Harcourt Company Subsidiaries

Greenwood Publishing Group, LLC.

HMH Intermediate Holdings (Delaware), LLC

HMH IP Company Unlimited Company

HMH Publishers LLC

Houghton Mifflin Company International, Inc.

Houghton Mifflin Harcourt IP LLC

Houghton Mifflin Harcourt Publishers, Inc.

Houghton Mifflin Harcourt Publishing Company

Tribal Nova, Inc.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-250147) and Form S-8 (No. 333-238796, No. 333-192404 and No. 333-204519) of Houghton Mifflin Harcourt Company of our report dated February 25, 2021 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 25, 2021

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, John J. Lynch, Jr., certify that:

1. I have reviewed this Annual Report on Form 10-K of Houghton Mifflin Harcourt Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 25, 2021

By:	/s/ John J. Lynch, Jr.
	John J. Lynch, Jr.
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Joseph P. Abbott, Jr., certify that:

1. I have reviewed this Annual Report on Form 10-K of Houghton Mifflin Harcourt Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 25, 2021

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

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Houghton Mifflin Harcourt Company’s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John J. Lynch, Jr., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 25, 2021

By:	/s/ John J. Lynch, Jr.
	John J. Lynch, Jr.
	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Houghton Mifflin Harcourt Company’s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph P. Abbott, Jr., Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 25, 2021

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

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Feb. 01, 2021	Jun. 30, 2020
Cover [Abstract]
Document Type	10-K
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Document Period End Date	Dec. 31, 2020
Entity Central Index Key	0001580156
Current Fiscal Year End Date	--12-31
Entity Registrant Name	Houghton Mifflin Harcourt Co
Entity Filer Category	Accelerated Filer
Trading Symbol	HMHC
Entity Current Reporting Status	Yes
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Shell Company	false
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	true
Entity Public Float			$ 161.3
Entity Common Stock, Shares Outstanding		126,121,144
Document Transition Report	false
Document Annual Report	true
Entity Small Business	false
Entity Interactive Data Current	Yes
Entity File Number	001-36166
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	27-1566372
Entity Address, Address Line One	125 High Street
Entity Address, City or Town	Boston
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02110
City Area Code	617
Local Phone Number	351-5000
Title of 12(b) Security	Common Stock, $0.01 par value
Security Exchange Name	NASDAQ
Documents Incorporated by Reference	The information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated herein by reference from the Registrant’s Definitive Proxy Statement for its 2020 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2020.

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Current assets
Cash and cash equivalents	$ 281,200	$ 296,353
Accounts receivable, net of allowances for bad debts and book returns of $18.6 million and $19.7 million, respectively	152,832	184,425
Inventories	166,963	213,059
Prepaid expenses and other assets	19,931	19,257
Total current assets	620,926	713,094
Property, plant, and equipment, net	93,202	100,388
Pre-publication costs, net	203,149	268,197
Royalty advances to authors, net	42,485	44,743
Goodwill	437,977	716,977
Other intangible assets, net	428,584	474,225
Operating lease assets	126,850	132,247
Deferred income taxes	2,415	2,520
Deferred commissions	30,659	29,291
Other assets	34,879	31,490
Total assets	2,021,126	2,513,172
Current liabilities
Current portion of long-term debt	19,000	19,000
Accounts payable	49,104	52,128
Royalties payable	50,771	72,985
Salaries, wages, and commissions payable	21,944	54,938
Deferred revenue	342,605	305,285
Interest payable	11,017	3,826
Severance and other charges	19,590	12,407
Accrued pension benefits	1,593
Accrued postretirement benefits	1,555	1,571
Operating lease liabilities	9,669	8,685
Other liabilities	24,973	24,325
Total current liabilities	551,821	555,150
Long-term debt, net of discount and issuance costs	624,692	638,187
Operating lease liabilities	132,014	134,994
Long-term deferred revenue	562,679	542,821
Accrued pension benefits	24,061	23,648
Accrued postretirement benefits	16,566	15,113
Deferred income taxes	16,411	30,871
Other liabilities	2,419	6,028
Total liabilities	1,930,663	1,946,812
Commitments and contingencies (Note 15)
Stockholders’ equity
Preferred stock, $0.01 par value: 20,000,000 shares authorized; no shares issued and outstanding at December 31, 2020 and 2019
Common stock, $0.01 par value: 380,000,000 shares authorized; 150,459,034 and 148,928,328 shares issued at December 31, 2020 and 2019, respectively; 125,882,000 and 124,351,294 shares outstanding at December 31, 2020 and 2019, respectively	1,505	1,489
Treasury stock, 24,577,034 shares as of December 31, 2020 and 2019, respectively, at cost	(518,030)	(518,030)
Capital in excess of par value	4,918,542	4,906,165
Accumulated deficit	(4,255,830)	(3,775,992)
Accumulated other comprehensive loss	(55,724)	(47,272)
Total stockholders’ equity	90,463	566,360
Total liabilities and stockholders’ equity	$ 2,021,126	$ 2,513,172

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Dec. 31, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Accounts receivable, allowances for bad debts and book returns	$ 18.6	$ 19.7
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	380,000,000	380,000,000
Common stock, shares issued	150,459,034	148,928,328
Common stock, shares outstanding	125,882,000	124,351,294
Treasury stock, shares	24,577,034	24,577,034

XML

Consolidated Statements of Operations - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Income Statement [Abstract]
Net sales	$ 1,031,292,000	$ 1,390,674,000	$ 1,322,417,000
Costs and expenses
Cost of sales, excluding publishing rights and pre-publication Amortization	497,816,000	668,108,000	581,467,000
Publishing rights amortization	20,056,000	26,557,000	34,713,000
Pre-publication amortization	126,180,000	149,515,000	109,257,000
Cost of sales	644,052,000	844,180,000	725,437,000
Selling and administrative	478,101,000	662,606,000	649,295,000
Other intangible asset amortization	25,585,000	25,310,000	26,933,000
Impairment charge for goodwill	279,000,000	0	0
Restructuring/severance and other charges	33,643,000	21,742,000	11,478,000
Gain on sale of assets			(201,000)
Operating loss	(429,089,000)	(163,164,000)	(90,525,000)
Other income (expense)
Retirement benefits non-service (expense) income	(856,000)	167,000	1,280,000
Interest expense	(65,959,000)	(48,778,000)	(45,680,000)
Interest income	899,000	3,157,000	2,550,000
Change in fair value of derivative instruments	672,000	(899,000)	(1,374,000)
Gain on investments	2,091,000
Income from transition services agreement		4,248,000	1,889,000
Loss on extinguishment of debt		(4,363,000)
Loss from continuing operations before taxes	(492,242,000)	(209,632,000)	(131,860,000)
Income tax (benefit) expense for continuing operations	(12,404,000)	4,201,000	5,597,000
Loss from continuing operations	(479,838,000)	(213,833,000)	(137,457,000)
Earnings from discontinued operations, net of tax			12,833,000
Gain on sale of discontinued operations, net of tax			30,469,000
Income from discontinued operations, net of tax			43,302,000
Net loss	$ (479,838,000)	$ (213,833,000)	$ (94,155,000)
Net loss per share attributable to common stockholders
Continuing operations	$ (3.82)	$ (1.72)	$ (1.11)
Discontinued operations			0.35
Net loss	$ (3.82)	$ (1.72)	$ (0.76)
Weighted average shares outstanding
Basic and diluted	125,455,487	124,152,984	123,444,943

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Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (479,838)	$ (213,833)	$ (94,155)
Other comprehensive (loss) income, net of taxes:
Foreign currency translation adjustments, net of tax	(230)	(511)	(156)
Net change in pension and benefit plan liabilities, net of tax	(9,209)	1,800	(2,056)
Unrealized gain on short-term investments, net of tax		9	9
Net change in unrealized gain (loss) on derivative financial instruments, net of tax	987	(3,386)	3,541
Other comprehensive (loss) income, net of taxes	(8,452)	(2,088)	1,338
Comprehensive loss	$ (488,290)	$ (215,921)	$ (92,817)

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities
Net loss	$ (479,838,000)	$ (213,833,000)	$ (94,155,000)
Adjustments to reconcile net loss to net cash provided by operating activities
Earnings from discontinued operations, net of tax			(12,833,000)
Gain on sale of discontinued operations, net of tax			(30,469,000)
Gain on sale of assets			(201,000)
Depreciation and amortization expense	236,489,000	272,692,000	250,466,000
Operating lease assets, amortization and impairments	5,397,000	15,949,000
Amortization of debt discount and deferred financing costs	6,004,000	4,286,000	4,181,000
Gain on investments	(2,091,000)
Deferred income taxes	(14,355,000)	4,535,000	5,140,000
Stock-based compensation expense	11,573,000	13,968,000	13,248,000
Impairment charge for goodwill	279,000,000	0	0
Loss on extinguishment of debt		4,363,000
Change in fair value of derivative instruments	(672,000)	899,000	1,374,000
Changes in operating assets and liabilities, net of acquisitions
Accounts receivable	31,593,000	19,182,000	(11,005,000)
Inventories	46,096,000	(28,850,000)	(33,515,000)
Other assets	(11,425,000)	(20,155,000)	3,908,000
Accounts payable and accrued expenses	(34,941,000)	(12,136,000)	16,144,000
Royalties payable and author advances, net	(19,956,000)	9,342,000	(1,650,000)
Deferred revenue	57,178,000	200,473,000	(7,692,000)
Interest payable	7,191,000	3,690,000	(186,000)
Severance and other charges	7,183,000	10,631,000	(2,823,000)
Accrued pension and postretirement benefits	3,443,000	(4,800,000)	(904,000)
Operating lease liabilities	(1,996,000)	(17,281,000)
Other liabilities	(10,625,000)	(7,980,000)	5,056,000
Net cash provided by operating activities—continuing operations	115,248,000	254,975,000	104,084,000
Net cash provided by operating activities—discontinued operations			10,831,000
Net cash provided by operating activities	115,248,000	254,975,000	114,915,000
Cash flows from investing activities
Proceeds from sales and maturities of short-term investments		50,000,000	86,539,000
Purchases of short-term investments			(49,553,000)
Additions to pre-publication costs	(61,331,000)	(102,562,000)	(123,403,000)
Additions to property, plant, and equipment	(50,940,000)	(37,561,000)	(53,741,000)
Proceeds from sale of business			140,000,000
Acquisition of business, net of cash acquired		(5,447,000)
Investment in preferred stock		(750,000)	(500,000)
Proceeds from sale of assets			1,085,000
Net cash (used in) provided by investing activities—continuing operations	(112,271,000)	(96,320,000)	427,000
Net cash used in investing activities—discontinued operations			(6,832,000)
Net cash used in investing activities	(112,271,000)	(96,320,000)	(6,405,000)
Cash flows from financing activities
Borrowings under revolving credit facility	150,000,000	60,000,000	50,000,000
Payments of revolving credit facility	(150,000,000)	(60,000,000)	(50,000,000)
Payments of long-term debt	(19,000,000)	(772,000,000)	(8,000,000)
Payments of deferred financing fees		(8,493,000)
Tax withholding payments related to net share settlements of restricted stock units and awards	(48,000)	(2,018,000)	(1,190,000)
Issuance of common stock under employee stock purchase plan	918,000	1,028,000	1,263,000
Net collections under transition service agreement		1,136,000	3,803,000
Net cash used in financing activities—continuing operations	(18,130,000)	(115,667,000)	(4,124,000)
Net (decrease) increase in cash and cash equivalents	(15,153,000)	42,988,000	104,386,000
Cash and cash equivalents at the beginning of the period	296,353,000	253,365,000	148,979,000
Cash and cash equivalents at the end of the period	281,200,000	296,353,000	253,365,000
Supplemental disclosure of cash flow information
Interest paid	52,942,000	41,059,000	41,758,000
Income taxes paid	1,883,000	671,000	430,000
Non-cash investing activities
Property, plant, and equipment acquired under finance leases	164,000	327,000	480,000
Term Loan [Member]
Cash flows from financing activities
Proceeds from long-term debt, net of discount		364,800,000
Senior Secured Notes [Member]
Cash flows from financing activities
Proceeds from long-term debt, net of discount		299,880,000
Pre-publication Costs [Member]
Non-cash investing activities
Costs included in accounts payable and accruals	5,282,000	5,480,000	13,974,000
Property, Plant, and Equipment [Member]
Non-cash investing activities
Costs included in accounts payable and accruals	$ 2,002,000	$ 3,039,000	$ 1,908,000

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Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment [Member]	Common Stock [Member]	Treasury Stock [Member]	Capital in Excess of Par Value [Member]	Accumulated Deficit [Member]	Accumulated Deficit [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]	Accumulated Other Comprehensive Loss [Member]
Beginning balance at Dec. 31, 2017	$ 795,193	$ 52,711	$ 1,479	$ (518,030)	$ 4,879,793	$ (3,521,527)	$ 52,711	$ (46,522)
Beginning balance, shares at Dec. 31, 2017			147,911,466
Accounting Standards Update Extensible List	us-gaap:AccountingStandardsUpdate201409Member
Net loss	$ (94,155)					(94,155)
Other comprehensive income (loss), net of tax	1,338							1,338
Issuance of common stock for employee purchase plan	1,613		$ 2		1,611
Issuance of common stock for employee purchase plan, shares			175,428
Issuance of common stock for vesting of restricted stock units			$ 3		(3)
Issuance of common stock for vesting of restricted stock units, shares			346,255
Stock withheld to cover tax withholdings requirements upon vesting of restricted stock units	(1,190)				(1,190)
Restricted stock forfeitures and cancellations			$ (3)		3
Restricted stock forfeitures and cancellations, shares			(268,295)
Stock-based compensation expense	12,960				12,960
Ending balance at Dec. 31, 2018	$ 768,470	$ 812	$ 1,481	(518,030)	4,893,174	(3,562,971)	$ 812	(45,184)
Ending balance, shares at Dec. 31, 2018			148,164,854
Accounting Standards Update Extensible List	us-gaap:AccountingStandardsUpdate201602Member
Net loss	$ (213,833)					(213,833)
Other comprehensive income (loss), net of tax	(2,088)							(2,088)
Issuance of common stock for employee purchase plan	1,438		$ 2		1,436
Issuance of common stock for employee purchase plan, shares			186,114
Issuance of common stock for vesting of restricted stock units			$ 6		(6)
Issuance of common stock for vesting of restricted stock units, shares			577,360
Stock withheld to cover tax withholdings requirements upon vesting of restricted stock units	(2,018)				(2,018)
Stock-based compensation expense	13,579				13,579
Ending balance at Dec. 31, 2019	566,360		$ 1,489	(518,030)	4,906,165	(3,775,992)		(47,272)
Ending balance, shares at Dec. 31, 2019			148,928,328
Net loss	(479,838)					(479,838)
Other comprehensive income (loss), net of tax	(8,452)							(8,452)
Issuance of common stock for employee purchase plan	1,247		$ 4		1,243
Issuance of common stock for employee purchase plan, shares			380,757
Issuance of common stock for vesting of restricted stock units			$ 12		(12)
Issuance of common stock for vesting of restricted stock units, shares			1,149,949
Stock withheld to cover tax withholdings requirements upon vesting of restricted stock units	(48)				(48)
Stock-based compensation expense	11,194				11,194
Ending balance at Dec. 31, 2020	$ 90,463		$ 1,505	$ (518,030)	$ 4,918,542	$ (4,255,830)		$ (55,724)
Ending balance, shares at Dec. 31, 2020			150,459,034

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Basis of Presentation

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Basis of Presentation

1. Basis of Presentation

Houghton Mifflin Harcourt Company (“HMH,” “Houghton Mifflin Harcourt,” “we,” “us,” “our,” or the “Company”) is a learning technology company, committed to delivering connected solutions that engage learners, empower educators and improve student outcomes. As a leading provider of Kindergarten through 12^th grade (“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 estimates that it serves more than 50 million students and three 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.

We are organized along two business segments: Education and HMH Books & Media. Within our Education segment, we focus on the K-12 market and, in the United States, we are a market leader. We specialize in comprehensive core curriculum, supplemental and intervention solutions, and we provide ongoing support in professional learning and coaching for educators and administrators. Our offerings are rooted in learning science, and we work with research partners, universities and third-party organizations as we design, build, implement and iterate our offerings to maximize their effectiveness. We are purposeful about innovation, leveraging technology to create engaging and immersive experiences designed to deepen learning experiences for students and to extend teachers’ capabilities so that they can focus on making meaningful connections with their students.

Our diverse portfolio enables us to help ensure that every student and teacher has the tools needed for success. We are able to build deep partnerships with school districts and leverage the scope of our offerings to provide holistic solutions at scale with the support of our far-reaching sales force and talented field-based specialists and consultants. We provide print, digital, and blended print/digital solutions that are tailored to a district’s needs, goals and technological readiness.

Furthermore, for nearly two centuries, our HMH Books & Media segment has brought renowned and awarded children’s, fiction, non-fiction, culinary and reference titles to readers throughout the world. Our distinguished author list includes ten Nobel Prize winners, forty-nine Pulitzer Prize winners, and twenty-six National Book Award winners. We are home to popular characters and titles such as Curious George, Carmen Sandiego, The Lord of the Rings, The Whole30, The Best American Series, the Peterson Field Guides, CliffsNotes, and The Polar Express, and published distinguished authors such as Tim O’Brien, Temple Grandin, Tim Ferriss, Kwame Alexander, Lois Lowry, and Chris Van Allsburg.

The consolidated financial statements of HMH include the accounts of all of our wholly-owned subsidiaries as of December 31, 2020 and 2019 and for the periods ended December 31, 2020, 2019 and 2018.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our accompanying consolidated financial statements include the results of operations of the Company and our wholly-owned subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation.

We expect our net cash provided by operations combined with our cash and cash equivalents and borrowing availability under our revolving credit facility to provide sufficient liquidity to fund our current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months.

The ability of the Company to fund planned operations is based on assumptions which involve significant judgment and estimates of future revenues, capital spend and other operating costs.

Seasonality and Comparability

Our net sales, operating profit or loss and net cash provided by or used in operations are impacted by the inherent seasonality of the academic calendar, which typically results in a cash flow usage in the first half of the year and a cash flow generation in the second half of the year. Consequently, the performance of our businesses may not be comparable quarter to consecutive quarter and should be considered on the basis of results for the whole year or by comparing results in a quarter with results in the same quarter for the previous year. Moreover, uncertainty resulting from the COVID-19 pandemic may result in not following this historic pattern.

Approximately 81% of our net sales for the year ended December 31, 2020 were derived from our Education segment, which is a markedly seasonal business. Schools conduct the majority of their purchases in the second and third quarters of the calendar year in preparation for the beginning of the school year. Thus, for the years ended December 31, 2020, 2019 and 2018, approximately 66% of our consolidated net sales were realized in the second and third quarters. Sales of K-12 instructional materials and customized testing products are also cyclical with some years offering more sales opportunities than others in light of the state adoption calendar. The amount of funding available at the state level for educational materials also has a significant effect on year-to-year net sales. Although the loss of a single customer would not have a material adverse effect on our business, schedules of school adoptions and market acceptance of our products can materially affect year-to-year net sales performance.

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Impact of the COVID-19 Pandemic

12 Months Ended

Dec. 31, 2020

Extraordinary And Unusual Items [Abstract]

Impact of the Covid-19 Pandemic

2. Impact of the COVID-19 Pandemic

The unprecedented and rapid spread of COVID-19 and the resulting social distancing measures, including business and school closures implemented by federal, state and local authorities, significantly reduced customer demand for our solutions and services, disrupted portions of our supply chain and warehousing operations and also disrupted our ability to deliver our educational solutions and services. We continue to monitor indicators of demand, including our sales pipeline, customer orders and product shipments, as well as observe the impact to state revenues and related educational budgets to ascertain an estimate of the impact; however, the length and severity of the reduction in demand due to the pandemic remains uncertain. Accordingly, our full year results for 2020 were adversely impacted compared to prior years.

While we are planning for a demand recovery, the exact timing and pace of recovery is uncertain given the significant disruption caused by the pandemic on the operations of our customers. Our expense management and liquidity measures may be modified as we obtain additional clarity on the timing of customer demand recovery.

In response to these developments, we have implemented measures to help mitigate the impact on our financial position and operations. These measures include, but are not limited to, the following:

Expense Management. With the reduction in net sales, we have, and will continue to implement cost saving initiatives, including:

• director, executive and senior leadership salary reductions, and for the majority of employees, a four-day work week with associated labor cost reductions, in each case beginning in April 2020 and ceasing near the end of July 2020. The costs associated with ending the furlough program and the salary reductions were subsequently mitigated by the 2020 Restructuring Plan discussed below;

• a freeze on spending not directly tied to near-term billings, including a reduction in all discretionary spending such as marketing, advertising, travel, and office supplies;

• executing a voluntary early retirement incentive program in September 2020, as discussed below; and

• commencing a restructuring program in September 2020 including a reduction in force, as discussed below.

Balance Sheet, Cash Flow and Liquidity. In addition to the expense management actions noted above, we have taken the following actions to increase liquidity and strengthen our financial position, including:

• reduced inventory purchasing;

• deferred long-term capital projects not directly contributing to billings in 2020; and

• deferred the payment of our employer payroll taxes allowed under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The deferred amounts under the CARES Act were repaid in full in December 2020 as a result of the success of the cash and expense mitigation efforts.

2020 Restructuring Plan.

On September 4, 2020, we completed a voluntary retirement incentive program, which was offered to all U.S. based employees at least 55 years of age with at least five years of service. Of the eligible employees, 165 elected to participate representing approximately 5% of our workforce. The majority of the employees voluntarily retired as of September 4, 2020 with select employees leaving later in the year. Each of the employees received or will receive separation payments in accordance with our severance policy.  

On September 30, 2020, we undertook a restructuring program, including a reduction in force, as part of the ongoing assessment of our cost structure amid the COVID-19 pandemic and in line with our strategic transformation plan. The reduction in force resulted in a 22% reduction in our workforce, including positions eliminated as part of the voluntary retirement incentive program mentioned above, and net of newly created positions to support our digital first operations. The reduction in force resulted in the departure of approximately 525 employees and was completed in October 2020. Each of the employees received or will receive separation payments in accordance with our severance policy. The total one-time, non-recurring cost incurred in connection with the restructuring program, inclusive of the voluntary retirement incentive program (collectively the “2020 Restructuring Plan”), all of which represents cash expenditures, is approximately $33.6 million.

Forward-looking

After reviewing our ability to meet future financial obligations over the next twelve months, including consideration of our recent actions described above, we have concluded our net cash from operations combined with our cash and cash equivalents and borrowing availability under our revolving credit facility provide sufficient liquidity to fund our current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months. Our primary credit facilities do not require us to comply with financial maintenance covenants.

The ability of the Company to fund planned operations is based on assumptions which involve significant judgment and estimates of future revenues, capital spend and other operating costs. Our current assumptions are that our industry will begin to recover as school districts become, or continue being, fully operational, either in-person, fully remote or hybrid, and we have performed a sensitivity analysis on these assumptions to forecast the impact of a slower-than-anticipated recovery. Based on the actions enacted in 2020 described earlier, we have concluded we have sufficient liquidity to fund our current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months.

Valuation of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets

We perform an impairment test to assess the carrying value of goodwill and indefinite-lived intangible assets on an annual basis (as of October 1) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. Our fourth quarter 2020 impairment tests of goodwill and indefinite-lived intangible assets did not indicate an impairment existed as the fair value exceeded our carrying values.

During the three months ended March 31, 2020, our stock price declined to historical lows since our 2013 initial public offering. We determined that the significant decline in our market capitalization and broader economic downturn arising from the COVID-19 pandemic was a triggering event. We concluded that quantitative analyses were required to be performed due to the triggering event occurring during the first quarter of 2020.

Goodwill is allocated entirely to our Education reporting unit. We utilized an implied market value method under the market approach to calculate the fair value of the Education reporting unit as of March 31, 2020, which we determined was the best approximation of fair value of the Education reporting unit in the current social and economic environment. This method included the determination of the Company's overall enterprise value, from which the fair value of the HMH Books & Media reporting unit was deducted to derive the fair value of the Education reporting unit. We have previously used a combination of the implied market value method and guideline public company method approach. The relevant inputs and assumptions used in the valuation of the Education reporting unit include our market capitalization, selection of a control premium, and the determination of an appropriate market multiple to value the HMH Books & Media reporting unit, as well as the fair value of individual assets and liabilities. Based on our interim impairment assessment, we concluded that our goodwill, which is wholly attributed to the Education reporting unit, was impaired and, accordingly, recorded a goodwill impairment charge of $279.0 million.

With the continuation of the COVID-19 pandemic and the associated downward pressure on our billings, we concluded that impairment triggering events existed as of September 30, 2020. Accordingly, we estimated the fair value of the Education reporting unit as of September 30, 2020 utilizing the implied market value method. Using consistent relative inputs and assumptions as described above with respect to the first quarter 2020 testing, we concluded that no impairment existed as of September 30, 2020. The fair value of the Education reporting unit as of September 30, 2020 exceeded its carrying value by approximately 18%. During the fourth quarter of 2020, we recorded an adjustment of $17.0 million and $1.0 million to increase both the goodwill impairment charge and income tax benefit recorded, respectively, to correct an error of the previously recorded goodwill impairment of $262.0 million and related income tax benefit in the first quarter of 2020. Management believes these adjustments are not material to the current period financial statements or any prior periods.  

Additionally, as a result of the triggering events identified in the first and third quarters, we performed quantitative impairment analyses over our indefinite-lived intangible assets and long-lived assets. With regards to indefinite-lived intangible assets, which includes the Houghton Mifflin Harcourt tradename, the recoverability was evaluated using a one-step process whereby we determined the fair value by asset and then compared it to its carrying value to determine if the asset was impaired. We estimated the fair value by preparing a relief-from-royalty discounted cash flow analysis using forward looking revenue projections. The significant assumptions used in discounted cash flow analysis included: future net sales, a long-term growth rate, a royalty rate and a discount rate used to present value future cash flows. The discount rate was based on the weighted-average cost of capital method at the date of the evaluation. The fair value of the indefinite-lived intangible assets was in excess of its carrying value by approximately 12% as of March 31, 2020 and 18% as of September 30, 2020, respectively, and substantially exceeded its carrying value as of October 1, 2019. We also performed an impairment test on our long-lived assets using an undiscounted cash flow model in determining the fair value, which was then compared to book value of the asset groups evaluated. The long-lived impairment analysis was performed over the Education reporting unit and the HMH Books & Media reporting unit. Estimates and significant assumptions included in the long-lived asset impairment analysis included identification of the primary asset in each asset group and undiscounted cash flow projections. We concluded that our indefinite-lived intangible assets and long-lived assets were not impaired based on the results of the quantitative analyses performed.

Depending on how long the economic and social conditions resulting from the COVID-19 pandemic exist and their future impact on state and local budgets with regards to educational spending, as well as discretionary consumer spending, we may be subject to further impairments in the future.   

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Significant Accounting Policies and Recent Accounting Standards

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Significant Accounting Policies and Recent Accounting Standards

3. Significant Accounting Policies and Recent Accounting Standards

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates, assumptions and judgments by management that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities in the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and assumptions including, but not limited to, book returns, deferred revenue and related standalone selling price estimates, allowance for bad debts, recoverability of advances to authors, valuation of inventory, financial instruments valuation, income taxes, pensions and other postretirement benefits obligations, contingencies, litigation, depreciation and amortization periods, and the recoverability of long-term assets such as property, plant, and equipment, capitalized pre-publication costs, other identified intangibles and goodwill. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat it, as well as the economic impact on local, regional, national and international customers and markets. Actual results may differ from those estimates.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of the new revenue recognition accounting standard, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. To the extent the transaction price includes variable consideration, which generally reflects estimated future product returns, we estimate the amount of variable consideration that should be included in the transaction price utilizing the expected value method to which we expect to be entitled. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based largely on all information (historical, current and forecasted) that is reasonably available. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

We estimate the collectability of contracts upon execution. For contracts with rights of return, the transaction price is adjusted to reflect the estimated returns for the arrangement on these sales and is made at the time of sale based on historical experience by product line or customer. The transaction prices allocated are adjusted to reflect expected returns and are based on historical return rates and sales patterns. Shipping and handling fees charged to customers are included in net sales.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. We do not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less. Significant financing components’ income is included in interest income.

Contracts are sometimes modified to account for changes in contract specifications and requirements. Contract modifications exist when the modification either creates new, or changes the existing, enforceable rights and

obligations. Generally, contract modifications are for products or services that are not distinct from the existing contract due to the inability to use, consume or sell the products or services on their own to generate economic benefits and are accounted for as if they were part of that existing contract. The effect of such a contract modification on the transaction price and measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

Physical product revenue is recognized when the customer obtains control of our product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract. Revenues from static digital content commence upon delivery to the customer of the digital entitlement that is required to access and download the content and is typically recognized at a point in time. Revenues from subscription software licenses, related hosting services and product support are recognized evenly over the license term as we believe this best represents the pattern of transfer to the customer. The perpetual software licenses provide the customer with a functional license to our products and their related revenues are recognized when the customer receives entitlement to the software. For the technical services provided to customers in connection with the software license, including hosting services related to perpetual licenses, we recognize revenue upon delivery of the services. As the invoices are based on each day of service, this is directly linked to the transfer of benefit to the customer.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. We enter into certain contracts that have multiple performance obligations, one or more of which may be delivered subsequent to the delivery of other performance obligations. These performance obligations may include print and digital media, professional development services, training, software licenses, access to hosted content, and various services related to the software including, but not limited to hosting, maintenance and support, and implementation. We allocate the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. We determine standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions and internally approved standard pricing discounts related to the performance obligations. Generally, our performance obligations include print and digital textbooks and instructional materials, trade books, reference materials, formative assessment materials and multimedia instructional programs; licenses to book rights and content; access to hosted content; and services including professional development, consulting and training. Our contracts may also contain software performance obligations including perpetual and subscription-based licenses and software maintenance and support services.

Accounts Receivable

Accounts receivable include amounts billed and currently due from customers and are recorded net of allowances for doubtful accounts and reserves for returns. In the normal course of business, we extend credit to customers that satisfy predefined criteria. We estimate the collectability of our receivables and develop those estimates to reflect the risk of credit loss. Allowances for doubtful accounts are established through the evaluation of accounts receivable aging, prior collection experience, current conditions and reasonable and supportable forecasts of the economic conditions that will exist through the contractual life of the financial asset. We monitor our ongoing credit exposure through an active review of collection trends and specific facts and circumstances. Our activities include monitoring the timeliness of payment collection and performing timely account reconciliations.

Contract Assets

Contract assets include unbilled amounts where revenue is recognized over time as the services are delivered to the customer based on the extent of progress towards completion and revenue recognized exceeds the amount billed to the customer, and right of payment is not subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are included in prepaid expenses and other assets on our consolidated balance sheets.

Deferred Commissions

Our incremental direct costs of obtaining a contract, which consist of sales commissions, are deferred and amortized over the period of contract performance. Applying the practical expedient, we recognize sales commission expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Amortization expense is included in selling and administrative expenses.

Deferred Revenue

Our contract liabilities consist of advance payments and billings in excess of revenue recognized and are classified as deferred revenue on our consolidated balance sheets. Our contract assets and liabilities are accounted for and presented on a net basis as either a contract asset or contract liability at the end of each reporting period. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue. In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance. If additional advances are received on those contracts in subsequent periods, we assume all revenue recognized in the reporting period first applies to the beginning contract liability as opposed to a portion applying to the new advances for the period.

Advertising Costs and Sample Expenses

Advertising costs are charged to selling and administrative expenses as incurred. Advertising costs were $12.1 million, $12.6 million and $12.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. Sample expenses are charged to selling and administrative expenses when the samples are shipped.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of cash in banks and highly liquid investment securities that have maturities of three months or less when purchased. The carrying amount of cash equivalents approximates fair value because of the short-term maturity of these investments.

Accounts Receivable

Accounts receivable are recorded net of allowances for doubtful accounts and reserves for returns. In the normal course of business, we extend credit to customers that satisfy predefined criteria. We estimate the collectability of our receivables. Allowances for doubtful accounts are established through the evaluation of accounts receivable aging and prior collection experience to estimate the ultimate collectability of these receivables. Reserves for returns are based on historical return rates and sales patterns.

Inventories

Inventories are stated at the lower of weighted-average cost or net realizable value. The level of obsolete and excess inventory is estimated on a program or title level-basis by comparing the number of units in stock with past usage and the expected future demand. The expected future demand of a program or title is determined by the copyright year, the previous year’s usage, the subsequent years’ sales forecast, and known forward-looking trends including our development cycle to replace the title or program and competing titles or programs.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost, or in the case of assets acquired in business combinations, at fair value as of the acquisition date, less accumulated depreciation. Equipment under capital lease is stated at fair value at inception of the lease, less accumulated depreciation. Maintenance and repair costs are charged to expense as incurred, and renewals and improvements that extend the useful life of the assets are capitalized. Costs associated with developing film and episodic series assets are deferred if such amounts are expected to be recovered through future revenues. Film and episodic series costs are amortized on a pro rata basis of revenue earned and total revenue expected to be earned from the film or episodic series. Depreciation on property, plant, and equipment is calculated using the straight-line method over the estimated useful lives of the assets or, in the case of assets acquired in business combinations, over their remaining lives. Equipment held under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. Estimated useful lives of property, plant, and equipment are as follows:

	Estimated Useful Life
Building and building equipment	10 to 35 years
Machinery and equipment	2 to 15 years
Capitalized software and internal-use software	3 to 5 years
Leasehold improvements	Lesser of useful life or lease term
Film and media	Revenue earned

Capitalized Internal-Use Software and Software Development Costs

Capitalized internal-use software and software is included in property, plant and equipment on the consolidated balance sheets.

We capitalize certain costs related to obtaining or developing computer software for internal use including external customer-facing websites. Costs incurred during the application development stage, including external direct costs of materials and services, and payroll and payroll related costs for employees who are directly associated with the internal-use software project, are capitalized and amortized on a straight-line basis over the expected useful life of the related software. The application development stage includes design of chosen path, software configuration and integration, coding, hardware installation and testing. Costs incurred during the preliminary project stage, as well as maintenance, training and upgrades that do not result in additional functionality subsequent to general release are expensed as incurred.

Certain computer software development costs for software that is to be sold or marketed are capitalized in the consolidated balance sheets. Capitalization of computer software development costs begins upon the establishment of technological feasibility. We define the establishment of technological feasibility as a working model. Amortization of capitalized computer software development costs is provided on a product-by-product basis using the straight-line method, beginning upon commercial release of the product and continuing over the remaining estimated economic life of the product. The carrying amounts of computer software development costs are annually compared to net realizable value and impairment charges are recorded, as appropriate, when amounts expected to be realized are lower.

We review internal-use software and software development costs for impairment. For the years ended December 31, 2020, 2019 and 2018, there was no impairment of internal-use software and software developments costs.

Pre-publication Costs

We capitalize the art, prepress, manuscript and other costs incurred in the creation of the master copy of a book or other media (the “pre-publication costs”). Pre-publication costs are primarily amortized from the year of sale over five years using the sum-of-the-years-digits method, which is an accelerated method for calculating an asset’s amortization. Under this method, the amortization expense recorded for a pre-publication cost asset is approximately 33% (year 1), 27% (year 2), 20% (year 3), 13% (year 4) and 7% (year 5). This policy is used throughout the Company, except for the HMH Books & Media young readers and general interest books, which generally expenses such costs as incurred. Additionally, pre-publication costs recorded in connection with the acquisition of the EdTech business are amortized over 7 years on a projected sales pattern. The amortization methods and periods chosen best reflects the pattern of expected sales generated from individual titles or programs. We periodically evaluate the remaining lives and recoverability of capitalized pre-publication costs, which are often dependent upon program acceptance by state adoption authorities. Amortization expense related to pre-publication costs for the years ended December 31, 2020, 2019 and 2018 were $126.2 million, $149.5 million and $109.3 million, respectively.

We review pre-publication costs for impairment.  For the years ended December 31, 2020, 2019 and 2018, there was no impairment of pre-publication costs.

Goodwill and Indefinite-lived Intangible Assets

Goodwill is the excess of the purchase price paid over the fair value of the net assets of the business acquired. Other intangible assets principally consist of branded trademarks and trade names, acquired publishing rights and customer relationships. Goodwill and indefinite-lived intangible assets (certain tradenames) are not amortized, but are reviewed at least annually for impairment or earlier, if an indication of impairment exists. Goodwill is allocated entirely to our Education reporting unit. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include our market capitalization, selection of a control premium, and the determination of appropriate market comparables as well as the fair value of certain individual assets and liabilities.

We have the option of first assessing qualitative factors to determine whether it is necessary to perform a quantitative impairment test for goodwill or we can perform the quantitative impairment test without performing the qualitative assessment. In performing the qualitative assessment, events and circumstances specific to the reporting unit and to the entity as a whole, such as macroeconomic conditions, industry and market considerations, overall financial performance and cost factors are considered when evaluating whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If the fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of the net assets assigned to a reporting unit exceeds the fair value of a reporting unit, goodwill is deemed impaired and is written down to the extent of the difference between the fair value of the reporting unit and the carrying value.

We estimate the total fair value of the Education reporting unit by using one or more of various valuation techniques including an evaluation of our market capitalization and peer company multiples depending on the best approximation of fair value of the Education reporting unit in the current social and economic environment. With regard to indefinite-lived intangible assets, which includes the Houghton Mifflin Harcourt tradename at December 31, 2020 and 2019, the recoverability is evaluated using a one-step process whereby we determine the fair value by asset and then compare it to its carrying value to determine if the asset is impaired. We estimate the fair value by preparing a relief-from-royalty discounted cash flow analysis using forward looking revenue projections. The significant assumptions used in discounted cash flow analysis include: future net sales, a long-term growth rate, a royalty rate and a discount rate used to present value future cash flows and the terminal value of the Education reporting unit. The discount rate is based on the weighted-average cost of capital method at the date of the evaluation. Adverse changes in our market capitalization or peer company multiples by an equivalent amount could give rise to an impairment.

We completed our annual goodwill impairment test as of October 1, 2020 using consistent methodologies and assumptions with those described during our event-driven tests and did not identify an impairment. The fair value of the Education reporting unit was in excess of its carrying value by approximately 18% as of October 1, 2020 and 2019. We recorded a goodwill impairment charge of $279.0 million for the year ended December 31, 2020. Refer to Note 2 for a discussion of the factors and circumstances leading to the goodwill impairment. There was no goodwill impairment for the years ended December 31, 2019 and 2018. We will continue to monitor and evaluate the carrying value of goodwill. If market and economic conditions or business performance deteriorate, this could increase the likelihood of us recording an impairment charge.   

We completed our annual indefinite-lived asset impairment tests as of October 1, 2020 and 2019. No indefinite-lived intangible assets were deemed to be impaired for the years ended December 31, 2020, 2019 and 2018.

Publishing Rights

A publishing right is an acquired right that allows us to publish and republish existing and future works as well as create new works based on previously published materials. We determined the fair market value of the publishing rights arising from business combinations by discounting the after-tax cash flows projected to be derived from the publishing rights and titles to their net present value using a rate of return that accounts for the time value of money and the appropriate degree of risk. The useful life of the publishing rights is based on the lives of the various copyrights involved. We calculate amortization using the percentage of the projected operating income before taxes derived from the titles in the current year as a percentage of the total estimated operating income before taxes over the remaining useful life. Acquired publication rights, as well as customer-related intangibles with definitive lives, are primarily amortized on an accelerated basis over periods ranging from 3 to 20 years.  We review our publishing rights for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable.  No publishing rights were deemed to be impaired for the years ended December 31, 2020, 2019 and 2018.  

Impairment of Other Long-lived Assets

We review our other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the future undiscounted cash flows are less than their book value, impairment exists. The impairment is measured as the difference between the book value and the fair value of the underlying asset. Fair value is normally determined using an undiscounted cash flow model.

Severance

We accrue postemployment benefits if the obligation is attributable to services already rendered, rights to those benefits accumulate, payment of benefits is probable, and amount of benefit is reasonably estimated. Postemployment benefits include severance benefits.

Subsequent to recording such accrued severance liabilities, changes in market or other conditions may result in changes to assumptions upon which the original liabilities were recorded that could result in an adjustment to the liabilities.

Royalty Advances

Royalty advances to authors are capitalized and represent amounts paid in advance of the sale of an author’s product and are recovered as earned. As advances are recorded, a partial reserve may be recorded immediately based primarily upon historical sales experience. Additionally, advances are evaluated periodically to determine if they are expected to be recovered on a title-by-title basis, with consideration given to the other titles in the author’s portfolio also earning against the outstanding advance. Any portion of a royalty advance that is not expected to be recovered is fully reserved. The reserve for royalty advances is reported as a reduction of the royalty advances to authors balance. Cash payments for royalty advances are included within cash flows from operating activities, under the caption “Royalties payable and author advances, net,” in our consolidated statements of cash flows.

Leases

On January 1, 2019, we adopted the new lease accounting standard using the modified retrospective method. We applied the guidance to each lease as of January 1, 2019 with a cumulative effect adjustment to the opening balance of accumulated deficit as of that date. The standard requires lessees to recognize a lease liability and a right of use asset on the balance sheet for operating leases. Right of use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Right of use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Accounting for finance leases is substantially unchanged.  Prior comparative periods were not adjusted.

We elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to not reassess whether any expired or existing contracts are or contain leases, carry forward the historical lease classification and to not reassess initial direct costs for any existing leases. We did not elect the hindsight practical expedient to determine the lease term for existing leases. Upon implementation of the new guidance, we have elected the practical expedients to combine lease and non-lease components, and to not recognize right of use assets and lease liabilities for short-term leases. The adoption of this guidance impacted our consolidated balance sheets due to the recognition of the lease rights and obligations related to our office space, automobile fleet and office equipment leases as assets and liabilities of approximately $148.0 million and $161.0 million, respectively. The adjustment to accumulated deficit of approximately $0.8 million related to a previously recorded deferred gain on the sale leaseback of a warehouse. The impact on our results of operations and cash flows was not material.

Under the new lease accounting standard, we determine if an arrangement is a lease at inception. Right of use assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, we consider only payments that are fixed and determinable at the time of commencement. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our incremental borrowing rate is a hypothetical rate based on our understanding of what our credit rating would be. The right of use asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. When determining the probability of exercising such options, we consider contract-based, asset-based, entity-based, and market-based factors. Our lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes or other costs. Variable lease costs are expensed as incurred on our consolidated statements of operations. Our lease agreements generally do not contain any residual value guarantees or restrictive covenants.

Operating leases are included in operating lease assets and operating lease liabilities on our consolidated balance sheets. Finance leases are included in property, plant, and equipment, and other liabilities on our consolidated balance sheets.

Income Taxes

We record income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax basis, and operating loss and tax credit carryforwards. Our consolidated financial statements contain certain deferred tax assets which have arisen primarily as a result of interest expense limitations, as well as other temporary differences between financial and tax accounting. We establish a valuation allowance if the likelihood of realization of the deferred tax assets is reduced based on an evaluation of objectively verifiable evidence. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against those deferred tax assets. We evaluate the weight of all available evidence to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

We also evaluate any uncertain tax positions and only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon settlement. We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Any change in judgment related to the expected ultimate resolution of uncertain tax positions is recognized in earnings in the period in which such change occurs. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense.

Stock-Based Compensation

Certain employees and directors have been granted stock options, restricted stock and restricted stock units in our common stock. Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant service period. We estimate the fair value of each stock-based award on the measurement date using the current market price based on the target value of the award for restricted stock and restricted stock units, the Monte Carlo simulation for market-based restricted stock units and the Black-Scholes valuation model for stock options. We recognize stock-based compensation expense over the awards requisite service period on a straight-line basis for time-based stock options, restricted stock and restricted stock units and on a graded basis for restricted stock and restricted stock units that are contingent on the achievement of performance conditions.

Comprehensive Loss

Comprehensive loss is defined as changes in the equity of an enterprise except those resulting from stockholder transactions. The amounts shown on the consolidated statements of stockholders’ equity and comprehensive loss relate to the cumulative effect of changes in pension and postretirement liabilities, foreign currency translation gain and loss adjustments, unrealized gains and losses on short-term investments and gains and losses on derivative instruments.

Foreign Currency Translation

The functional currency for each of our subsidiaries is the currency of the primary economic environment in which the subsidiary operates, generally defined as the currency in which the entity generates and expends cash. Foreign currency denominated assets and liabilities are translated into United States dollars at current rates as of the balance sheet date and the revenue, costs and expenses are translated at the average rates established during each reporting period. Cumulative translation gains or losses are recorded in equity as an element of accumulated other comprehensive income.

Financial Instruments

Derivative financial instruments are employed to manage risks associated with interest rate exposures and are not used for trading or speculative purposes. We recognize all derivative instruments in our consolidated balance sheets at fair value. Changes in the fair value of derivatives are recognized periodically either in earnings or in stockholders’ equity as a component of accumulated other comprehensive loss, depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value hedge or a cash flow hedge. Gains and losses on derivatives designated as hedges, to the extent they are effective, are recorded in other comprehensive loss, and subsequently reclassified to earnings to offset the impact of the hedged items when they occur. Changes in the fair value of derivatives not qualifying as hedges are reported in earnings. During 2020, 2019 and 2018, our interest rate swaps were designated as hedges and the majority qualified for hedge accounting. The interest rate derivative contracts matured on July 22, 2020. We recorded an unrealized loss of $3.4 million and an unrealized gain of $3.5 million in our statements of comprehensive loss to account for the changes in fair value of these derivatives during the periods ended December 31, 2019 and 2018, respectively. The corresponding $1.0 million hedge liability was included within current other liabilities in our consolidated balance sheet as of December 31, 2019. Our foreign exchange forward contracts did not qualify for hedge accounting because we did not contemporaneously document our hedging strategy upon entering into the hedging arrangements.

Treasury Stock

We account for treasury stock under the cost method. When shares are reissued or retired from treasury stock they are accounted for at an average price. Upon retirement the excess over par value is charged against capital in excess of par value.

Net Loss per Share

Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. Except where the result would be anti-dilutive, net loss per share is computed using the treasury stock method for the exercise of stock options. For periods in which the Company has reported net losses, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders for the years ended December 31, 2020, 2019 and 2018.

Recent Accounting Standards

Recent accounting pronouncements, not included below, are not expected to have a material impact on our consolidated financial position or results of operations.

Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles, including simplification of areas such as franchise taxes, step-up in tax basis of goodwill, intraperiod allocations, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The standard will be effective in 2021, with early adoption permitted. We do not expect it to have a material impact on our consolidated financial statements.  

Recently Adopted Accounting Standards

In August 2018, the FASB issued new guidance on a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract). Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement to develop or obtain internal use software. Accordingly, the guidance requires a customer to determine the stage of a project that the implementation activity relates to and the nature of the associated costs in

order to determine whether those costs should be expensed as incurred or capitalized. The guidance also requires the customer to amortize the capitalized implementation costs as an expense over the term of the hosting arrangement. We adopted the guidance on January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued updated guidance to simplify the test for goodwill impairment by the elimination of Step 2 in the determination on whether goodwill should be considered impaired. The annual assessments are still required to be completed. We adopted the guidance on January 1, 2020.  

In June 2016, the FASB issued new guidance that requires credit losses on financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, not based on incurred losses, as well as additional disclosures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. We adopted the guidance on January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

We are exposed to credit losses primarily through our accounts receivable. We develop estimates to reflect the risk of credit loss which are based on an evaluation of accounts receivable aging, prior collection experience, current conditions and reasonable and supportable forecasts of the economic conditions that will exist through the contractual life of the financial asset. We write off the asset when it is no longer deemed collectible. We monitor our ongoing credit exposure through an active review of collection trends. Our activities include monitoring the timeliness of payment collection and performing timely account reconciliations. At December 31, 2020, we reported allowances for doubtful accounts of $4.0 million, compared to $3.0 million at December 31, 2019, reflecting an increase of $1.6 million, prior to write-offs of $0.6 million for the year ended December 31, 2020.

We are also exposed to losses on our royalty advances. Royalty advances to authors are capitalized and represent amounts paid in advance of the sale of an author’s product and are recovered as earned. As advances are recorded, a partial reserve may be recorded immediately based primarily upon historical sales experience. Additionally, advances are evaluated periodically to determine if they are expected to be recovered on a title-by-title basis. Any portion of a royalty advance that is not expected to be recovered is fully reserved. At December 31, 2020, we reported a reserve for royalty advances of $96.7 million, compared to $119.7 million at December 31, 2019, reflecting a decrease of $23.0 million for the year ended December 31, 2020.

In February 2016, the FASB issued guidance that primarily requires lessees to recognize most leases on their balance sheets but record expenses on their income statements in a manner similar to current accounting. We adopted the guidance on January 1, 2019 using the modified retrospective method and did not adjust comparative periods or modify disclosures in those comparative periods.

In May 2014, the FASB issued new guidance related to revenue recognition. This new accounting standard replaced most current U.S. GAAP guidance on this topic and eliminated most industry-specific guidance. We adopted the guidance on January 1, 2018 applying the modified retrospective method.

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Acquisitions

12 Months Ended

Dec. 31, 2020

Business Combinations [Abstract]

Acquisitions

4. Acquisitions

On January 14, 2019, we completed the acquisition of certain assets of PV Waggle LLC, which comprised a web-based adaptive learning solution providing Math and English Language Arts (“ELA”) instruction for students in grades 2-8 for a total purchase price of approximately $5.4 million. The transaction was accounted for under the acquisition method of accounting. Goodwill, other intangible assets and other liabilities recorded as part of the acquisition totaled approximately $0.9 million, $5.2 million and $0.7 million, respectively. The other intangible assets represent developed technology and were valued using a replacement cost approach. Pro forma financial information and measurement period adjustments were not material.

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Discontinued Operations

12 Months Ended

Dec. 31, 2020

Discontinued Operations And Disposal Groups [Abstract]

Discontinued Operations

5. Discontinued Operations

On October 1, 2018, we completed the sale of all the assets, including intellectual property, used primarily in our Riverside clinical and standardized testing business (“Riverside Business”) for cash consideration received of $140.0 million and the purchaser’s assumption of all liabilities relating to the Riverside Business subject to specified exceptions. Net proceeds from the sale after the payment of transaction costs were approximately $135.0 million with a post-tax book gain on sale of approximately $30.5 million. The gain was recorded in the fourth quarter of 2018 as the transaction closed on October 1, 2018. The tax gain on the sale was offset by 2018 losses. The results of the Riverside Business were previously reported in our Education segment. In connection with the sale of the Riverside Business, we entered into a Transition Services Agreement with the purchaser whereby we performed certain support functions through September 30, 2019. 

Upon the signing of the asset purchase agreement on September 12, 2018, the Riverside Business qualified as a discontinued operation, and goodwill originally included in the Education reportable segment was transferred to the Riverside Business. The amount of transferred goodwill was $67.0 million and was determined using the relative fair value method. The relative fair value was determined based on the purchase price of the Riverside Business compared to the Education reportable segment fair value. The Education reportable segment fair value was based primarily on the market value of the overall Company at the date that the Riverside Business qualified as a discontinued operation. The allocation also required the assessment for impairment for each of the Riverside Business and Education reportable segment’s goodwill and indefinite-lived intangible assets carrying values. No impairment was deemed to exist.

Selected financial information of the Riverside Business included in discontinued operations is as follows:

	For the Year
	Ended December 31,
	2018
Net sales	$	56,562
Costs		37,714
Amortization		4,954
Earnings from discontinued operations before taxes		13,894
Income tax expense		1,061
Earnings from discontinued operations, net of tax	$	12,833

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Balance Sheet Information

12 Months Ended

Dec. 31, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Balance Sheet Information

6. Balance Sheet Information

Account Receivable

Accounts receivable at December 31, 2020 and 2019 consisted of the following:

	2020			2019
Accounts receivable	$	171,395		$	204,119
Allowance for bad debt		(3,989	)		(3,015	)
Reserve for book returns		(14,574	)		(16,679	)
	$	152,832		$	184,425

As of December 31, 2020 and 2019, one individual customer comprised more than 10% of our accounts receivable, net balance.  We believe that our accounts receivable credit risk exposure is limited and we have not experienced significant write-downs in our accounts receivable balances.

Inventories

Inventories at December 31, 2020 and 2019 consisted of the following:

	2020		2019
Finished goods	$	155,759	$	203,103
Raw materials		11,204		9,956
Inventories	$	166,963	$	213,059

Property, Plant, and Equipment

Balances of major classes of assets and accumulated depreciation and amortization at December 31, 2020 and 2019 were as follows:

	2020			2019
Land and land improvements	$	4,939		$	4,939
Building and building equipment		11,160			10,239
Machinery and equipment		14,985			12,970
Capitalized software and internal-use software		641,027			598,317
Leasehold improvements		24,266			22,974
Film and media		29,845			22,055
		726,222			671,494
Less: Accumulated depreciation and amortization		(633,020	)		(571,106	)
Property, plant, and equipment, net	$	93,202		$	100,388

For the years ended December 31, 2020, 2019 and 2018, depreciation and amortization expense related to property, plant, and equipment were $64.7 million, $71.3 million and $81.2 million, respectively.

Property, plant, and equipment at December 31, 2020 and 2019 included approximately $0.1 million and $0.3 million, respectively, acquired under finance lease agreements, of which the majority is included in machinery and equipment. The future minimum lease payments required under non-cancelable capital leases as of December 31, 2020 are $0.1 million in 2021.

Included within property, plant, and equipment on our consolidated balance sheets are film and media assets. Our film and media assets are comprised of the cost to develop our animated series Carmen Sandiego and other production series. These assets will be amortized proportionally to the revenues recognized relative to the total estimated revenue consistent with the guidance over episodic television series development. We recorded amortization expense of $14.0 million, $9.8 million and $6.1 million for the years ended December 31, 2020, 2019 and 2018, respectively, against this asset, which is included within cost of sales, excluding publishing rights and pre-publication amortization, in the statement of operations.

Substantially all property, plant, and equipment are pledged as collateral under our term loan and revolving credit facility.

Contract Assets, Contract Liabilities and Contract Costs

Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional. Contract assets are included in prepaid expenses and other assets on our consolidated balance sheets. Contract liabilities consist of deferred revenue (current and long-term). The following table presents changes in contract assets and contract liabilities during the year ended December 31, 2020:

	December 31,		December 31,
	2020		2019		$ Change		% Change
Contract assets	$	580	$	109	$	471		432.11	%
Contract liabilities (deferred revenue)	$	905,284	$	848,106	$	57,178		6.74	%

The $56.7 million increase in our net contract liabilities from December 31, 2019 to December 31, 2020 was primarily due to the non-satisfaction of performance obligations related to physical and digital products, and services during the period in excess of recognition from deferred revenue.

During the years ended December 31, 2020, 2019 and 2018, we recognized the following net sales as a result of changes in the contract assets and contract liabilities balances:

	Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,
	2020		2019		2018
Net sales recognized in the period from:
Amounts included in contract liabilities at the beginning of the period	$	295,675	$	229,557	$	220,769

As of December 31, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligations, which includes deferred revenue and open orders, was $970.3 million, and we will recognize approximately 73% to net sales over the next 1 to 3 years.

We capitalize incremental commissions paid to sales representatives for obtaining product sales as well as service contracts unless the capitalization and amortization of such costs are not expected to have a material impact on the financial statements. Applying the practical expedient within the accounting guidance, we recognize sales commission expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. We had deferred commissions in the amount of $30.7 million and $29.3 million at December 31, 2020 and 2019, respectively, and amortized $12.9 million, $13.2 million and $10.5 million during the years ended December 31, 2020, 2019 and 2018, respectively. The amortization is included in selling and administrative expenses.

Costs to fulfill a contract are directly related to a contract that will be used to satisfy a performance obligation in the future and are expected to be recovered. These costs are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. Our assets associated with incremental costs to fulfill a contract were $14.7 million and $5.6 million at December 31, 2020 and 2019, respectively, and are included within prepaid expenses and other assets (current) and other assets (long term) on our consolidated balance sheet. We recorded amortization of $3.8 million and $4.6 million during the years ended December 31, 2020 and 2019, respectively. The amortization is included in cost of sales, excluding publishing rights and pre-publication amortization.

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Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

7. Goodwill and Other Intangible Assets

The change in the carrying amount of goodwill, which all relates to the Education segment, for the year ended December 31, 2020 is as follows:

Balance at December 31, 2019	$	716,977
Impairment		(279,000)
Balance at December 31, 2020	$	437,977

In accordance with the provisions of the accounting standard for goodwill and other intangible assets, goodwill and certain indefinite-lived tradenames are not amortized but rather are assessed for impairment on an annual basis. Accumulated impairment losses on goodwill as of December 31, 2020 was $279.0 million. Refer to Note 2 for a discussion of the valuation of goodwill, indefinite-lived intangible assets and long-lived assets along with the triggering event which resulted in a goodwill impairment of $279.0 million during the year ended December 31, 2020. There was no impairment charge recorded in the years ended December 31, 2019 and 2018.

Other intangible assets consisted of the following:

	December 31, 2020							December 31, 2019
			Accumulated							Accumulated
	Cost		Amortization			Total		Cost		Amortization			Total
Trademarks and tradenames: indefinite-    Lived	$	161,000	$	—		$	161,000	$	161,000	$	—		$	161,000
Trademarks and tradenames: definite-    Lived		164,130		(53,610	)		110,520		164,130		(38,948	)		125,182
Publishing rights		1,180,000		(1,159,482	)		20,518		1,180,000		(1,139,426	)		40,574
Customer related and other		449,840		(313,294	)		136,546		449,840		(302,371	)		147,469
Other intangible assets, net	$	1,954,970	$	(1,526,386	)	$	428,584	$	1,954,970	$	(1,480,745	)	$	474,225

   During 2019, we acquired certain assets of PV Waggle LLC and recorded an intangible asset of $5.2 million. Refer to Note 4.

Amortization expense for definite-lived intangible assets, publishing rights and customer related and other intangibles were $45.6 million, $51.9 million and $61.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Estimated aggregate amortization expense expected for each of the next five years related to intangibles subject to amortization is as follows:

	Trademarks				Other
	and		Publishing		Intangible
	Tradenames		Rights		Assets
2021		14,408		11,642		10,333
2022		10,608		7,569		10,134
2023		6,808		1,307		9,954
2024		6,715		—		8,503
2025		6,437				8,315
Thereafter		65,544		—		89,307
	$	110,520	$	20,518	$	136,546

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Debt

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Debt

8. Debt

Our debt consisted of the following:

	December 31,			December 31,
	2020			2019
$380,000 term loan due November 22, 2024 interest    payable quarterly (net of discount and    issuance costs)	$	346,091		$	361,294
$306,000 senior secured notes due February 15, 2025    interest payable semi-annually (net of discount and    issuance costs)		297,601			295,893
		643,692			657,187
Less: Current portion of long-term debt		(19,000	)		(19,000	)
Total long-term debt, net of discount and issuance    Costs	$	624,692		$	638,187
Revolving credit facility	$	—		$	—

Long-term debt repayments due in each of the next five years and thereafter is as follows:

Year
2021		19,000
2022		19,000
2023		19,000
2024		304,000
2025		306,000
	$	667,000

Senior Secured Notes

On November 22, 2019, we completed the sale of $306.0 million in aggregate principal amount of 9.0% Senior Secured Notes due 2025 (the “notes”) in a private placement to qualified institutional buyers under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to persons outside the United States pursuant to Regulation S under the Securities Act.  The notes mature on February 15, 2025 and bear interest at a rate of 9.0% per annum. Interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2020.

The notes were issued at a discount equal to 2.0% of the outstanding borrowing commitment.

The transaction was accounted for under the guidance for debt modifications and extinguishments. We incurred approximately $5.4 million of third-party fees for the transaction, of which approximately $4.1 million were capitalized as deferred financing fees and approximately $1.3 million was recorded to expense and included in the selling and administrative line item in our consolidated statements of operations for the year ended December 31, 2019.  

We may redeem all or a portion of the notes at redemption prices as described in the notes.  

The notes do not require us to comply with financial maintenance covenants. We are currently required to meet certain incurrence based financial covenants as defined under our notes. The notes are subject to restrictions on our ability to incur additional indebtedness, issue certain preferred stock, redeem, purchase or retire subordinated debt, make certain investments, pay dividends or other amounts, enter into certain transactions with affiliates, merge or consolidate with another person, sell or otherwise dispose of all or substantially all of our assets, sell certain assets, including capital stock, designate our subsidiaries as unrestricted subsidiaries, redeem or repurchase capital stock or make other restricted payments, and incur certain liens.  The notes are subject to customary events of

default. If an event of default occurs and is continuing, the administrative agent may, or at the request of certain required lenders shall, accelerate the obligations outstanding under the notes.

Term Loan Facility

On November 22, 2019, we entered into a second amended and restated term loan credit agreement for an aggregate principal amount of $380.0 million (the “term loan facility”).  The term loan facility is required to be repaid in quarterly installments of approximately $4.8 million with the balance being payable on the maturity date.  The term loan facility matures on November 22, 2024 and the interest rate per annum is equal to, at the option of the Company, either (a) LIBOR plus a margin of 6.25% or (b) an alternate base rate plus a margin of 5.25%.  As of December 31, 2020, the interest rate on the term loan facility was 7.25%.  

On July 27, 2017, the U.K. Financial Conduct Authority (the “FCA”) announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021. Our term loan facility provides that the administrative agent may determine that (i) adequate and reasonable means do not exist for ascertaining the LIBOR rate or (ii) the FCA or the government authority having jurisdiction over the administrative agent has made a public statement identifying a specific date after which the LIBOR rate shall no longer be used for determining interest rates for loans. If the administrative agent determines that (i) or (ii) above is unlikely to be temporary then the administrative agent and the Company will agree to transition to an alternate base rate or amend the term loan facility to establish an alternate rate of interest to LIBOR that gives due consideration to the then-prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time.

The term loan facility was issued at a discount equal to 4.0% of the outstanding borrowing commitment.

The transaction was accounted for under the guidance for debt modifications and extinguishments. We incurred approximately $7.2 million of third-party fees for the transaction, of which approximately $2.9 million were capitalized as deferred financing fees and approximately $4.3 million was recorded to expense and included in the selling and administrative line item in our consolidated statements of operations for the year ended December 31, 2019.

The term loan facility contains customary mandatory prepayment requirements, including with respect to excess cash flow, proceeds from certain asset sales or dispositions of property, and proceeds from certain incurrences of indebtedness. The term loan facility permits the Company to voluntarily prepay outstanding amounts at any time without premium or penalty, other than customary breakage costs with respect to LIBOR loans; provided, however, that any voluntary prepayment in connection with certain repricing transactions that occur before the date that is twelve months after the closing of the term loan facility shall be subject to a prepayment premium of 1.00% of the principal amount of the amounts prepaid.

The term loan facility does not require us to comply with financial maintenance covenants. We are currently required to meet certain incurrence based financial covenants as defined under our term loan facility. The term loan facility is subject to usual and customary conditions, representations, warranties and covenants, including restrictions on additional indebtedness, liens, investments, mergers, acquisitions, asset dispositions, dividends to stockholders, repurchase or redemption of our stock, transactions with affiliates and other matters. The term loan facility is subject to customary events of default. If an event of default occurs and is continuing, the administrative agent may, or at the request of certain required lenders shall, accelerate the obligations outstanding under the term loan facility.

We are subject to an excess cash flow provision under our term loan facility which is predicated upon our leverage ratio and cash flow. We were not required to make a payment under the excess cash flow provision in 2020 and 2019.

On November 22, 2019, in connection with the notes and term loan facility described above, we paid off the remaining outstanding balance of our previous $800.0 million term loan facility. The transaction was accounted for under the guidance for debt modifications and extinguishments. We incurred a loss on extinguishment of debt of approximately $4.4 million related to the write off of the portion of the unamortized deferred financing fees and discount associated with the portion of the previous term loan accounted for as an extinguishment

Interest Rate Hedging

On August 17, 2015, we entered into interest rate derivative contracts with various financial institutions having an aggregate notional amount of $400.0 million to convert floating rate debt into fixed rate debt. We assessed at inception, and re-assess on an ongoing basis, whether the interest rate derivative contracts are highly effective in offsetting changes in the fair value of the hedged variable rate debt. The interest rate derivative contracts matured on July 22, 2020.  

These interest rate swaps were designated as cash flow hedges and qualified for hedge accounting under the accounting guidance related to derivatives and hedging. Accordingly, we recorded an unrealized loss of $3.4 million and an unrealized gain of $3.5 million in our statements of comprehensive loss to account for the changes in fair value of these derivatives during the periods ended December 31, 2019 and 2018, respectively. The corresponding $1.0 million hedge liability is included within current other liabilities in our consolidated balance sheet as of December 31, 2019.  We reclassified $1.9 million from other comprehensive loss to earnings during the year ended December 31, 2020.

In connection with the term loan facility on November 22, 2019, we incurred a change in the mix of floating rate debt versus fixed rate debt. As a result, the aggregate notional of our active interest rate derivative contracts designated as cash flow hedges exceeded the outstanding floating rate debt notional by approximately $29.5 million. To accommodate for this notional shortfall, we partially de-designated one of our active interest rate derivative contracts. This involved splitting the notional amount with one portion remaining designated under cash flow hedge accounting, and the remaining portion, with a $29.5 million notional amount, left undesignated. There were no changes made to the interest rate derivative contracts from an economic perspective; the notional split is accounting in nature only.

Beginning on November 22, 2019, the fair value changes on the undesignated portion of the swap flow through earnings, as opposed to being deferred as unrealized gains or losses in other comprehensive income (loss). The impact of this change was less than $0.1 million and was recorded in our consolidated statements of operations for each year ended December 31, 2020 and 2019.  We had no interest rate derivative contracts outstanding as of December 31, 2020.  

Revolving Credit Facility

On November 22, 2019, we entered into a second amended and restated revolving credit agreement that provides borrowing availability in an amount equal to the lesser of either $250.0 million or a borrowing base that is computed monthly or weekly and comprised of the Borrowers’ and the Guarantors’ (as such terms are defined below) eligible inventory and receivables (the “revolving credit facility”). The revolving credit facility includes a letter of credit subfacility of $50.0 million, a swingline subfacility of $20.0 million and the option to expand the facility by up to $100.0 million in the aggregate under certain specified conditions. The revolving credit facility may be prepaid, in whole or in part, at any time, without premium.  The transaction was accounted for under the accounting guidance for modifications to or exchanges of revolving debt arrangements. We incurred approximately $1.1 million of creditor and third-party fees which were capitalized as deferred financing fees.

The revolving credit facility requires the Company to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 on a trailing four-quarter basis only during certain periods commencing when excess availability under the revolving credit facility is less than certain limits prescribed by the terms of the revolving credit facility. The revolving credit facility is subject to usual and customary conditions, representations, warranties and covenants, including restrictions on additional indebtedness, liens, investments, mergers, acquisitions, asset dispositions, dividends to stockholders, repurchase or redemption of our stock, transactions with affiliates and other matters. The revolving credit facility is subject to customary events of default.  If an event of default occurs and is continuing, the administrative agent may, or at the request of certain required lenders shall, accelerate the obligations outstanding under the revolving credit facility. As of December 31, 2020, no amounts are outstanding under the revolving credit facility.

As of December 31, 2020, the minimum fixed charge coverage ratio covenant under our revolving credit facility was not applicable, due to our level of borrowing availability. The minimum fixed charge coverage ratio, which is only tested in limited situations, is 1.0 to 1.0 through the end of the facility.

Guarantees

Under each of the notes, the term loan facility and the revolving credit facility, Houghton Mifflin Harcourt Publishers Inc., Houghton Mifflin Harcourt Publishing Company and HMH Publishers LLC are the borrowers (collectively, the “Borrowers”), and Citibank, N.A. acts as both the administrative agent and the collateral agent.

The obligations under the notes, the term loan facility and the revolving credit facility are guaranteed by the Company and each of its direct and indirect for-profit domestic subsidiaries (other than the Borrowers) (collectively, the “Guarantors”) and are secured by all capital stock and other equity interests of the Borrowers and the Guarantors and substantially all of the other tangible and intangible assets of the Borrowers and the Guarantors, including, without limitation, receivables, inventory, equipment, contract rights, securities, patents, trademarks, other intellectual property, cash, bank accounts and securities accounts and owned real estate. The revolving credit facility is secured by first priority liens on receivables, inventory, deposit accounts, securities accounts, instruments, chattel paper and other assets related to the foregoing (the “Revolving First Lien Collateral”), and second priority liens on the collateral which secures the term loan facility on a first priority basis. The term loan facility is secured by first priority liens on the capital stock and other equity interests of the Borrowers and the Guarantors, equipment, owned real estate, trademarks and other intellectual property, general intangibles that are not Revolving First Lien Collateral and other assets related to the foregoing, and second priority liens on the Revolving First Lien Collateral.

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Leases

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Leases

9. Leases

We lease property and equipment under finance and operating leases. We have operating leases for various office space and facilities, warehouse equipment, automobile fleet and office equipment that expire at various dates through 2033. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the lease term. Many of our leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. For leases beginning in 2019 and later, we account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) as combined with the non-lease components (e.g., common-area maintenance costs). Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We sublease certain real estate office space to third parties. Our sublease portfolio consists of operating leases.

When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. We give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.

Lease Position as of December 31, 2020

The table below presents the lease assets and liabilities recorded on the balance sheet.

Leases	Classification	December 31, 2020				December 31, 2019
Assets
Operating lease assets	Operating lease assets	$		126,850		$		132,247
Total leased assets		$		126,850		$		132,247
Liabilities
Current
Operating	Operating lease liabilities	$		9,669		$		8,685
Noncurrent
Operating	Operating lease liabilities			132,014				134,994
Total lease liabilities		$		141,683		$		143,679
Weighted average remaining lease term Operating leases		8.2 Years				9.6 Years
Weighted average discount rate Operating leases (1)			12.56		%		12.46		%

(1) Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

Lease costs

Operating lease cost and sublease income totaled $34.9 million and $2.1 million and $39.9 million and $2.3 million for the years ended December 31, 2020 and 2019, respectively. The net lease cost of $32.8 million and $37.6 million for years ended December 31, 2020 and 2019, respectively, is included in the selling and administrative line item in our consolidated statements of operations. Operating lease cost includes short term leases and variable lease costs, which are not material.

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the balance sheet.

	Operating
Maturity of Lease Liabilities	Leases
2021		24,143
2022		25,395
2023		27,838
2024		29,034
2025		28,370
Thereafter		110,993
Total lease payments	$	245,773
Less: interest		(104,090	)
Present value of lease liabilities	$	141,683

During the third quarter of 2019, we executed a lease agreement on new office space in Portsmouth, New Hampshire. We plan to relocate our employees from the existing location in Portsmouth, New Hampshire to this new office space upon the completion of the building. The lease term specified in the agreement is 10 years with an option to renew for an additional five years. Our estimated fixed lease payments over the 10 year initial lease term

is $9.8 million. We currently expect to relocate to the space in the second quarter of 2021, but this timing as well as when we are required to begin making payments and recognize rental and other expenses under the new lease, is dependent on when the space is available for use.

Other Information

The table below presents supplemental cash flow information related to leases during the years ended December 31, 2020 and 2019.

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases – 2020	$	28,639
Operating cash flows for operating leases – 2019	$	31,245

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Restructuring, Severance and Other Charges

12 Months Ended

Dec. 31, 2020

Restructuring And Related Activities [Abstract]

Restructuring, Severance and Other Charges

10. Restructuring, Severance and Other Charges

2020 Restructuring Plan

On September 4, 2020, we finalized a voluntary retirement incentive program, which was offered to all U.S. based employees at least 55 years of age with at least five years of service. Of the eligible employees, 165 elected to participate representing approximately 5% of our workforce. The majority of the employees voluntarily retired as of September 4, 2020 with select employees leaving later in the year.  Each of the employees received or will receive separation payments in accordance with our severance policy.  

On September 30, 2020, we undertook a restructuring program, including a reduction in force, as part of the ongoing assessment of our cost structure amid the COVID-19 pandemic and in line with our strategic transformation plan. The reduction in force resulted in a 22% reduction in our workforce, including positions eliminated as part of the voluntary retirement incentive program mentioned above, and net of newly created positions to support our digital first operations. The reduction in force will result in the departure of approximately 525 employees and was completed in October 2020. Each of the employees received or will receive separation payments in accordance with our severance policy. The total one-time, non-recurring cost incurred in connection with the restructuring program, inclusive of the voluntary retirement incentive program, (collectively the “2020 Restructuring Plan”) all of which represents cash expenditures, is approximately $33.6 million.

The following table provides a summary of our total costs associated with the 2020 Restructuring Plan, included in the restructuring/severance and other charges line item within our consolidated statements of operations, for the year ended December 31, 2020, by major type of cost:

	Year Ended		Total Amount
	December 31,		Incurred
Type of Cost	2020		to Date
Restructuring charges: (1)
Severance and termination benefits	$	33,643	$	33,643
	$	33,643	$	33,643

(1) All restructuring charges are included within Corporate and Other.

Our restructuring liabilities are comprised of accruals for severance and termination benefits. The following is a rollforward of our liabilities associated with the 2020 Restructuring Plan:

	2020
	Restructuring						Restructuring
	accruals at						accruals at
	December 31,				Cash		December 31,
	2019		Charges		payments		2020
Severance and termination benefits	$	—	$	33,643	$	(14,332)	$	19,311
	$	—	$	33,643	$	(14,332)	$	19,311

2019 Restructuring Plan

On October 15, 2019, our Board of Directors approved changes connected with our ongoing strategic transformation to simplify our business model and accelerate growth. This includes new product development and go-to-market capabilities, as well as the streamlining of operations company-wide for greater efficiency. These actions (the “2019 Restructuring Plan”) resulted in the net elimination of approximately 10% of our workforce, after taking into account new strategy-aligned positions that are expected to be added, and additional operating and capitalized cost reductions, including an approximately 20% reduction in previously planned content development expenditures over the next three years. These steps are intended to further simplify our business model while delivering increased value to customers, teachers and students. The workforce reductions were completed in the first quarter of 2020.

After considering additional headcount actions, implementation of the planned actions resulted in total charges of $15.8 million which was recorded in the fourth quarter of 2019. With respect to each major type of cost associated with such activities, substantially all costs were severance and other termination benefit costs and will result in cash expenditures.

Further, as part of such strategic transformation plan, we recorded an incremental $9.8 million inventory obsolescence charge which is recorded in cost of sales in the statement of operations.

The following tables provide a summary of our total costs associated with the 2019 Restructuring Plan, included in the restructuring line item within our consolidated statements of operations, for the year ended December 31, 2019, by major type of cost:

	Year Ended		Total Amount
	December 31,		Incurred
Type of Cost	2019		to Date
Restructuring charges: (1)
Severance and termination benefits	$	15,820	$	15,820
	$	15,820	$	15,820

(1) All restructuring charges are included within Corporate and Other.

Our restructuring liabilities are primarily comprised of accruals for severance and termination benefits. The following is a rollforward of our liabilities associated with the 2019 Restructuring Plan:

	2020
	Restructuring							Restructuring
	accruals at							accruals at
	December 31,				Cash			December 31,
	2019		Charges		payments			2020
Severance and termination benefits	$	11,649	$	—	$	(11,370	)	$	279
	$	11,649	$	—	$	(11,370	)	$	279

	2019
	Restructuring							Restructuring
	accruals at							accruals at
	December 31,				Cash			December 31,
	2018		Charges		payments			2019
Severance and termination benefits	$	—	$	15,820	$	(4,171	)	$	11,649
	$	—	$	15,820	$	(4,171	)	$	11,649

Severance and Other Charges

2020

Exclusive of the 2020 Restructuring Plan and the 2019 Restructuring Plan, during the year ended December 31, 2020, $0.8 million of severance payments were made to employees whose employment ended in 2019 and prior years.

A summary of the significant components of the severance costs, which are not allocated to our segments and instead are included in the Corporate and Other category, is as follows:

	2020
	Severance/ other accruals at December 31, 2019		Severance/ other expense		Cash payments			Severance/ other accruals at December 31, 2020
Severance costs	$	758	$	—	$	(758	)	$	—
	$	758	$	—	$	(758	)	$	—

2019

Exclusive of the 2019 Restructuring Plan, during the year ended December 31, 2019, $3.2 million of severance payments were made to employees whose employment ended in 2019 and prior years, and we recorded an expense in the amount of $2.5 million to reflect costs for severance. We also recorded an expense in the amount of $3.4 million for real estate consolidation costs, which is reflected as a reduction in operating lease assets in our consolidated balance sheet as of December 31, 2019.

	2019
	Severance/								Severance/
	other								other
	accruals at			Severance/					accruals at
	December 31,			other		Cash			December 31,
	2018			expense		payments			2019
Severance costs	$	1,420		$	2,534	$	(3,196	)	$	758
Other accruals		270	(1)		—		—			—
	$	1,690		$	2,534	$	(3,196	)	$	758

(1)In connection with the adoption of the new leasing standard on January 1, 2019, the restructuring liabilities related to office space consolidation were reclassed on the balance sheet as a reduction of operating lease assets.

2018

During the year ended December 31, 2018, $5.7 million of severance payments were made to employees whose employment ended in 2018 and prior years and $1.0 million of net payments were made for office space no longer utilized by the Company as a result of prior savings initiatives. Further, we recorded an expense in the amount of $6.8 million to reflect costs for severance, which have been fully paid.

A summary of the significant components of the severance/restructuring and other charges, which are not allocated to our segments and included in Corporate and Other, is as follows:

	2018
	Severance/							Severance/
	other							other
	accruals at		Severance/					accruals at
	December 31,		other		Cash			December 31,
	2017		expense		payments			2018
Severance costs	$	341	$	6,821	$	(5,742	)	$	1,420
Other accruals		1,299		—		(1,029	)		270
	$	1,640	$	6,821	$	(6,771	)	$	1,690

The current portion of the severance and other charges was $19.6 million and $12.4 million (inclusive of the 2019 Restructuring Plan and 2020 Restructuring Plan) as of December 31, 2020 and 2019, respectively.

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Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

The components of loss before taxes by jurisdiction are as follows:

	For			For			For
	the Year			the Year			the Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
U.S.	$	(494,456	)	$	(213,541	)	$	(134,884	)
Foreign		2,214			3,909			3,024
Loss before taxes	$	(492,242	)	$	(209,632	)	$	(131,860	)

Total income taxes by jurisdiction are as follows:

	For			For			For
	the Year			the Year			the Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Income tax expense (benefit)
U.S.	$	(12,691	)	$	4,273		$	3,701
Foreign		287			(72	)		1,896
	$	(12,404	)	$	4,201		$	5,597

Significant components of the (benefit) expense for income taxes attributable to loss from continuing operations consist of the following:

	For the			For the			For the
	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Current
Foreign	$	182		$	(730	)	$	1,562
U.S.—Federal		—			0			(63	)
U.S.—State and other		1,769			396			(1,042	)
Total current		1,951			(334	)		457
Deferred
Foreign		105			658			334
U.S.—Federal		(5,505	)		1,908			2,329
U.S.—State and other		(8,955	)		1,969			2,477
Total deferred		(14,355	)		4,535			5,140
Income tax (benefit) expense	$	(12,404	)	$	4,201		$	5,597

The reconciliation of the income tax rate computed at the statutory tax rate to the reported income tax expense (benefit) attributable to continuing operations is as follows:

	For the			For the			For the
	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Statutory rate		21.0	%		21.0	%		21.0	%
Permanent items		(0.9	)		(3.6	)		(2.6	)
Foreign rate differential		—			—			(0.1	)
State and local taxes		2.0			(7.9	)		6.8
Cancellation of debt income		—			(1.3	)		—
Increase in valuation allowance		(15.5	)		(10.0	)		(26.6	)
Tax credits		(0.2	)		(0.2	)		(2.7	)
Goodwill impairment		(3.9	)		—			—
Effective tax rate		2.5	%		(2.0	)%		(4.2	)%

The significant components of the net deferred tax assets and liabilities are shown in the following table:

	2020			2019
Tax assets related to
Net operating loss and other carryforwards	$	326,504		$	272,378
Returns reserve/inventory expense		39,095			41,824
Pension benefits		6,879			6,624
Postretirement benefits		4,480			4,475
Deferred interest (1)		226,227			259,375
Deferred revenue		141,775			113,029
Stock-based compensation		2,806			3,298
Deferred compensation		6,525			6,152
Research and development		12,435			10,302
Operating lease liabilities		33,963			35,890
Other, net		8,263			6,769
Valuation allowance		(662,569	)		(583,505	)
	$	146,383		$	176,611

	2020			2019
Tax liabilities related to
Indefinite-lived intangible assets		(53,400	)		(89,879	)
Definite-lived intangible assets		(21,578	)		(25,503	)
Depreciation and amortization expense		(45,279	)		(48,984	)
Operating lease assets		(30,245	)		(32,887	)
Other, net		(9,877	)		(7,709	)
		(160,379	)		(204,962	)
Net deferred tax liabilities	$	(13,996	)	$	(28,351	)

(1) The deferred interest tax asset represents disallowed interest deductions under Section 163(j) (Limitation on Deduction for interest on Certain Indebtedness) of the Internal Revenue Code of 1986, as amended (“IRC”) for the current and prior years. At December 31, 2020 and 2019, we had gross deferred interest deductions totaling $900.2 million and $984.5 million, respectively. The disallowed interest is able to be carried forward indefinitely and utilized in future years pursuant to IRC Section 163(j). A full valuation allowance has been provided against deferred tax assets, excluding $2.4 million of foreign deferred tax assets which are expected to be realized, net of deferred tax liabilities resulting from indefinite-lived intangibles.

The net deferred tax liability balance is stated at prevailing statutory income tax rates. Deferred tax assets and liabilities are reflected on our consolidated balance sheets as follows:

	2020			2019
Non-current deferred tax assets	$	2,415		$	2,520
Non-current deferred tax liabilities		(16,411	)		(30,871	)
	$	(13,996	)	$	(28,351	)

A reconciliation of the gross amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows:

Balance at December 31, 2017	$	15,680
Reductions based on tax positions related to the prior    year		—
Additions based on tax positions related to the    prior year		—
Balance at December 31, 2018		15,680
Reductions based on tax positions related to the prior    year		—
Additions based on tax positions related to the prior    year		—
Balance at December 31, 2019		15,680
Reductions based on tax positions related to the prior    year		—
Additions based on tax positions related to the prior    year		—
Balance at December 31, 2020	$	15,680

  We are currently open for audit under the statute of limitation for Federal, state and foreign jurisdictions for years 2017 to 2020. However, carryforward attributes from prior years may still be adjusted upon examination by tax authorities if they are used in a future period.

We report penalties and tax-related interest expense on unrecognized tax benefits as a component of the provision for income taxes in the accompanying consolidated statement of operations. At December 31, 2020 and 2019, accrued interest and penalties in the accompanying consolidated balance sheet and interest and penalties included in the provision for income taxes for the years ended December 31, 2020, 2019 and 2018 were immaterial.

As of December 31, 2020, we have approximately $1,058.8 million of Federal tax loss carryforwards, of which $612.5 million will expire between 2034 and 2037. The Company has approximately $446.3 million of post-tax reform Federal tax loss carryforwards which have an indefinite life, though are limited in their use by 80% of taxable income. The Company has approximately $1,419.5 million of state tax loss carryforwards, which will expire between 2021 and 2040. In addition, we have foreign tax credit carryforwards of $7.3 million and research and development credit carryforwards of $4.2 million, which will expire between 2021 and 2036. The Company’s Irish net operating losses of $142.6 million, which are reduced by a reserve for uncertain tax positions of $123.6 million, are not subject to expiration. The Canadian Federal losses of $0.7 million will expire between 2033 and 2037. The Puerto Rico alternative minimum tax credit carryforwards of $2.8 million are not subject to expiration.

Under Section 382 of the IRC, substantial changes in the Company’s ownership may limit the amount of net operating loss and Section 163(j) carryforwards that could be utilized annually in the future to offset taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. Any such annual limitation may significantly reduce the utilization of net operating loss carryforwards before they expire. The Company performed an analysis through December 31, 2020, and determined any potential ownership change under Section 382 during the year would not have a material impact on the future utilization of U.S. net operating losses and tax credits. However, future transactions in the Company’s

common stock could trigger an ownership change for purposes of Section 382, which could limit the amount of net operating loss carryforwards and other attributes that could be utilized annually in the future to offset taxable income, if any. Any such limitation, whether as the result of sales of common stock by our existing stockholders or sales of common stock by the Company, could have a material adverse effect on results of operations in future years.

U.S. income taxes on the undistributed earnings of the Company’s non-U.S. subsidiaries have not been provided for as the Company currently plans to indefinitely reinvest these amounts and has the ability to do so. There are no cumulative undistributed and untaxed foreign earnings at December 31, 2020 and 2019.

Based on our assessment of historical pre-tax losses and the fact that we did not anticipate sufficient future taxable income in the near term to assure utilization of certain deferred tax assets, the Company recorded a valuation allowance at December 31, 2020 and 2019 of $662.6 million and $583.5 million, respectively. We have increased our valuation allowance by $79.1 million in 2020 with $76.7 million as a component of operations and $2.4 million as a component of other comprehensive income.

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Retirement and Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2020

Compensation And Retirement Disclosure [Abstract]

Retirement and Postretirement Benefit Plans

12. Retirement and Postretirement Benefit Plans

Retirement Plan

We have a noncontributory, qualified defined benefit pension plan (the “Retirement Plan”), which covers certain employees. The Retirement Plan is a cash balance plan, which accrues benefits based on pay, length of service, and interest. The funding policy is to contribute amounts subject to minimum funding standards set forth by the Employee Retirement Income Security Act of 1974 and the IRC. The Retirement Plan’s assets consist principally of common stocks, fixed income securities, investments in registered investment companies, and cash and cash equivalents. We also have a nonqualified defined benefit plan, or nonqualified plan, that previously covered employees who earned over the qualified pay limit as determined by the Internal Revenue Service. The nonqualified plan accrues benefits for the participants based on the cash balance plan calculation. The nonqualified plan is not funded. We use a December 31 date to measure the pension and postretirement liabilities. In 2007, both the qualified and nonqualified pension plans eliminated participation in the plans for new employees hired after October 31, 2007.

We recognize the funded status of defined benefit pension and other postretirement plans as an asset or liability in the balance sheet and are required to recognize actuarial gains and losses and prior service costs and credits in other comprehensive income and subsequently amortize those items in the statement of operations.

The following table summarizes the Accumulated Benefit Obligations (“ABO”), the change in Projected Benefit Obligation (“PBO”), and the funded status of our plans as of and for the financial statement period ended December 31, 2020 and 2019:

	2020			2019
ABO at end of period	$	179,408		$	169,364
Change in PBO
PBO at beginning of period	$	169,364		$	162,096
Interest cost on PBO		4,388			6,045
Plan settlements		(4,990	)		—
Actuarial loss (gain)		18,447			12,507
Benefits paid		(7,801	)		(11,284	)
PBO at end of period	$	179,408		$	169,364
Change in plan assets
Fair market value at beginning of period	$	145,716		$	132,776
Actual return		16,060			22,955
Company contribution		4,769			1,269
Plan settlements		(4,990	)		—
Benefits paid		(7,801	)		(11,284	)
Fair market value at end of period	$	153,754		$	145,716
Unfunded status	$	(25,654	)	$	(23,648	)

Amounts recognized in the consolidated balance sheets at December 31, 2020 and 2019 consist of:

	2020			2019
Current liabilities	$	(1,593	)	$	—
Noncurrent liabilities		(24,061	)		(23,648	)
Net amount recognized	$	(25,654	)	$	(23,648	)

Additional year-end information for pension plans with ABO in excess of plan assets at December 31, 2020 and 2019 consist of:

	2020		2019
PBO	$	179,408	$	169,364
ABO		179,408		169,364
Fair value of plan assets		153,754		145,716

Weighted average assumptions used to determine the benefit obligations (both PBO and ABO) at December 31, 2020 and 2019 are:

	2020			2019
Discount rate		2.2	%		3.1	%
Increase in future compensation	N/A			N/A

Net periodic pension (income) cost includes the following components:

	For the			For the			For the
	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Interest cost on projected benefit obligation	$	4,388		$	6,045		$	5,300
Expected return on plan assets		(7,419	)		(7,659	)		(7,985	)
Amortization of net loss		2,325			1,028			1,420
Settlement loss recognized		1,100			—			—
Net pension (income) expense recognized for    the period	$	394		$	(586	)	$	(1,265	)

Significant actuarial assumptions used to determine net periodic pension cost at December 31, 2020, 2019 and 2018 are:

	2020			2019			2018
Discount rate		3.1	%		4.2	%		3.6	%
Increase in future compensation	N/A			N/A			N/A
Expected long-term rate of return on assets		5.5	%		5.5	%		5.5	%

Assumptions on Expected Long-Term Rate of Return as Investment Strategies

We employ a building block approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-term relationships between equities and fixed income are preserved congruent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return is established via a building block approach and proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed for reasonability and appropriateness. We regularly review the actual asset allocation and periodically rebalances investments to a targeted allocation when appropriate. The current targeted asset allocation is 34% with equity managers, 56% with fixed income managers, 5% with real-estate investment trust managers and 5% with hedge fund managers. For 2021, we will use a 5.50% long-term rate of return for the Retirement Plan. We will continue to evaluate the expected rate of return assumption, at least annually, and will adjust as necessary.

Plan Assets

Plan assets for the U.S. tax qualified plans consist of a diversified portfolio of fixed income securities, equity securities, real estate, and cash equivalents. Plan assets do not include any of our securities. The U.S. pension plan assets are invested in a variety of funds within a Collective Trust (“Trust”). The Trust is a group trust designed to permit qualified trusts to comingle their assets for investment purposes on a tax-exempt basis.

Investment Policy and Investment Targets

The tax qualified plans consist of the U.S. pension plan and the U.K. pension scheme (prior to May 28, 2014). We fund amounts for our qualified pension plans at least sufficient to meet minimum requirements of local benefit and tax laws. The investment objectives of our pension plan asset investments are to provide long-term total growth and return, which includes capital appreciation and current income. The nonqualified noncontributory defined benefit pension plan is generally not funded. Assets were invested among several asset classes.

The percentage of assets invested in each asset class at December 31, 2020 and 2019 is shown below.

	2020			2019
	Percentage			Percentage
	in Each			in Each
Asset Class	Asset Class			Asset Class
Equity		33.5	%		32.6	%
Fixed income		52.7			54.5
Real estate investment trust		7.0			8.0
Other		6.8			4.9
		100.0	%		100.0	%

Fair Value Measurements

The fair value of our pension plan assets by asset category at December 31 were as follows:

	December 31,		Not subject
	2020		to leveling (1)
Cash and cash equivalents	$	1,914	$	1,914
Equity securities
U.S. equity		27,765		27,765
Non-US equity		15,544		15,544
Emerging markets equity		8,259		8,259
Fixed income
Government bonds		28,855		28,855
Corporate bonds		46,228		46,228
Mortgage-backed securities		9		9
Asset-backed securities		810		810
Commercial mortgage-backed securities		604		604
International fixed income		4,485		4,485
Alternatives
Real estate		10,689		10,689
Hedge funds		8,228		8,228
Other		364		364
	$	153,754	$	153,754

(1) Investments that are valued using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

	December 31,		Not subject
	2019		to leveling (1)
Cash and cash equivalents	$	1,413	$	1,413
Equity securities
U.S. equity		28,993		28,993
Non-US equity		12,474		12,474
Emerging markets equity		5,537		5,537
Fixed income
Government bonds		20,316		20,316
Corporate bonds		37,925		37,925
Mortgage-backed securities		7,943		7,943
Asset-backed securities		3,255		3,255
Commercial mortgage-backed securities		1,930		1,930
International fixed income		5,741		5,741
Alternatives
Real estate		11,609		11,609
Hedge funds		7,043		7,043
Other		1,537		1,537
	$	145,716	$	145,716

We recognize that risk and volatility are present to some degree with all types of investments. However, high levels of risk are minimized through diversification by asset class, and by style of each fund.

Estimated Future Benefit Payments

The following benefit payments are expected to be paid.

Fiscal Year Ended	Pension
2021	$	14,030
2022		12,817
2023		12,581
2024		12,789
2025		13,356
2026–2030		61,944

Expected Contributions

We expect to contribute $3.3 million in 2021.

Postretirement Benefit Plan

We also provide postretirement medical benefits to retired full-time, nonunion employees hired before April 1, 1992, who have provided a minimum of five years of service and attained age 55.

The following table summarizes the Accumulated Postretirement Benefit Obligation (“APBO”), the changes in plan assets, and the funded status of our plan as of and for the financial statement periods ended December 31, 2020 and 2019.

	2020			2019
Change in APBO
APBO at beginning of period	$	16,684		$	15,812
Service cost (benefits earned during the period)		67			58
Interest cost on APBO		426			582
Employee contributions		184			66
Actuarial loss (gain)		2,857			1,878
Benefits paid		(2,097	)		(1,712	)
APBO at end of period	$	18,121		$	16,684
Change in plan assets
Fair market value at beginning of period	$	—		$	—
Company contributions		1,913			1,646
Employee contributions		184			66
Benefits paid		(2,097	)		(1,712	)
Fair market value at end of period	$	—		$	—
Unfunded status	$	(18,121	)	$	(16,684	)

Amounts for postretirement benefits accrued in the consolidated balance sheets at December 31, 2020 and 2019 consist of:

	2020			2019
Current liabilities	$	(1,555	)	$	(1,571	)
Noncurrent liabilities		(16,566	)		(15,113	)
Net amount recognized	$	(18,121	)	$	(16,684	)

Amounts not yet reflected in net periodic benefit cost and recognized in accumulated other comprehensive (loss) income at December 31, 2020 and 2019 consist of:

	2020			2019
Net (loss) gain	$	(1,050	)	$	1,771
Prior service cost		(384	)		(426	)
Accumulated other comprehensive (loss) income	$	(1,434	)	$	1,345

Weighted average actuarial assumptions used to determine APBO at year-end December 31, 2020 and 2019 are:

	2020			2019
Discount rate		2.2	%		3.1	%
Health care cost trend rate assumed for next year		5.5	%		5.8	%
Rate to which the cost trend rate is assumed to    decline (ultimate trend rate)		4.5	%		4.5	%
Year that the rate reaches the ultimate trend rate	2038			2038

Net periodic postretirement benefit cost included the following components:

	2020			2019			2018
Service cost	$	67		$	58		$	128
Interest cost on APBO		426			582			672
Amortization of unrecognized prior service cost		42			42			(690	)
Amortization of net (gain) loss		(7	)		(164	)		—
Net periodic postretirement benefit expense	$	528		$	518		$	110

Significant actuarial assumptions used to determine postretirement benefit cost at December 31, 2020, 2019 and 2018 are:

	2020			2019			2018
Discount rate		3.1	%		4.2	%		3.6	%
Health care cost trend rate assumed for next year		5.8	%		6.1	%		6.3	%
Rate to which the cost trend rate is assumed to    decline (ultimate trend rate)		4.5	%		4.5	%		4.5	%
Year that the rate reaches the ultimate trend rate	2038			2038			2038

Assumed health care trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects on the expense recorded in 2020 and 2019 for the postretirement medical plan:

	2020			2019
One-percentage-point increase
Effect on total of service and interest cost    components	$	2		$	8
Effect on postretirement benefit obligation		87			85
One-percentage-point decrease
Effect on total of service and interest cost    components		(2	)		(7	)
Effect on postretirement benefit obligation		(77	)		(76	)

The following table presents the change in other comprehensive loss for the year ended December 31, 2020 related to our pension and postretirement obligations.

	Pension			Postretirement
	Plans			Benefit Plan			Total
Sources of change in accumulated other    comprehensive loss
Net loss arising during the period	$	(9,807	)	$	(2,814	)	$	(12,621	)
Amortization of prior service credit		—			42			42
Amortization of net gain (loss)		3,377			(7	)		3,370
Total accumulated other comprehensive    loss recognized during the period	$	(6,430	)	$	(2,779	)	$	(9,209	)

Estimated amounts that will be amortized from accumulated other comprehensive income (loss) over the next fiscal year.

	Pension			Postretirement
	Plans			Benefit Plan
Prior service credit (cost)	$	—		$	(42	)
Net gain (loss)		(3,389	)		—
	$	(3,389	)	$	(42	)

Amounts not yet reflected in net periodic benefit cost for pension plans and postretirement plan and recognized in accumulated other comprehensive income at December 31, 2020 and 2019 consist of:

	2020			2019
Net actuarial loss	$	(44,219	)	$	(35,010	)
Accumulated other comprehensive loss	$	(44,219	)	$	(35,010	)

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, are expected to be paid:

	Postretirement
Fiscal Year Ended	Benefit Plan
2021	$	1,555
2022		1,488
2023		1,437
2024		1,389
2025		1,320
2026-2030		5,686

Expected Contribution

We expect to contribute approximately $1.6 million in 2021.

Defined Contribution Retirement Plan

We maintain a defined contribution retirement plan, the Houghton Mifflin 401(k) Savings Plan, which conforms to Section 401(k) of the IRC and covers substantially all of our eligible employees. Participants may elect to contribute up to 50.0% of their compensation subject to an annual limit. We provide a matching contribution in amounts up to 3.0% of employee contributions. The 401(k) contribution expense amounted to $6.8 million, $7.4 million and $7.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. We did not make any additional discretionary contributions in 2020, 2019 and 2018.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

13. Stock-Based Compensation

Total compensation expense related to grants of stock options, restricted stock units, and purchases under the employee stock purchase plan recorded in the years ended December 31, 2020, 2019 and 2018 was approximately $11.6 million, $14.0 million and $13.3 million, respectively, and is included in selling and administrative expense.

2015 Omnibus Incentive Plan

Our Board of Directors adopted the 2015 Omnibus Incentive Plan (“Plan”) in February 2015, which became effective on May 19, 2015 following stockholder approval. The Plan initially provided to grant up to an aggregate of 4,000,000 shares of our common stock plus 2,615,476 shares of our common stock that were reserved for issuance under the 2012 Management Incentive Plan (“2012 MIP”) as of May 19, 2015 but were not issuable pursuant to any outstanding awards. There were 10,604,071 additional shares underlying outstanding awards under the 2012 MIP as of May 19, 2015 that could have otherwise become available again for grants under the 2012 MIP in the future (by potential forfeiture, withholding or otherwise) which will instead become reserved for issuance under the Plan in the event such shares become available for future grants. On December 13, 2019, our Board of Directors approved an amendment to the Plan to allow employees to have the share withholding increased from the minimum statutory rate to a higher rate, not to exceed the maximum statutory rate. On May 19, 2020, our shareholders approved an amended and restated Plan which increased the authorization of the number of shares available for grant under the Plan by 3,630,000 shares of our common stock.  

Our Compensation Committee may grant awards of nonqualified stock options, incentive (qualified) stock options or cash, stock appreciation rights, restricted stock awards, restricted stock units, performance compensation awards, other stock-based awards or any combination of the foregoing. Certain employees, directors, officers, consultants or advisors who have been selected by the Compensation Committee and who enter into an award agreement with respect to an award granted to them under the Plan are eligible for awards under the 2015 Omnibus Incentive Plan. The stock option awards will be granted at a strike price equal to or greater than the fair value per share of common stock as of the date of grant. The stock related to award forfeitures and stock withheld to cover tax withholding requirements upon vesting of restricted stock units remains outstanding and may be reallocated to new recipients. The purpose of the Plan is to help us attract and retain key personnel by providing them the opportunity to acquire an equity interest in our Company.

As of May 19, 2015, there were 6,615,476 shares authorized and available for issuance under the Plan plus any amount that could have otherwise become available again for grants under the 2012 MIP in the future by forfeiture, withholding or otherwise. As of December 31, 2020, there were 6,996,290 shares authorized and available for future issuance under the Plan. The vesting terms for equity awards generally range from 1 to 4 years over equal annual installments and generally expire seven years after the date of grant.

Stock Options

The following table summarizes option activity for certain employees in our stock options:

				Weighted
	Number of			Average
	Shares			Exercise Price
Balance at December 31, 2019		2,765,826		$	13.10
Forfeited		(868,614	)		13.40
Balance at December 31, 2020		1,897,212		$	12.95
Vested and expected to vest at December 31, 2020		1,883,100		$	12.97
Exercisable at December 31, 2020		1,521,524		$	13.65

As of December 31, 2020, the range of exercise prices is $5.25 to $22.80 with a weighted average remaining contractual life of 3.3 years for options outstanding. The weighted average remaining contractual life for options vested and expected to vest and exercisable was 3.3 years and 3.1 years, respectively. The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option as of the balance sheet date. The intrinsic value of options outstanding, options vested and expected to vest, and options exercisable was zero at December 31, 2020. The intrinsic value of options outstanding, options vested and expected to vest, and options exercisable was $0.1 million, $0.1 million and zero at December 31, 2019, respectively.            

We estimate the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected volatility of our

stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and our expected annual dividend yield.

The fair value of each option granted was estimated on the grant date using the Black-Scholes valuation model with the following assumptions:

	For the
	Year Ended
	December 31,
	2018
Expected term (years) (a)		4.75
Expected dividend yield	0.00%
Expected volatility (b)	35.30%
Risk-free interest rate (c)	2.84%

(a) The expected term is the number of years that we estimate that options will be outstanding prior to exercise. During 2018, we have used the simplified method for estimating the expected term as we do not have sufficient stock option exercise experience to support a reasonable estimate of the expected term. The simplified method represents the best estimate of the expected term.

(b) During 2018, we estimated volatility for options granted based on our historical volatility.

(c) The risk-free interest rate is based on the U.S. Treasury yield for a period commensurate with the expected life of the option.

We estimate forfeitures at the time of grant and periodically revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense is recorded only for those awards expected to vest using estimated forfeiture rates based on historical forfeiture data.

As of December 31, 2020, there remained approximately $0.6 million of unearned compensation expense related to unvested stock options to be recognized over a weighted average term of 0.8 years.

The weighted average grant date fair value was $1.82 for options granted in 2018. 

Restricted Stock Units

The following table summarizes restricted stock activity for grants to certain employees and independent members of the board of directors in our restricted stock units:

	Restricted Stock Units
				Weighted
				Average
	Numbers of			Grant Date
	Units			Fair Value
Balance at December 31, 2019		3,846,608		$	8.03
Granted		3,716,974			3.94
Vested		(1,149,957	)		8.50
Forfeited		(723,816	)		7.41
Balance at December 31, 2020		5,689,809		$	5.34

During 2020 and 2019, we granted market-based restricted stock units to certain members of our senior management team. The number of shares ultimately issued to the recipient is based on the total shareholder return (“TSR”) of our common stock as compared to the TSR of the common stock of a peer group comprised of each member of the Russell 2000 Small Cap Market Index over a three-year performance measurement period. In addition, award recipients must remain employed by us throughout the three-year performance measurement period to attain the full amount of the market-based units that satisfy the market performance criteria. We determined the fair value of the 2020 and 2019 market-based restricted stock units to be approximately $2.9 million and $3.1 million, respectively. We determined the fair value based on a Monte-Carlo simulation as of the date of grant, utilizing the following assumptions: the stock price on the date of grant of $4.21 for 2020, and $7.75, $6.71 and $6.53 for 2019, a three-year performance measurement period, and a risk-free rate of 0.40% and 2.51% for 2020 and 2019, respectively. We recognize the expense on these awards on a straight-line basis over the three-year performance measurement period.

As of December 31, 2020, there remained approximately $11.9 million of unearned compensation expense related to unvested restricted stock units to be recognized over a weighted average term of 1.5 years. The restricted stock units include a combination of time-based and performance-based vesting.

Employee Stock Purchase Plan

Our Board of Directors adopted an Employee Stock Purchase Plan (“ESPP”) in February 2015, which became effective on May 19, 2015 following stockholder approval. The ESPP provides for up to an aggregate of 1.3 million shares of our common stock may be made available for sale under the plan to eligible employees. At the beginning of each six-month offering period under the ESPP each participant is deemed to have been granted an option to purchase shares of our common stock equal to the amount of their payroll deductions during the period, but in any event not more than five percent of the employee’s eligible compensation, subject to certain limitations. Such options may be exercised only to the extent of accumulated payroll deductions at the end of the offering period, at a purchase price per share equal to 85% of the fair market value of our common stock at the beginning or end of each offering period, whichever is less. On December 10, 2020, the Compensation Committee of the Board of Directors determined we would not start a new offering period for the ESPP until we have an opportunity to seek shareholder approval of an amended and restated ESPP. As of December 31, 2020, there were a de minimis number of shares available for future issuance under the ESPP.

Information related to shares issued or to be issued in connection with the ESPP based on employee contributions and the range of purchase prices is as follows:

	December 31,		December 31,
	2020		2019
Shares issued or to be issued		516,563		212,476
Range of purchase prices	$1.54 - $1.56		$4.73 - $4.90

We record stock-based compensation expense related to the discount provided to participants. Also, we use the Black-Scholes option-pricing model to calculate the grant-date fair value of shares issued under the employee stock purchase plan. We recognize expense related to shares purchased through the employee stock purchase plan ratably over the offering period. We recognized $0.4 million in expense associated with our ESPP for each of the years ended December 31, 2020 and 2019, respectively.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

14. Fair Value Measurements

The accounting standard for fair value measurements, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. The accounting standard establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1 Observable input such as quoted prices in active markets for identical assets or liabilities;

Level 2 Observable inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3 Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of three valuation techniques identified in the tables below. Where more than one technique is noted, individual assets or liabilities were valued using one or more of the noted techniques. The valuation techniques are as follows:

(a)  Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;

(b)  Cost approach: Amount that would be currently required to replace the service capacity of an asset (current replacement cost); and

(c)  Income approach: Valuation techniques to convert future amounts to a single present amount based on market expectations (including present value techniques).

On a recurring basis, we measure certain financial assets and liabilities at fair value, including our money market funds, foreign exchange forward contracts, and interest rate derivatives contracts. The accounting standard for fair value measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty and its credit risk in its assessment of fair value.

Financial Assets and Liabilities

The following tables present our financial assets and liabilities measured at fair value on a recurring basis at December 31, 2020 and 2019:

			Quoted Prices		Significant
			in Active		Other
			Markets for		Observable
			Identical Assets		Inputs		Valuation
	2020		(Level 1)		(Level 2)		Technique
Financial assets
Money market funds	$	262,135	$	262,135	$	—	(a)
Foreign exchange derivatives		466		—		466	(a)
	$	262,601	$	262,135	$	466

			Quoted Prices		Significant
			in Active		Other
			Markets for		Observable
			Identical Assets		Inputs		Valuation
	2019		(Level 1)		(Level 2)		Technique
Financial assets
Money market funds	$	276,654	$	276,654	$	—	(a)
	$	276,654	$	276,654	$	—
Financial liabilities
Interest rate derivatives	$	986	$	—	$	986	(a)
Foreign exchange derivatives		127		—		127	(a)
	$	1,113	$	—	$	1,113

Our money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices in active markets for identical instruments. In addition to $262.1 million and $276.7 million invested in money market funds as of December 31, 2020 and 2019, respectively, we had $19.1 million and $19.7 million of cash invested in bank accounts as of December 31, 2020 and 2019, respectively.

Our foreign exchange derivatives consist of forward contracts and are classified within Level 2 of the fair value hierarchy because they are valued based on observable inputs and are available for substantially the full term of our derivative instruments. We use foreign exchange forward contracts to fix the functional currency value of forecasted commitments, payments and receipts. The aggregate notional amount of the outstanding foreign exchange forward contracts was $14.9 million and $15.2 million at December 31, 2020 and 2019, respectively. Our foreign exchange forward contracts contain netting provisions to mitigate credit risk in the event of counterparty default, including payment default and cross default. At December 31, 2020 and 2019, the fair value of our counterparty default exposure was less than $1.0 million and spread across several highly rated counterparties.

Our interest rate derivatives are classified within Level 2 of the fair value hierarchy because they are valued based on observable inputs and are available for substantially the full term of our derivative instruments. Our interest rate risk relates primarily to U.S. dollar borrowings, partially offset by U.S. dollar cash investments. We have historically used interest rate derivative instruments to manage our earnings and cash flow exposure to changes in interest rates by converting floating-rate debt into fixed-rate debt. There were no aggregate notional amounts outstanding of the interest rate derivative instruments as of December 31, 2020. We designate these derivative instruments either as fair value or cash flow hedges under the accounting guidance related to derivatives and hedging. We record changes in the value of fair value hedges in interest expense, which is generally offset by changes in the fair value of the hedged debt obligation. Interest payments made or received related to our interest rate derivative instruments are included in interest expense. We record the effective portion of any change in the fair value of derivative instruments designated as cash flow hedges as unrealized gains or losses in other comprehensive loss, net of tax, until the hedged cash flow occurs, at which point the effective portion of any gain or loss is reclassified to earnings. In the event the hedged cash flow does not occur, or it becomes no longer probable that it will occur, we reclassify the amount of any gain or loss on the related cash flow hedge to interest expense at that time.

We believe we do not have significant concentrations of credit risk arising from our interest rate derivative instruments, whether from an individual counterparty or a related group of counterparties. We manage the concentration of counterparty credit risk on our interest rate derivatives instruments by limiting acceptable counterparties to a diversified group of major financial institutions with investment grade credit ratings, limiting the amount of credit exposure to each counterparty, and actively monitoring their credit ratings and outstanding fair values on an ongoing basis. Furthermore, none of our derivative transactions contain provisions that are dependent on our credit ratings from any credit rating agency.

We also employ master netting arrangements that reduce our counterparty payment settlement risk on any given maturity date to the net amount of any receipts or payments due between us and the counterparty financial institution. Thus, the maximum loss due to counterparty credit risk is limited to the unrealized gains in such contracts net of any unrealized losses should any of these counterparties fail to perform as contracted. Although these protections do not eliminate concentrations of credit risk, as a result of the above considerations, we do not consider the risk of counterparty default to be significant.

Non-Financial Assets and Liabilities

Our non-financial assets, which include goodwill, other intangible assets, property, plant, and equipment, and pre-publication costs, are not required to be measured at fair value on a recurring basis. However, if certain trigger events occur, or if an annual impairment test is required, we evaluate the non-financial assets for impairment. If an impairment did occur, the asset is required to be recorded at the estimated fair value. An impairment analysis was performed for the preparation of the first quarter report, as there were triggering events for the three months ended March 31, 2020 related to the decline in our stock price attributed to the market environment, which resulted in a goodwill impairment. There were no non-financial liabilities that were required to be measured at fair value on a nonrecurring basis during 2020, 2019 and 2018.

The following table presents our nonfinancial assets measured at fair value on a nonrecurring basis during 2020:

			Significant
			Unobservable
			Inputs		Total		Valuation
	December 31, 2020		(Level 3)		Impairment		Technique
Nonfinancial assets
Goodwill	$	437,977	$	437,977	$	279,000	(c)
	$	437,977	$	437,977	$	279,000

In evaluating goodwill for impairment, we first compare our reporting unit’s fair value to its carrying value. We estimate the fair values of our reporting units by considering our market capitalization and other judgements. Impairment recorded for goodwill for the year ended December 31, 2020 was $279.0 million. There was no impairment recorded for goodwill for the years ended December 31, 2019 and 2018. 

We perform an impairment test for our other intangible assets by comparing the assets fair value to its carrying value. Fair value is estimated based on recent market transactions, where available, and projected discounted cash flows, if reasonably estimable. There was no impairment of other intangible assets for the years ended December 31, 2020, 2019 and 2018.

Non-Marketable Investments

At December 31, 2020 and 2019, the carrying value of our non-marketable investments, which were comprised of equity interests in educational technology private partnerships, was $4.4 million and $2.3 million, respectively. The amounts are included in other assets in our consolidated balance sheets. Our non-marketable investments are accounted for using the cost method and are adjusted for observable transactions as appropriate. Gains from non-marketable investments were $2.1 million for the year ended December 31, 2020 and are included in gain on investments in our consolidated statements of operations.

Fair Value of Debt

The following table presents the carrying amounts and estimated fair market values of our debt at December 31, 2020 and 2019. The fair value of debt is deemed to be the amount at which the instrument could be exchanged in an orderly transaction between market participants at the measurement date.

	December 31, 2020				December 31, 2019
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
$380,000 Term loan	$	346,091	$	331,382	$	361,294	$	360,391
$306,000 Senior secured notes		297,601	$	304,297		295,893		301,441

The fair market values of our debt were estimated based on quoted market prices on a private exchange for those instruments that are traded and are classified as Level 2 within the fair value hierarchy at December 31, 2020 and 2019. The fair market values require varying degrees of management judgment. The factors used to estimate these values may not be valid on any subsequent date. Accordingly, the fair market values of the debt presented may not be indicative of their future values.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

15. Commitments and Contingencies

We are involved in ordinary and routine litigation and matters incidental to our business, including claims alleging breach of contract and seeking royalty payments. Litigation alleging infringement of copyrights and other intellectual property rights is also common in the educational publishing industry. There have been various settled, pending and threatened litigation that allege we exceeded the print run limitation or other restrictions in licenses granted to us to reproduce photographs in our textbooks.   

While we may incur a loss associated with certain pending or threatened litigation, we are not able to estimate such amount, if any, but we do not expect any of these matters to have a material adverse effect on our results of operations, financial position or cash flows. We have insurance over such amounts and with coverage and deductibles as management believes is reasonable. There can be no assurance that our liability insurance will cover all events or that the limits of coverage will be sufficient to fully cover all liabilities.

In April 2019, we were notified of an unasserted claim by the Commonwealth of Puerto Rico with regards to payments in the amount of approximately $33.0 million that we received in the normal course of business during the four year period prior to the May 3, 2017 bankruptcy petition of the Commonwealth public instrumentalities. Management believes, based on discussions with its legal counsel, that we have meritorious defenses against such unasserted claim. The Company will vigorously defend this matter if such claim is asserted.

In September 2019, we were notified of an unasserted claim by Riverside Assessments LLC (“Riverside”) with regard to purported breaches of the Asset Purchase Agreement between the Company and Riverside dated September 12, 2018 (“APA”) and the Transition Services Agreement between the Company and Riverside dated October 1, 2018. Management believes, based on discussions with its legal counsel, that we have meritorious defenses against such unasserted claim. With regard to the alleged breaches of the APA, the APA provides that the Company may be liable only for that portion of Riverside’s damages that exceeds $1.4 million, and in an amount that shall not exceed $1.4 million, which we believe would be the maximum exposure. For damages above $2.8 million, Riverside obtained a representation and warranty insurance policy as required by the APA. The Company will vigorously defend this matter if such claim is asserted.

In January 2018, Vanderbilt University (“Vanderbilt”) filed a complaint against the Company and others in connection with a license agreement originally entered into between Vanderbilt and Scholastic Inc. in 1997 and subsequently assigned to the Company as part of our acquisition of Scholastic’s Educational Technology and Services business pursuant to the stock and asset purchase agreement dated April 23, 2015. Vanderbilt alleges entitlement to additional royalties in connection with READ 180 and other products acquired from Scholastic and alleges trademark infringement in the marketing of these products. The Company is vigorously defending this matter. The case is scheduled for trial in August 2021.

In connection with an agreement with a development content provider, we agreed to act as guarantor to that party’s loan to finance such development. Such guarantee is expected to remain until 2022. Under the guarantee, we believe the maximum future payments to approximate $10.1 million. In the unlikely event that we are required to make payments on behalf of the development content provider, we would have recourse against the development content provider.

We were contingently liable for $1.4 million and $2.5 million of performance-related surety bonds for our operating activities as of December 31, 2020 and 2019, respectively. An aggregate of $18.8 million and $23.7 million of letters of credit existed each year at December 31, 2020 and 2019, respectively, of which $1.1 million and $0.7 million backed the aforementioned performance-related surety bonds each year in 2020 and 2019, respectively.

We routinely enter into standard indemnification provisions as part of license agreements involving use of our intellectual property. These provisions typically require us to indemnify and hold harmless licensees in connection with any infringement claim by a third-party relating to the intellectual property covered by the license agreement. Although the term of these provisions and the maximum potential amounts of future payments we could be required to make is not limited, we have never incurred any costs to defend or settle claims related to these types of indemnification provisions. We therefore believe the estimated fair value of these provisions is inconsequential and have no liabilities recorded for them as of December 31, 2020 and 2019.

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Stockholders' Equity

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Stockholders' Equity

16. Stockholders’ Equity

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consisted of the following at December 31, 2020, 2019 and 2018:

	2020			2019			2018
Net change in pension and benefit plan liabilities	$	(48,966	)	$	(39,757	)	$	(41,557	)
Foreign currency translation adjustments		(6,650	)		(6,420	)		(5,909	)
Unrealized loss on short-term investments		(90	)		(90	)		(99	)
Net change in unrealized loss on derivative    instruments		(18	)		(1,005	)		2,381
	$	(55,724	)	$	(47,272	)	$	(45,184	)

Amounts reclassified from accumulated other comprehensive loss for the years ended December 31, 2020, 2019 and 2018 relating to the amortization of defined benefit pension and postretirement benefit plans totaled approximately $(2.4) million, $(0.9) million and $(0.9) million, respectively, and affected the selling and administrative line item in the consolidated statement of operations. These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost.

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Related Party Transactions

12 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

Related Party Transactions

17. Related Party Transactions

There were no related party transactions during 2020 and 2018.

In November 2019, Anchorage Capital Group, L.L.C. (“Anchorage”), a significant stockholder in the Company at the time and a former partner of which was serving on the Company’s board of directors, participated as a lender in the refinancing of the Company’s debt, acquiring $20.0 million out of the $306.0 million in aggregate principal amount of 9.000% Senior Secured Notes due 2025 (the “Notes”) issued by the Company and becoming a lender under the Company’s second amended and restated term loan credit agreement (the “Term Loan Credit Agreement”) with a commitment of $15.0 million out of the $380.0 million in initial principal amount of the term

loan. As of December 10, 2020, Anchorage no longer had an ownership interest in the Company. Anchorage’s participation in the refinancing was on the same terms as all the other lenders. Refer to note 8 for additional information about the Notes and the Term Loan Credit Agreement.

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Net Loss Per Share

12 Months Ended

Dec. 31, 2020

Earnings Per Share [Abstract]

Net Loss Per Share

18. Net Loss Per Share

The following table sets forth the computation of basic and diluted earnings per share (“EPS”):

	For the Year			For the Year			For the Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Numerator
Loss from continuing operations	$	(479,838	)	$	(213,833	)	$	(137,457	)
Earnings from discontinued operations,    net of tax		—			—			12,833
Gain on sale of discontinued operations,    net of tax		—			—			30,469
Income from discontinued operations, net    of tax		—			—			43,302
Net loss attributable to common stockholders	$	(479,838	)	$	(213,833	)	$	(94,155	)
Denominator
Weighted average shares outstanding
Basic and diluted		125,455,487			124,152,984			123,444,943
Net loss per share attributable to common    Stockholders
Basic and diluted:
Continuing operations	$	(3.82	)	$	(1.72	)	$	(1.11	)
Discontinued operations		—			—			0.35
Net loss	$	(3.82	)	$	(1.72	)	$	(0.76	)

As we incurred a net loss in each of the periods presented above, all outstanding stock options and restricted stock units for those periods have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding. Accordingly, basic and diluted weighted average shares outstanding are equal for such periods.

The following table summarizes our weighted average outstanding common stock equivalents that were anti-dilutive attributable to common stockholders during the periods, and therefore excluded from the computation of diluted EPS:

	For the Year		For the Year		For the Year
	Ended		Ended		Ended
	December 31,		December 31,		December 31,
	2020		2019		2018
Stock options		1,897,212		2,765,826		3,406,171
Restricted stock units		4,133,531		3,342,923		2,793,680

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Segment Reporting

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Segment Reporting

19. Segment Reporting

As of December 31, 2020, we had two reportable segments (Education and HMH Books & Media). Our Education segment provides educational products, technology platforms and services to meet the diverse needs of today’s classrooms. These products and services include print and digital content in the form of textbooks, digital courseware, instructional aids, educational assessment and intervention solutions, which are aimed at improving achievement and supporting learning for students who are not keeping pace with peers, professional development and school reform services. Our HMH Books & Media segment primarily develops, markets and sells consumer books in print and digital formats and licenses book rights to other publishers and electronic businesses in the United

States and abroad. The principal distribution channels for HMH Books & Media products are retail stores, both physical and online, and wholesalers.

We measure and evaluate our reportable segments based on net sales and segment Adjusted EBITDA from continuing operations. We exclude from our segments certain corporate-related expenses, as our corporate functions do not meet the definition of a segment, as defined in the accounting guidance relating to segment reporting. In addition, certain transactions or adjustments that our Chief Operating Decision Maker considers to be non-operational, such as amounts related to goodwill and other intangible asset impairment charges, derivative instruments charges, acquisition/disposition-related activity, restructuring, severance costs, equity compensation charges, gains or losses from investments, gains or losses from divestitures, amortization and depreciation expenses, as well as interest and taxes, are excluded from segment Adjusted EBITDA from continuing operations. Although we exclude these amounts from segment Adjusted EBITDA from continuing operations, they are included in reported consolidated net loss and are included in the reconciliation below.

	Year Ended December 31,
			HMH		Corporate/
(in thousands)	Education		Books & Media		Other
2020
Net sales	$	839,553	$	191,739	$	—
Segment Adjusted EBITDA		145,862		26,627		(40,649	)
2019
Net sales	$	1,210,646	$	180,028	$	—
Segment Adjusted EBITDA		196,907		14,908		(46,077	)
2018
Net sales	$	1,122,689	$	199,728	$	—
Segment Adjusted EBITDA		210,604		21,942		(40,418	)

The following table disaggregates our net sales by major source:

	Year Ended December 31, 2020
			HMH
(in thousands)	Education		Books & Media		Consolidated
Core solutions (1)	$	459,350	$	—	$	459,350
Extensions businesses (2)		380,203		—		380,203
Books & Media		—		191,739		191,739
Net sales	$	839,553	$	191,739	$	1,031,292

	Year Ended December 31, 2019
			HMH
(in thousands)	Education		Books & Media		Consolidated
Core solutions (1)	$	578,675	$	—	$	578,675
Extensions businesses (2)		631,971		—		631,971
Books & Media		—		180,028		180,028
Net sales	$	1,210,646	$	180,028	$	1,390,674

	Year Ended December 31, 2018
			HMH
(in thousands)	Education		Books & Media		Consolidated
Core solutions (1)	$	538,166	$	—	$	538,166
Extensions businesses (2)		584,523		—		584,523
Books & Media		—		199,728		199,728
Net sales	$	1,122,689	$	199,728	$	1,322,417

(1) Comprehensive solutions primarily for reading, literature, math, science and social studies programs.

(2) Primarily consists of our Heinemann brand, intervention, supplemental and professional services.

Reconciliation of Segment Adjusted EBITDA to the consolidated statements of operations is as follows:

	Years Ended December 31,
(in thousands)	2020			2019			2018
Education Adjusted EBITDA	$	145,862		$	196,907		$	210,604
HMH Books & Media Adjusted EBITDA		26,627			14,908			21,942
Total Segment Adjusted EBITDA		172,489			211,815			232,546
Corporate/Other Adjusted EBITDA		(40,649	)		(46,077	)		(40,418	)
Interest expense		(65,959	)		(48,778	)		(45,680	)
Interest income		899			3,157			2,550
Depreciation expense		(50,715	)		(61,475	)		(75,116	)
Amortization expense—film asset		(13,953	)		(9,835	)		(6,057	)
Amortization expense		(171,821	)		(201,382	)		(170,903	)
Non-cash charges—stock compensation		(11,573	)		(13,968	)		(13,248	)
Non-cash charges—loss on derivative instruments		672			(899	)		(1,374	)
Non-cash charges—asset impairment charges		(279,000	)		—			—
Inventory obsolescence related to strategic transformation plan		—			(9,758	)		—
Fees, expenses or charges for equity offerings, debt    or acquisitions/dispositions		(1,080	)		(6,327	)		(2,883	)
Restructuring/severance and other charges		(33,643	)		(21,742	)		(11,478	)
Gain on investments		2,091			—			—
Gain on sale of assets		—			—			201
Loss on extinguishment of debt		—			(4,363	)		—
Loss before taxes		(492,242	)		(209,632	)		(131,860	)
(Provision) benefit for income taxes		12,404			(4,201	)		(5,597	)
Net loss from continuing operations	$	(479,838	)	$	(213,833	)	$	(137,457	)

Segment information as of December 31, 2020 and 2019 is as follows:

(in thousands)	2020		2019
Total assets—Education segment	$	1,520,504	$	1,971,553
Total assets—HMH Books & Media segment		175,710		186,318
Total assets—Corporate and Other		324,912		355,301
Total consolidated assets	$	2,021,126	$	2,513,172

The following represents long-lived assets (property, plant, and equipment) outside of the United States, which are substantially in Ireland. All other long-lived assets are located in the United States.

(in thousands)	2020		2019
Long-lived assets—International	$	228	$	113

The following is a schedule of net sales by geographic region:

(in thousands)
Year Ended December 31, 2020
Net sales—U.S.	$	997,178
Net sales—International		34,114
Total net sales	$	1,031,292
Year Ended December 31, 2019
Net sales—U.S.	$	1,327,833
Net sales—International		62,841
Total net sales	$	1,390,674
Year Ended December 31, 2018
Net sales—U.S.	$	1,249,568
Net sales—International		72,849
Total net sales	$	1,322,417

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Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2020

Valuation And Qualifying Accounts [Abstract]

Valuation and Qualifying Accounts

20. Valuation and Qualifying Accounts

	Balance at								Balance at
	Beginning					Utilization of			End
	of Year		Net Charges			Allowances			of Year
2020
Allowance for doubtful accounts	$	3,015	$	1,589		$	(615	)	$	3,989
Reserve for returns		16,679		33,847			(35,952	)		14,574
Reserve for royalty advances		119,695		16,552			(39,592	)		96,655
Deferred tax valuation allowance		583,505		81,475			(2,412	)		662,568
2019
Allowance for doubtful accounts	$	2,173	$	1,909		$	(1,067	)	$	3,015
Reserve for returns		18,559		41,654			(43,534	)		16,679
Reserve for royalty advances		117,797		16,500			(14,602	)		119,695
Deferred tax valuation allowance		562,392		23,707			(2,594	)		583,505
2018
Allowance for doubtful accounts	$	2,508	$	128		$	(463	)	$	2,173
Reserve for returns		20,580		36,395			(38,416	)		18,559
Reserve for royalty advances		103,606		17,301			(3,110	)		117,797
Deferred tax valuation allowance		571,653		(7,667	)		(1,594	)		562,392

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Quarterly Results of Operations (Unaudited)

12 Months Ended

Dec. 31, 2020

Quarterly Financial Information Disclosure [Abstract]

Quarterly Results of Operations (Unaudited)

21. Quarterly Results of Operations (Unaudited)

	Three Months Ended
	March 31,			June 30,			September 30,			December 31,
2020:
Net sales	$	189,925		$	251,216		$	386,590		$	203,561
Gross profit		63,450			90,389			167,415			65,986
Operating (loss) income		(338,176	)		(22,212	)		272			(68,973	)
Net loss		(345,973	)		(38,168	)		(12,552	)		(83,145	)
Net loss per share attributable to    common stockholders
Basic:
Net loss	$	(2.77	)	$	(0.30	)	$	(0.10	)	$	(0.66	)
Diluted:
Net loss	$	(2.77	)	$	(0.30	)	$	(0.10	)	$	(0.66	)
2019:
Net sales	$	194,635		$	388,896		$	565,668		$	241,475
Gross profit		57,893			156,055			273,481			59,065
Operating (loss) income		(101,835	)		(30,253	)		77,871			(108,947	)
Net (loss) income		(117,362	)		(40,613	)		69,260			(125,118	)
Net (loss) income per share attributable to    common stockholders
Basic:
Net (loss) income	$	(0.95	)	$	(0.33	)	$	0.56		$	(1.01	)
Diluted:
Net (loss) income	$	(0.95	)	$	(0.33	)	$	0.55		$	(1.01	)

Our net sales, operating profit or loss and net cash provided by or used in operations are impacted by the inherent seasonality of the academic calendar. Consequently, the performance of our businesses may not be comparable quarter to consecutive quarter and should be considered on the basis of results for the whole year or by comparing results in a quarter with results in the same quarter for the previous year.

During the fourth quarter of 2020, we recorded an adjustment of $17.0 million and $1.0 million to increase both the goodwill impairment charge and income tax benefit recorded, respectively, to correct an error of the previously recorded goodwill impairment of $262.0 million and related income tax benefit in the first quarter of 2020. Management believes these adjustments are not material to the current period financial statements or any prior periods.

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Significant Accounting Policies and Recent Accounting Standards (Policies)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates, assumptions and judgments by management that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities in the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and assumptions including, but not limited to, book returns, deferred revenue and related standalone selling price estimates, allowance for bad debts, recoverability of advances to authors, valuation of inventory, financial instruments valuation, income taxes, pensions and other postretirement benefits obligations, contingencies, litigation, depreciation and amortization periods, and the recoverability of long-term assets such as property, plant, and equipment, capitalized pre-publication costs, other identified intangibles and goodwill. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat it, as well as the economic impact on local, regional, national and international customers and markets. Actual results may differ from those estimates.

Revenue Recognition

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of the new revenue recognition accounting standard, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. To the extent the transaction price includes variable consideration, which generally reflects estimated future product returns, we estimate the amount of variable consideration that should be included in the transaction price utilizing the expected value method to which we expect to be entitled. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based largely on all information (historical, current and forecasted) that is reasonably available. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

We estimate the collectability of contracts upon execution. For contracts with rights of return, the transaction price is adjusted to reflect the estimated returns for the arrangement on these sales and is made at the time of sale based on historical experience by product line or customer. The transaction prices allocated are adjusted to reflect expected returns and are based on historical return rates and sales patterns. Shipping and handling fees charged to customers are included in net sales.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. We do not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less. Significant financing components’ income is included in interest income.

Contracts are sometimes modified to account for changes in contract specifications and requirements. Contract modifications exist when the modification either creates new, or changes the existing, enforceable rights and

obligations. Generally, contract modifications are for products or services that are not distinct from the existing contract due to the inability to use, consume or sell the products or services on their own to generate economic benefits and are accounted for as if they were part of that existing contract. The effect of such a contract modification on the transaction price and measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

Physical product revenue is recognized when the customer obtains control of our product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract. Revenues from static digital content commence upon delivery to the customer of the digital entitlement that is required to access and download the content and is typically recognized at a point in time. Revenues from subscription software licenses, related hosting services and product support are recognized evenly over the license term as we believe this best represents the pattern of transfer to the customer. The perpetual software licenses provide the customer with a functional license to our products and their related revenues are recognized when the customer receives entitlement to the software. For the technical services provided to customers in connection with the software license, including hosting services related to perpetual licenses, we recognize revenue upon delivery of the services. As the invoices are based on each day of service, this is directly linked to the transfer of benefit to the customer.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. We enter into certain contracts that have multiple performance obligations, one or more of which may be delivered subsequent to the delivery of other performance obligations. These performance obligations may include print and digital media, professional development services, training, software licenses, access to hosted content, and various services related to the software including, but not limited to hosting, maintenance and support, and implementation. We allocate the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. We determine standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions and internally approved standard pricing discounts related to the performance obligations. Generally, our performance obligations include print and digital textbooks and instructional materials, trade books, reference materials, formative assessment materials and multimedia instructional programs; licenses to book rights and content; access to hosted content; and services including professional development, consulting and training. Our contracts may also contain software performance obligations including perpetual and subscription-based licenses and software maintenance and support services.

Accounts Receivable

Accounts Receivable

Accounts receivable include amounts billed and currently due from customers and are recorded net of allowances for doubtful accounts and reserves for returns. In the normal course of business, we extend credit to customers that satisfy predefined criteria. We estimate the collectability of our receivables and develop those estimates to reflect the risk of credit loss. Allowances for doubtful accounts are established through the evaluation of accounts receivable aging, prior collection experience, current conditions and reasonable and supportable forecasts of the economic conditions that will exist through the contractual life of the financial asset. We monitor our ongoing credit exposure through an active review of collection trends and specific facts and circumstances. Our activities include monitoring the timeliness of payment collection and performing timely account reconciliations.

Contract Assets

Contract Assets

Contract assets include unbilled amounts where revenue is recognized over time as the services are delivered to the customer based on the extent of progress towards completion and revenue recognized exceeds the amount billed to the customer, and right of payment is not subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are included in prepaid expenses and other assets on our consolidated balance sheets.

Deferred Commissions

Deferred Commissions

Our incremental direct costs of obtaining a contract, which consist of sales commissions, are deferred and amortized over the period of contract performance. Applying the practical expedient, we recognize sales commission expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Amortization expense is included in selling and administrative expenses.

Deferred Revenue

Deferred Revenue

Our contract liabilities consist of advance payments and billings in excess of revenue recognized and are classified as deferred revenue on our consolidated balance sheets. Our contract assets and liabilities are accounted for and presented on a net basis as either a contract asset or contract liability at the end of each reporting period. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue. In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance. If additional advances are received on those contracts in subsequent periods, we assume all revenue recognized in the reporting period first applies to the beginning contract liability as opposed to a portion applying to the new advances for the period.

Advertising Costs and Sample Expenses

Advertising Costs and Sample Expenses

Advertising costs are charged to selling and administrative expenses as incurred. Advertising costs were $12.1 million, $12.6 million and $12.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. Sample expenses are charged to selling and administrative expenses when the samples are shipped.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of cash in banks and highly liquid investment securities that have maturities of three months or less when purchased. The carrying amount of cash equivalents approximates fair value because of the short-term maturity of these investments.

Accounts Receivable

Accounts Receivable

Accounts receivable are recorded net of allowances for doubtful accounts and reserves for returns. In the normal course of business, we extend credit to customers that satisfy predefined criteria. We estimate the collectability of our receivables. Allowances for doubtful accounts are established through the evaluation of accounts receivable aging and prior collection experience to estimate the ultimate collectability of these receivables. Reserves for returns are based on historical return rates and sales patterns.

Inventories

Inventories

Inventories are stated at the lower of weighted-average cost or net realizable value. The level of obsolete and excess inventory is estimated on a program or title level-basis by comparing the number of units in stock with past usage and the expected future demand. The expected future demand of a program or title is determined by the copyright year, the previous year’s usage, the subsequent years’ sales forecast, and known forward-looking trends including our development cycle to replace the title or program and competing titles or programs.

Property, Plant, and Equipment

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost, or in the case of assets acquired in business combinations, at fair value as of the acquisition date, less accumulated depreciation. Equipment under capital lease is stated at fair value at inception of the lease, less accumulated depreciation. Maintenance and repair costs are charged to expense as incurred, and renewals and improvements that extend the useful life of the assets are capitalized. Costs associated with developing film and episodic series assets are deferred if such amounts are expected to be recovered through future revenues. Film and episodic series costs are amortized on a pro rata basis of revenue earned and total revenue expected to be earned from the film or episodic series. Depreciation on property, plant, and equipment is calculated using the straight-line method over the estimated useful lives of the assets or, in the case of assets acquired in business combinations, over their remaining lives. Equipment held under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. Estimated useful lives of property, plant, and equipment are as follows:

	Estimated Useful Life
Building and building equipment	10 to 35 years
Machinery and equipment	2 to 15 years
Capitalized software and internal-use software	3 to 5 years
Leasehold improvements	Lesser of useful life or lease term
Film and media	Revenue earned

Capitalized Internal-Use Software and Software Development Costs

Capitalized Internal-Use Software and Software Development Costs

Capitalized internal-use software and software is included in property, plant and equipment on the consolidated balance sheets.

We capitalize certain costs related to obtaining or developing computer software for internal use including external customer-facing websites. Costs incurred during the application development stage, including external direct costs of materials and services, and payroll and payroll related costs for employees who are directly associated with the internal-use software project, are capitalized and amortized on a straight-line basis over the expected useful life of the related software. The application development stage includes design of chosen path, software configuration and integration, coding, hardware installation and testing. Costs incurred during the preliminary project stage, as well as maintenance, training and upgrades that do not result in additional functionality subsequent to general release are expensed as incurred.

Certain computer software development costs for software that is to be sold or marketed are capitalized in the consolidated balance sheets. Capitalization of computer software development costs begins upon the establishment of technological feasibility. We define the establishment of technological feasibility as a working model. Amortization of capitalized computer software development costs is provided on a product-by-product basis using the straight-line method, beginning upon commercial release of the product and continuing over the remaining estimated economic life of the product. The carrying amounts of computer software development costs are annually compared to net realizable value and impairment charges are recorded, as appropriate, when amounts expected to be realized are lower.

We review internal-use software and software development costs for impairment. For the years ended December 31, 2020, 2019 and 2018, there was no impairment of internal-use software and software developments costs.

Pre-publication Costs

Pre-publication Costs

We capitalize the art, prepress, manuscript and other costs incurred in the creation of the master copy of a book or other media (the “pre-publication costs”). Pre-publication costs are primarily amortized from the year of sale over five years using the sum-of-the-years-digits method, which is an accelerated method for calculating an asset’s amortization. Under this method, the amortization expense recorded for a pre-publication cost asset is approximately 33% (year 1), 27% (year 2), 20% (year 3), 13% (year 4) and 7% (year 5). This policy is used throughout the Company, except for the HMH Books & Media young readers and general interest books, which generally expenses such costs as incurred. Additionally, pre-publication costs recorded in connection with the acquisition of the EdTech business are amortized over 7 years on a projected sales pattern. The amortization methods and periods chosen best reflects the pattern of expected sales generated from individual titles or programs. We periodically evaluate the remaining lives and recoverability of capitalized pre-publication costs, which are often dependent upon program acceptance by state adoption authorities. Amortization expense related to pre-publication costs for the years ended December 31, 2020, 2019 and 2018 were $126.2 million, $149.5 million and $109.3 million, respectively.

We review pre-publication costs for impairment.  For the years ended December 31, 2020, 2019 and 2018, there was no impairment of pre-publication costs.

Goodwill and Indefinite-lived Intangible Assets

Goodwill and Indefinite-lived Intangible Assets

Goodwill is the excess of the purchase price paid over the fair value of the net assets of the business acquired. Other intangible assets principally consist of branded trademarks and trade names, acquired publishing rights and customer relationships. Goodwill and indefinite-lived intangible assets (certain tradenames) are not amortized, but are reviewed at least annually for impairment or earlier, if an indication of impairment exists. Goodwill is allocated entirely to our Education reporting unit. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include our market capitalization, selection of a control premium, and the determination of appropriate market comparables as well as the fair value of certain individual assets and liabilities.

We have the option of first assessing qualitative factors to determine whether it is necessary to perform a quantitative impairment test for goodwill or we can perform the quantitative impairment test without performing the qualitative assessment. In performing the qualitative assessment, events and circumstances specific to the reporting unit and to the entity as a whole, such as macroeconomic conditions, industry and market considerations, overall financial performance and cost factors are considered when evaluating whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If the fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of the net assets assigned to a reporting unit exceeds the fair value of a reporting unit, goodwill is deemed impaired and is written down to the extent of the difference between the fair value of the reporting unit and the carrying value.

We estimate the total fair value of the Education reporting unit by using one or more of various valuation techniques including an evaluation of our market capitalization and peer company multiples depending on the best approximation of fair value of the Education reporting unit in the current social and economic environment. With regard to indefinite-lived intangible assets, which includes the Houghton Mifflin Harcourt tradename at December 31, 2020 and 2019, the recoverability is evaluated using a one-step process whereby we determine the fair value by asset and then compare it to its carrying value to determine if the asset is impaired. We estimate the fair value by preparing a relief-from-royalty discounted cash flow analysis using forward looking revenue projections. The significant assumptions used in discounted cash flow analysis include: future net sales, a long-term growth rate, a royalty rate and a discount rate used to present value future cash flows and the terminal value of the Education reporting unit. The discount rate is based on the weighted-average cost of capital method at the date of the evaluation. Adverse changes in our market capitalization or peer company multiples by an equivalent amount could give rise to an impairment.

We completed our annual goodwill impairment test as of October 1, 2020 using consistent methodologies and assumptions with those described during our event-driven tests and did not identify an impairment. The fair value of the Education reporting unit was in excess of its carrying value by approximately 18% as of October 1, 2020 and 2019. We recorded a goodwill impairment charge of $279.0 million for the year ended December 31, 2020. Refer to Note 2 for a discussion of the factors and circumstances leading to the goodwill impairment. There was no goodwill impairment for the years ended December 31, 2019 and 2018. We will continue to monitor and evaluate the carrying value of goodwill. If market and economic conditions or business performance deteriorate, this could increase the likelihood of us recording an impairment charge.   

We completed our annual indefinite-lived asset impairment tests as of October 1, 2020 and 2019. No indefinite-lived intangible assets were deemed to be impaired for the years ended December 31, 2020, 2019 and 2018.

Publishing Rights

Publishing Rights

A publishing right is an acquired right that allows us to publish and republish existing and future works as well as create new works based on previously published materials. We determined the fair market value of the publishing rights arising from business combinations by discounting the after-tax cash flows projected to be derived from the publishing rights and titles to their net present value using a rate of return that accounts for the time value of money and the appropriate degree of risk. The useful life of the publishing rights is based on the lives of the various copyrights involved. We calculate amortization using the percentage of the projected operating income before taxes derived from the titles in the current year as a percentage of the total estimated operating income before taxes over the remaining useful life. Acquired publication rights, as well as customer-related intangibles with definitive lives, are primarily amortized on an accelerated basis over periods ranging from 3 to 20 years.  We review our publishing rights for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable.  No publishing rights were deemed to be impaired for the years ended December 31, 2020, 2019 and 2018.  

Impairment of Other Long-lived Assets

Impairment of Other Long-lived Assets

We review our other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the future undiscounted cash flows are less than their book value, impairment exists. The impairment is measured as the difference between the book value and the fair value of the underlying asset. Fair value is normally determined using an undiscounted cash flow model.

Severance

Severance

We accrue postemployment benefits if the obligation is attributable to services already rendered, rights to those benefits accumulate, payment of benefits is probable, and amount of benefit is reasonably estimated. Postemployment benefits include severance benefits.

Subsequent to recording such accrued severance liabilities, changes in market or other conditions may result in changes to assumptions upon which the original liabilities were recorded that could result in an adjustment to the liabilities.

Royalty Advances

Royalty Advances

Royalty advances to authors are capitalized and represent amounts paid in advance of the sale of an author’s product and are recovered as earned. As advances are recorded, a partial reserve may be recorded immediately based primarily upon historical sales experience. Additionally, advances are evaluated periodically to determine if they are expected to be recovered on a title-by-title basis, with consideration given to the other titles in the author’s portfolio also earning against the outstanding advance. Any portion of a royalty advance that is not expected to be recovered is fully reserved. The reserve for royalty advances is reported as a reduction of the royalty advances to authors balance. Cash payments for royalty advances are included within cash flows from operating activities, under the caption “Royalties payable and author advances, net,” in our consolidated statements of cash flows.

Leases

Leases

On January 1, 2019, we adopted the new lease accounting standard using the modified retrospective method. We applied the guidance to each lease as of January 1, 2019 with a cumulative effect adjustment to the opening balance of accumulated deficit as of that date. The standard requires lessees to recognize a lease liability and a right of use asset on the balance sheet for operating leases. Right of use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Right of use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Accounting for finance leases is substantially unchanged.  Prior comparative periods were not adjusted.

We elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to not reassess whether any expired or existing contracts are or contain leases, carry forward the historical lease classification and to not reassess initial direct costs for any existing leases. We did not elect the hindsight practical expedient to determine the lease term for existing leases. Upon implementation of the new guidance, we have elected the practical expedients to combine lease and non-lease components, and to not recognize right of use assets and lease liabilities for short-term leases. The adoption of this guidance impacted our consolidated balance sheets due to the recognition of the lease rights and obligations related to our office space, automobile fleet and office equipment leases as assets and liabilities of approximately $148.0 million and $161.0 million, respectively. The adjustment to accumulated deficit of approximately $0.8 million related to a previously recorded deferred gain on the sale leaseback of a warehouse. The impact on our results of operations and cash flows was not material.

Under the new lease accounting standard, we determine if an arrangement is a lease at inception. Right of use assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, we consider only payments that are fixed and determinable at the time of commencement. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our incremental borrowing rate is a hypothetical rate based on our understanding of what our credit rating would be. The right of use asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. When determining the probability of exercising such options, we consider contract-based, asset-based, entity-based, and market-based factors. Our lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes or other costs. Variable lease costs are expensed as incurred on our consolidated statements of operations. Our lease agreements generally do not contain any residual value guarantees or restrictive covenants.

Operating leases are included in operating lease assets and operating lease liabilities on our consolidated balance sheets. Finance leases are included in property, plant, and equipment, and other liabilities on our consolidated balance sheets.

Income Taxes

Income Taxes

We record income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax basis, and operating loss and tax credit carryforwards. Our consolidated financial statements contain certain deferred tax assets which have arisen primarily as a result of interest expense limitations, as well as other temporary differences between financial and tax accounting. We establish a valuation allowance if the likelihood of realization of the deferred tax assets is reduced based on an evaluation of objectively verifiable evidence. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against those deferred tax assets. We evaluate the weight of all available evidence to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

We also evaluate any uncertain tax positions and only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon settlement. We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Any change in judgment related to the expected ultimate resolution of uncertain tax positions is recognized in earnings in the period in which such change occurs. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense.

Stock-Based Compensation

Stock-Based Compensation

Certain employees and directors have been granted stock options, restricted stock and restricted stock units in our common stock. Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant service period. We estimate the fair value of each stock-based award on the measurement date using the current market price based on the target value of the award for restricted stock and restricted stock units, the Monte Carlo simulation for market-based restricted stock units and the Black-Scholes valuation model for stock options. We recognize stock-based compensation expense over the awards requisite service period on a straight-line basis for time-based stock options, restricted stock and restricted stock units and on a graded basis for restricted stock and restricted stock units that are contingent on the achievement of performance conditions.

Comprehensive Loss

Comprehensive Loss

Comprehensive loss is defined as changes in the equity of an enterprise except those resulting from stockholder transactions. The amounts shown on the consolidated statements of stockholders’ equity and comprehensive loss relate to the cumulative effect of changes in pension and postretirement liabilities, foreign currency translation gain and loss adjustments, unrealized gains and losses on short-term investments and gains and losses on derivative instruments.

Foreign Currency Translation

Foreign Currency Translation

The functional currency for each of our subsidiaries is the currency of the primary economic environment in which the subsidiary operates, generally defined as the currency in which the entity generates and expends cash. Foreign currency denominated assets and liabilities are translated into United States dollars at current rates as of the balance sheet date and the revenue, costs and expenses are translated at the average rates established during each reporting period. Cumulative translation gains or losses are recorded in equity as an element of accumulated other comprehensive income.

Financial Instruments

Financial Instruments

Derivative financial instruments are employed to manage risks associated with interest rate exposures and are not used for trading or speculative purposes. We recognize all derivative instruments in our consolidated balance sheets at fair value. Changes in the fair value of derivatives are recognized periodically either in earnings or in stockholders’ equity as a component of accumulated other comprehensive loss, depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value hedge or a cash flow hedge. Gains and losses on derivatives designated as hedges, to the extent they are effective, are recorded in other comprehensive loss, and subsequently reclassified to earnings to offset the impact of the hedged items when they occur. Changes in the fair value of derivatives not qualifying as hedges are reported in earnings. During 2020, 2019 and 2018, our interest rate swaps were designated as hedges and the majority qualified for hedge accounting. The interest rate derivative contracts matured on July 22, 2020. We recorded an unrealized loss of $3.4 million and an unrealized gain of $3.5 million in our statements of comprehensive loss to account for the changes in fair value of these derivatives during the periods ended December 31, 2019 and 2018, respectively. The corresponding $1.0 million hedge liability was included within current other liabilities in our consolidated balance sheet as of December 31, 2019. Our foreign exchange forward contracts did not qualify for hedge accounting because we did not contemporaneously document our hedging strategy upon entering into the hedging arrangements.

Treasury Stock

Treasury Stock

We account for treasury stock under the cost method. When shares are reissued or retired from treasury stock they are accounted for at an average price. Upon retirement the excess over par value is charged against capital in excess of par value.

Net Loss per Share

Net Loss per Share

Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. Except where the result would be anti-dilutive, net loss per share is computed using the treasury stock method for the exercise of stock options. For periods in which the Company has reported net losses, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders for the years ended December 31, 2020, 2019 and 2018.

Recent Accounting Standards

Recent Accounting Standards

Recent accounting pronouncements, not included below, are not expected to have a material impact on our consolidated financial position or results of operations.

Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles, including simplification of areas such as franchise taxes, step-up in tax basis of goodwill, intraperiod allocations, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The standard will be effective in 2021, with early adoption permitted. We do not expect it to have a material impact on our consolidated financial statements.  

Recently Adopted Accounting Standards

In August 2018, the FASB issued new guidance on a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract). Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement to develop or obtain internal use software. Accordingly, the guidance requires a customer to determine the stage of a project that the implementation activity relates to and the nature of the associated costs in

order to determine whether those costs should be expensed as incurred or capitalized. The guidance also requires the customer to amortize the capitalized implementation costs as an expense over the term of the hosting arrangement. We adopted the guidance on January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued updated guidance to simplify the test for goodwill impairment by the elimination of Step 2 in the determination on whether goodwill should be considered impaired. The annual assessments are still required to be completed. We adopted the guidance on January 1, 2020.  

In June 2016, the FASB issued new guidance that requires credit losses on financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, not based on incurred losses, as well as additional disclosures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. We adopted the guidance on January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

We are exposed to credit losses primarily through our accounts receivable. We develop estimates to reflect the risk of credit loss which are based on an evaluation of accounts receivable aging, prior collection experience, current conditions and reasonable and supportable forecasts of the economic conditions that will exist through the contractual life of the financial asset. We write off the asset when it is no longer deemed collectible. We monitor our ongoing credit exposure through an active review of collection trends. Our activities include monitoring the timeliness of payment collection and performing timely account reconciliations. At December 31, 2020, we reported allowances for doubtful accounts of $4.0 million, compared to $3.0 million at December 31, 2019, reflecting an increase of $1.6 million, prior to write-offs of $0.6 million for the year ended December 31, 2020.

We are also exposed to losses on our royalty advances. Royalty advances to authors are capitalized and represent amounts paid in advance of the sale of an author’s product and are recovered as earned. As advances are recorded, a partial reserve may be recorded immediately based primarily upon historical sales experience. Additionally, advances are evaluated periodically to determine if they are expected to be recovered on a title-by-title basis. Any portion of a royalty advance that is not expected to be recovered is fully reserved. At December 31, 2020, we reported a reserve for royalty advances of $96.7 million, compared to $119.7 million at December 31, 2019, reflecting a decrease of $23.0 million for the year ended December 31, 2020.

In February 2016, the FASB issued guidance that primarily requires lessees to recognize most leases on their balance sheets but record expenses on their income statements in a manner similar to current accounting. We adopted the guidance on January 1, 2019 using the modified retrospective method and did not adjust comparative periods or modify disclosures in those comparative periods.

In May 2014, the FASB issued new guidance related to revenue recognition. This new accounting standard replaced most current U.S. GAAP guidance on this topic and eliminated most industry-specific guidance. We adopted the guidance on January 1, 2018 applying the modified retrospective method.

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Significant Accounting Policies and Recent Accounting Standards (Tables)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Summary of Estimated Useful Lives of Property, Plant, and Equipment

Estimated useful lives of property, plant, and equipment are as follows:

	Estimated Useful Life
Building and building equipment	10 to 35 years
Machinery and equipment	2 to 15 years
Capitalized software and internal-use software	3 to 5 years
Leasehold improvements	Lesser of useful life or lease term
Film and media	Revenue earned

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Discontinued Operations (Tables)

12 Months Ended

Dec. 31, 2020

Discontinued Operations And Disposal Groups [Abstract]

Summary of Amounts Included in Discontinued Operations

Selected financial information of the Riverside Business included in discontinued operations is as follows:

	For the Year
	Ended December 31,
	2018
Net sales	$	56,562
Costs		37,714
Amortization		4,954
Earnings from discontinued operations before taxes		13,894
Income tax expense		1,061
Earnings from discontinued operations, net of tax	$	12,833

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Balance Sheet Information (Tables)

12 Months Ended

Dec. 31, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Accounts Receivable

Accounts receivable at December 31, 2020 and 2019 consisted of the following:

	2020			2019
Accounts receivable	$	171,395		$	204,119
Allowance for bad debt		(3,989	)		(3,015	)
Reserve for book returns		(14,574	)		(16,679	)
	$	152,832		$	184,425

Schedule of Inventories

Inventories at December 31, 2020 and 2019 consisted of the following:

	2020		2019
Finished goods	$	155,759	$	203,103
Raw materials		11,204		9,956
Inventories	$	166,963	$	213,059

Balances of Major Classes of Assets and Accumulated Depreciation and Amortization

Balances of major classes of assets and accumulated depreciation and amortization at December 31, 2020 and 2019 were as follows:

	2020			2019
Land and land improvements	$	4,939		$	4,939
Building and building equipment		11,160			10,239
Machinery and equipment		14,985			12,970
Capitalized software and internal-use software		641,027			598,317
Leasehold improvements		24,266			22,974
Film and media		29,845			22,055
		726,222			671,494
Less: Accumulated depreciation and amortization		(633,020	)		(571,106	)
Property, plant, and equipment, net	$	93,202		$	100,388

Summary of Changes in Contract Assets and Contract Liabilities

The following table presents changes in contract assets and contract liabilities during the year ended December 31, 2020:

	December 31,		December 31,
	2020		2019		$ Change		% Change
Contract assets	$	580	$	109	$	471		432.11	%
Contract liabilities (deferred revenue)	$	905,284	$	848,106	$	57,178		6.74	%

Summary of Net Sales Recognized from Changes in Contract Assets and Contract Liabilities

During the years ended December 31, 2020, 2019 and 2018, we recognized the following net sales as a result of changes in the contract assets and contract liabilities balances:

	Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,
	2020		2019		2018
Net sales recognized in the period from:
Amounts included in contract liabilities at the beginning of the period	$	295,675	$	229,557	$	220,769

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Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Change in the Carrying Amount of Goodwill Relates to the Education Segment

The change in the carrying amount of goodwill, which all relates to the Education segment, for the year ended December 31, 2020 is as follows:

Balance at December 31, 2019	$	716,977
Impairment		(279,000)
Balance at December 31, 2020	$	437,977

Schedule of Other Intangible Assets

Other intangible assets consisted of the following:

	December 31, 2020							December 31, 2019
			Accumulated							Accumulated
	Cost		Amortization			Total		Cost		Amortization			Total
Trademarks and tradenames: indefinite-    Lived	$	161,000	$	—		$	161,000	$	161,000	$	—		$	161,000
Trademarks and tradenames: definite-    Lived		164,130		(53,610	)		110,520		164,130		(38,948	)		125,182
Publishing rights		1,180,000		(1,159,482	)		20,518		1,180,000		(1,139,426	)		40,574
Customer related and other		449,840		(313,294	)		136,546		449,840		(302,371	)		147,469
Other intangible assets, net	$	1,954,970	$	(1,526,386	)	$	428,584	$	1,954,970	$	(1,480,745	)	$	474,225

Estimated Aggregate Amortization Expense Expected for Intangibles

Estimated aggregate amortization expense expected for each of the next five years related to intangibles subject to amortization is as follows:

	Trademarks				Other
	and		Publishing		Intangible
	Tradenames		Rights		Assets
2021		14,408		11,642		10,333
2022		10,608		7,569		10,134
2023		6,808		1,307		9,954
2024		6,715		—		8,503
2025		6,437				8,315
Thereafter		65,544		—		89,307
	$	110,520	$	20,518	$	136,546

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Debt (Tables)

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Long-Term Debt

Our debt consisted of the following:

	December 31,			December 31,
	2020			2019
$380,000 term loan due November 22, 2024 interest    payable quarterly (net of discount and    issuance costs)	$	346,091		$	361,294
$306,000 senior secured notes due February 15, 2025    interest payable semi-annually (net of discount and    issuance costs)		297,601			295,893
		643,692			657,187
Less: Current portion of long-term debt		(19,000	)		(19,000	)
Total long-term debt, net of discount and issuance    Costs	$	624,692		$	638,187
Revolving credit facility	$	—		$	—

Long-Term Debt Repayments Due

Long-term debt repayments due in each of the next five years and thereafter is as follows:

Year
2021		19,000
2022		19,000
2023		19,000
2024		304,000
2025		306,000
	$	667,000

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Leases (Tables)

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Schedule of Lease Assets and Liabilities

The table below presents the lease assets and liabilities recorded on the balance sheet.

Leases	Classification	December 31, 2020				December 31, 2019
Assets
Operating lease assets	Operating lease assets	$		126,850		$		132,247
Total leased assets		$		126,850		$		132,247
Liabilities
Current
Operating	Operating lease liabilities	$		9,669		$		8,685
Noncurrent
Operating	Operating lease liabilities			132,014				134,994
Total lease liabilities		$		141,683		$		143,679
Weighted average remaining lease term Operating leases		8.2 Years				9.6 Years
Weighted average discount rate Operating leases (1)			12.56		%		12.46		%

(1) Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

Summary of Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the balance sheet.

	Operating
Maturity of Lease Liabilities	Leases
2021		24,143
2022		25,395
2023		27,838
2024		29,034
2025		28,370
Thereafter		110,993
Total lease payments	$	245,773
Less: interest		(104,090	)
Present value of lease liabilities	$	141,683

Supplemental Cash Flow Information Related to Leases

The table below presents supplemental cash flow information related to leases during the years ended December 31, 2020 and 2019.

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases – 2020	$	28,639
Operating cash flows for operating leases – 2019	$	31,245

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Restructuring, Severance and Other Charges (Tables)

12 Months Ended

Dec. 31, 2020

Components of Severance/Restructuring and Other Charges

A summary of the significant components of the severance costs, which are not allocated to our segments and instead are included in the Corporate and Other category, is as follows:

	2020
	Severance/ other accruals at December 31, 2019		Severance/ other expense		Cash payments			Severance/ other accruals at December 31, 2020
Severance costs	$	758	$	—	$	(758	)	$	—
	$	758	$	—	$	(758	)	$	—

	2019
	Severance/								Severance/
	other								other
	accruals at			Severance/					accruals at
	December 31,			other		Cash			December 31,
	2018			expense		payments			2019
Severance costs	$	1,420		$	2,534	$	(3,196	)	$	758
Other accruals		270	(1)		—		—			—
	$	1,690		$	2,534	$	(3,196	)	$	758

(1)In connection with the adoption of the new leasing standard on January 1, 2019, the restructuring liabilities related to office space consolidation were reclassed on the balance sheet as a reduction of operating lease assets.

A summary of the significant components of the severance/restructuring and other charges, which are not allocated to our segments and included in Corporate and Other, is as follows:

	2018
	Severance/							Severance/
	other							other
	accruals at		Severance/					accruals at
	December 31,		other		Cash			December 31,
	2017		expense		payments			2018
Severance costs	$	341	$	6,821	$	(5,742	)	$	1,420
Other accruals		1,299		—		(1,029	)		270
	$	1,640	$	6,821	$	(6,771	)	$	1,690

2020 Restructuring Plan [Member]

Components of Severance/Restructuring and Other Charges

The following table provides a summary of our total costs associated with the 2020 Restructuring Plan, included in the restructuring/severance and other charges line item within our consolidated statements of operations, for the year ended December 31, 2020, by major type of cost:

	Year Ended		Total Amount
	December 31,		Incurred
Type of Cost	2020		to Date
Restructuring charges: (1)
Severance and termination benefits	$	33,643	$	33,643
	$	33,643	$	33,643

(1) All restructuring charges are included within Corporate and Other.

Summary of Restructuring Liabilities Comprised of Accruals for Severance and Termination Benefits

The following is a rollforward of our liabilities associated with the 2020 Restructuring Plan:

	2020
	Restructuring						Restructuring
	accruals at						accruals at
	December 31,				Cash		December 31,
	2019		Charges		payments		2020
Severance and termination benefits	$	—	$	33,643	$	(14,332)	$	19,311
	$	—	$	33,643	$	(14,332)	$	19,311

2019 Restructuring Plan [Member]

Components of Severance/Restructuring and Other Charges

The following tables provide a summary of our total costs associated with the 2019 Restructuring Plan, included in the restructuring line item within our consolidated statements of operations, for the year ended December 31, 2019, by major type of cost:

	Year Ended		Total Amount
	December 31,		Incurred
Type of Cost	2019		to Date
Restructuring charges: (1)
Severance and termination benefits	$	15,820	$	15,820
	$	15,820	$	15,820

(1) All restructuring charges are included within Corporate and Other.

Summary of Restructuring Liabilities Comprised of Accruals for Severance and Termination Benefits

The following is a rollforward of our liabilities associated with the 2019 Restructuring Plan:

	2020
	Restructuring							Restructuring
	accruals at							accruals at
	December 31,				Cash			December 31,
	2019		Charges		payments			2020
Severance and termination benefits	$	11,649	$	—	$	(11,370	)	$	279
	$	11,649	$	—	$	(11,370	)	$	279

	2019
	Restructuring							Restructuring
	accruals at							accruals at
	December 31,				Cash			December 31,
	2018		Charges		payments			2019
Severance and termination benefits	$	—	$	15,820	$	(4,171	)	$	11,649
	$	—	$	15,820	$	(4,171	)	$	11,649

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Components of Loss Before Taxes by Jurisdiction

The components of loss before taxes by jurisdiction are as follows:

	For			For			For
	the Year			the Year			the Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
U.S.	$	(494,456	)	$	(213,541	)	$	(134,884	)
Foreign		2,214			3,909			3,024
Loss before taxes	$	(492,242	)	$	(209,632	)	$	(131,860	)

Total Income Tax by Jurisdiction

Total income taxes by jurisdiction are as follows:

	For			For			For
	the Year			the Year			the Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Income tax expense (benefit)
U.S.	$	(12,691	)	$	4,273		$	3,701
Foreign		287			(72	)		1,896
	$	(12,404	)	$	4,201		$	5,597

Components of (Benefit) Expense for Income Taxes Attributable to Loss from Continuing Operations

Significant components of the (benefit) expense for income taxes attributable to loss from continuing operations consist of the following:

	For the			For the			For the
	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Current
Foreign	$	182		$	(730	)	$	1,562
U.S.—Federal		—			0			(63	)
U.S.—State and other		1,769			396			(1,042	)
Total current		1,951			(334	)		457
Deferred
Foreign		105			658			334
U.S.—Federal		(5,505	)		1,908			2,329
U.S.—State and other		(8,955	)		1,969			2,477
Total deferred		(14,355	)		4,535			5,140
Income tax (benefit) expense	$	(12,404	)	$	4,201		$	5,597

Reconciliation of Income Tax Rate Computed at Statutory Tax Rate

The reconciliation of the income tax rate computed at the statutory tax rate to the reported income tax expense (benefit) attributable to continuing operations is as follows:

	For the			For the			For the
	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Statutory rate		21.0	%		21.0	%		21.0	%
Permanent items		(0.9	)		(3.6	)		(2.6	)
Foreign rate differential		—			—			(0.1	)
State and local taxes		2.0			(7.9	)		6.8
Cancellation of debt income		—			(1.3	)		—
Increase in valuation allowance		(15.5	)		(10.0	)		(26.6	)
Tax credits		(0.2	)		(0.2	)		(2.7	)
Goodwill impairment		(3.9	)		—			—
Effective tax rate		2.5	%		(2.0	)%		(4.2	)%

Components of Net Deferred Tax Assets and Liabilities

The significant components of the net deferred tax assets and liabilities are shown in the following table:

	2020			2019
Tax assets related to
Net operating loss and other carryforwards	$	326,504		$	272,378
Returns reserve/inventory expense		39,095			41,824
Pension benefits		6,879			6,624
Postretirement benefits		4,480			4,475
Deferred interest (1)		226,227			259,375
Deferred revenue		141,775			113,029
Stock-based compensation		2,806			3,298
Deferred compensation		6,525			6,152
Research and development		12,435			10,302
Operating lease liabilities		33,963			35,890
Other, net		8,263			6,769
Valuation allowance		(662,569	)		(583,505	)
	$	146,383		$	176,611

	2020			2019
Tax liabilities related to
Indefinite-lived intangible assets		(53,400	)		(89,879	)
Definite-lived intangible assets		(21,578	)		(25,503	)
Depreciation and amortization expense		(45,279	)		(48,984	)
Operating lease assets		(30,245	)		(32,887	)
Other, net		(9,877	)		(7,709	)
		(160,379	)		(204,962	)
Net deferred tax liabilities	$	(13,996	)	$	(28,351	)

(1) The deferred interest tax asset represents disallowed interest deductions under Section 163(j) (Limitation on Deduction for interest on Certain Indebtedness) of the Internal Revenue Code of 1986, as amended (“IRC”) for the current and prior years. At December 31, 2020 and 2019, we had gross deferred interest deductions totaling $900.2 million and $984.5 million, respectively. The disallowed interest is able to be carried forward indefinitely and utilized in future years pursuant to IRC Section 163(j). A full valuation allowance has been provided against deferred tax assets, excluding $2.4 million of foreign deferred tax assets which are expected to be realized, net of deferred tax liabilities resulting from indefinite-lived intangibles.

Deferred Tax Assets and Liabilities Reflected on Consolidated Balance Sheets

The net deferred tax liability balance is stated at prevailing statutory income tax rates. Deferred tax assets and liabilities are reflected on our consolidated balance sheets as follows:

	2020			2019
Non-current deferred tax assets	$	2,415		$	2,520
Non-current deferred tax liabilities		(16,411	)		(30,871	)
	$	(13,996	)	$	(28,351	)

Reconciliation of Gross Amount of Unrecognized Tax Benefits

A reconciliation of the gross amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows:

Balance at December 31, 2017	$	15,680
Reductions based on tax positions related to the prior    year		—
Additions based on tax positions related to the    prior year		—
Balance at December 31, 2018		15,680
Reductions based on tax positions related to the prior    year		—
Additions based on tax positions related to the prior    year		—
Balance at December 31, 2019		15,680
Reductions based on tax positions related to the prior    year		—
Additions based on tax positions related to the prior    year		—
Balance at December 31, 2020	$	15,680

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Retirement and Postretirement Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2020

Summary of Accumulated Benefit Obligations Change in Projected Benefit Obligation and Funded Status of Plans

The following table summarizes the Accumulated Benefit Obligations (“ABO”), the change in Projected Benefit Obligation (“PBO”), and the funded status of our plans as of and for the financial statement period ended December 31, 2020 and 2019:

	2020			2019
ABO at end of period	$	179,408		$	169,364
Change in PBO
PBO at beginning of period	$	169,364		$	162,096
Interest cost on PBO		4,388			6,045
Plan settlements		(4,990	)		—
Actuarial loss (gain)		18,447			12,507
Benefits paid		(7,801	)		(11,284	)
PBO at end of period	$	179,408		$	169,364
Change in plan assets
Fair market value at beginning of period	$	145,716		$	132,776
Actual return		16,060			22,955
Company contribution		4,769			1,269
Plan settlements		(4,990	)		—
Benefits paid		(7,801	)		(11,284	)
Fair market value at end of period	$	153,754		$	145,716
Unfunded status	$	(25,654	)	$	(23,648	)

Amounts Recognized in Consolidated Balance Sheets

Amounts recognized in the consolidated balance sheets at December 31, 2020 and 2019 consist of:

	2020			2019
Current liabilities	$	(1,593	)	$	—
Noncurrent liabilities		(24,061	)		(23,648	)
Net amount recognized	$	(25,654	)	$	(23,648	)

Additional Year-End Information for Pension Plans with ABO in Excess of Plan Assets

Additional year-end information for pension plans with ABO in excess of plan assets at December 31, 2020 and 2019 consist of:

	2020		2019
PBO	$	179,408	$	169,364
ABO		179,408		169,364
Fair value of plan assets		153,754		145,716

Weighted Average Assumptions used to Determine Benefit Obligations

Weighted average assumptions used to determine the benefit obligations (both PBO and ABO) at December 31, 2020 and 2019 are:

	2020			2019
Discount rate		2.2	%		3.1	%
Increase in future compensation	N/A			N/A

Summary of Percentage of Assets Invested in Each Class

The percentage of assets invested in each asset class at December 31, 2020 and 2019 is shown below.

	2020			2019
	Percentage			Percentage
	in Each			in Each
Asset Class	Asset Class			Asset Class
Equity		33.5	%		32.6	%
Fixed income		52.7			54.5
Real estate investment trust		7.0			8.0
Other		6.8			4.9
		100.0	%		100.0	%

Summary of Fair Value of Pension Plan Assets by Asset Category

The fair value of our pension plan assets by asset category at December 31 were as follows:

	December 31,		Not subject
	2020		to leveling (1)
Cash and cash equivalents	$	1,914	$	1,914
Equity securities
U.S. equity		27,765		27,765
Non-US equity		15,544		15,544
Emerging markets equity		8,259		8,259
Fixed income
Government bonds		28,855		28,855
Corporate bonds		46,228		46,228
Mortgage-backed securities		9		9
Asset-backed securities		810		810
Commercial mortgage-backed securities		604		604
International fixed income		4,485		4,485
Alternatives
Real estate		10,689		10,689
Hedge funds		8,228		8,228
Other		364		364
	$	153,754	$	153,754

(1) Investments that are valued using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

	December 31,		Not subject
	2019		to leveling (1)
Cash and cash equivalents	$	1,413	$	1,413
Equity securities
U.S. equity		28,993		28,993
Non-US equity		12,474		12,474
Emerging markets equity		5,537		5,537
Fixed income
Government bonds		20,316		20,316
Corporate bonds		37,925		37,925
Mortgage-backed securities		7,943		7,943
Asset-backed securities		3,255		3,255
Commercial mortgage-backed securities		1,930		1,930
International fixed income		5,741		5,741
Alternatives
Real estate		11,609		11,609
Hedge funds		7,043		7,043
Other		1,537		1,537
	$	145,716	$	145,716

Expected Future Benefit Payments

The following benefit payments, which reflect expected future service, are expected to be paid:

	Postretirement
Fiscal Year Ended	Benefit Plan
2021	$	1,555
2022		1,488
2023		1,437
2024		1,389
2025		1,320
2026-2030		5,686

Summary of Accumulated Postretirement Benefit Obligation Changes in Plan Assets and Funded Status of Plan

The following table summarizes the Accumulated Postretirement Benefit Obligation (“APBO”), the changes in plan assets, and the funded status of our plan as of and for the financial statement periods ended December 31, 2020 and 2019.

	2020			2019
Change in APBO
APBO at beginning of period	$	16,684		$	15,812
Service cost (benefits earned during the period)		67			58
Interest cost on APBO		426			582
Employee contributions		184			66
Actuarial loss (gain)		2,857			1,878
Benefits paid		(2,097	)		(1,712	)
APBO at end of period	$	18,121		$	16,684
Change in plan assets
Fair market value at beginning of period	$	—		$	—
Company contributions		1,913			1,646
Employee contributions		184			66
Benefits paid		(2,097	)		(1,712	)
Fair market value at end of period	$	—		$	—
Unfunded status	$	(18,121	)	$	(16,684	)

Amounts not yet Reflected in Net Periodic Benefit Cost and Recognized in Accumulated Other Comprehensive (Loss) Income

	2020			2019
Net (loss) gain	$	(1,050	)	$	1,771
Prior service cost		(384	)		(426	)
Accumulated other comprehensive (loss) income	$	(1,434	)	$	1,345

One Percentage Point Changes in Assumed Health Care Cost

Assumed health care trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects on the expense recorded in 2020 and 2019 for the postretirement medical plan:

	2020			2019
One-percentage-point increase
Effect on total of service and interest cost    components	$	2		$	8
Effect on postretirement benefit obligation		87			85
One-percentage-point decrease
Effect on total of service and interest cost    components		(2	)		(7	)
Effect on postretirement benefit obligation		(77	)		(76	)

Summary of Change in Other Comprehensive Income

The following table presents the change in other comprehensive loss for the year ended December 31, 2020 related to our pension and postretirement obligations.

	Pension			Postretirement
	Plans			Benefit Plan			Total
Sources of change in accumulated other    comprehensive loss
Net loss arising during the period	$	(9,807	)	$	(2,814	)	$	(12,621	)
Amortization of prior service credit		—			42			42
Amortization of net gain (loss)		3,377			(7	)		3,370
Total accumulated other comprehensive    loss recognized during the period	$	(6,430	)	$	(2,779	)	$	(9,209	)

Summary of Estimated Amounts Amortized from Accumulated Other Comprehensive Income (Loss) Over Next Fiscal Year

Estimated amounts that will be amortized from accumulated other comprehensive income (loss) over the next fiscal year.

	Pension			Postretirement
	Plans			Benefit Plan
Prior service credit (cost)	$	—		$	(42	)
Net gain (loss)		(3,389	)		—
	$	(3,389	)	$	(42	)

Pension Plans [Member]

Net Periodic Benefit Cost Components

Net periodic pension (income) cost includes the following components:

	For the			For the			For the
	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Interest cost on projected benefit obligation	$	4,388		$	6,045		$	5,300
Expected return on plan assets		(7,419	)		(7,659	)		(7,985	)
Amortization of net loss		2,325			1,028			1,420
Settlement loss recognized		1,100			—			—
Net pension (income) expense recognized for    the period	$	394		$	(586	)	$	(1,265	)

Significant Actuarial Assumptions used to Determine Net Periodic Pension Cost

Significant actuarial assumptions used to determine net periodic pension cost at December 31, 2020, 2019 and 2018 are:

	2020			2019			2018
Discount rate		3.1	%		4.2	%		3.6	%
Increase in future compensation	N/A			N/A			N/A
Expected long-term rate of return on assets		5.5	%		5.5	%		5.5	%

Expected Future Benefit Payments

The following benefit payments are expected to be paid.

Fiscal Year Ended	Pension
2021	$	14,030
2022		12,817
2023		12,581
2024		12,789
2025		13,356
2026–2030		61,944

Other Post Retirement Plans [Member]

Amounts Recognized in Consolidated Balance Sheets

Amounts for postretirement benefits accrued in the consolidated balance sheets at December 31, 2020 and 2019 consist of:

	2020			2019
Current liabilities	$	(1,555	)	$	(1,571	)
Noncurrent liabilities		(16,566	)		(15,113	)
Net amount recognized	$	(18,121	)	$	(16,684	)

Weighted Average Assumptions used to Determine Benefit Obligations

Weighted average actuarial assumptions used to determine APBO at year-end December 31, 2020 and 2019 are:

	2020			2019
Discount rate		2.2	%		3.1	%
Health care cost trend rate assumed for next year		5.5	%		5.8	%
Rate to which the cost trend rate is assumed to    decline (ultimate trend rate)		4.5	%		4.5	%
Year that the rate reaches the ultimate trend rate	2038			2038

Net Periodic Benefit Cost Components

Net periodic postretirement benefit cost included the following components:

	2020			2019			2018
Service cost	$	67		$	58		$	128
Interest cost on APBO		426			582			672
Amortization of unrecognized prior service cost		42			42			(690	)
Amortization of net (gain) loss		(7	)		(164	)		—
Net periodic postretirement benefit expense	$	528		$	518		$	110

Significant Actuarial Assumptions used to Determine Net Periodic Pension Cost

Significant actuarial assumptions used to determine postretirement benefit cost at December 31, 2020, 2019 and 2018 are:

	2020			2019			2018
Discount rate		3.1	%		4.2	%		3.6	%
Health care cost trend rate assumed for next year		5.8	%		6.1	%		6.3	%
Rate to which the cost trend rate is assumed to    decline (ultimate trend rate)		4.5	%		4.5	%		4.5	%
Year that the rate reaches the ultimate trend rate	2038			2038			2038

Amounts not yet Reflected in Net Periodic Benefit Cost and Recognized in Accumulated Other Comprehensive (Loss) Income

Amounts not yet reflected in net periodic benefit cost for pension plans and postretirement plan and recognized in accumulated other comprehensive income at December 31, 2020 and 2019 consist of:

	2020			2019
Net actuarial loss	$	(44,219	)	$	(35,010	)
Accumulated other comprehensive loss	$	(44,219	)	$	(35,010	)

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2020

Summary of Option Activity

The following table summarizes option activity for certain employees in our stock options:

				Weighted
	Number of			Average
	Shares			Exercise Price
Balance at December 31, 2019		2,765,826		$	13.10
Forfeited		(868,614	)		13.40
Balance at December 31, 2020		1,897,212		$	12.95
Vested and expected to vest at December 31, 2020		1,883,100		$	12.97
Exercisable at December 31, 2020		1,521,524		$	13.65

Fair Value of Each Option Granted was Estimated on Grant Date using Black-Scholes Valuation Model

The fair value of each option granted was estimated on the grant date using the Black-Scholes valuation model with the following assumptions:

	For the
	Year Ended
	December 31,
	2018
Expected term (years) (a)		4.75
Expected dividend yield	0.00%
Expected volatility (b)	35.30%
Risk-free interest rate (c)	2.84%

(a) The expected term is the number of years that we estimate that options will be outstanding prior to exercise. During 2018, we have used the simplified method for estimating the expected term as we do not have sufficient stock option exercise experience to support a reasonable estimate of the expected term. The simplified method represents the best estimate of the expected term.

(b) During 2018, we estimated volatility for options granted based on our historical volatility.

(c) The risk-free interest rate is based on the U.S. Treasury yield for a period commensurate with the expected life of the option.

Summary of Restricted Stock Activity for Grants to Certain Executive Employees and Independent Members of Board of Directors

The following table summarizes restricted stock activity for grants to certain employees and independent members of the board of directors in our restricted stock units:

	Restricted Stock Units
				Weighted
				Average
	Numbers of			Grant Date
	Units			Fair Value
Balance at December 31, 2019		3,846,608		$	8.03
Granted		3,716,974			3.94
Vested		(1,149,957	)		8.50
Forfeited		(723,816	)		7.41
Balance at December 31, 2020		5,689,809		$	5.34

Employees Stock Purchase Plan [Member]

Schedule of Share Repurchase Activity

Information related to shares issued or to be issued in connection with the ESPP based on employee contributions and the range of purchase prices is as follows:

	December 31,		December 31,
	2020		2019
Shares issued or to be issued		516,563		212,476
Range of purchase prices	$1.54 - $1.56		$4.73 - $4.90

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables present our financial assets and liabilities measured at fair value on a recurring basis at December 31, 2020 and 2019:

			Quoted Prices		Significant
			in Active		Other
			Markets for		Observable
			Identical Assets		Inputs		Valuation
	2020		(Level 1)		(Level 2)		Technique
Financial assets
Money market funds	$	262,135	$	262,135	$	—	(a)
Foreign exchange derivatives		466		—		466	(a)
	$	262,601	$	262,135	$	466

			Quoted Prices		Significant
			in Active		Other
			Markets for		Observable
			Identical Assets		Inputs		Valuation
	2019		(Level 1)		(Level 2)		Technique
Financial assets
Money market funds	$	276,654	$	276,654	$	—	(a)
	$	276,654	$	276,654	$	—
Financial liabilities
Interest rate derivatives	$	986	$	—	$	986	(a)
Foreign exchange derivatives		127		—		127	(a)
	$	1,113	$	—	$	1,113

Summary of Non-financial Assets Measured at Fair Value on Nonrecurring Basis

The following table presents our nonfinancial assets measured at fair value on a nonrecurring basis during 2020:

			Significant
			Unobservable
			Inputs		Total		Valuation
	December 31, 2020		(Level 3)		Impairment		Technique
Nonfinancial assets
Goodwill	$	437,977	$	437,977	$	279,000	(c)
	$	437,977	$	437,977	$	279,000

Summary of Carrying Amounts and Estimated Fair Market Values of Debt

The following table presents the carrying amounts and estimated fair market values of our debt at December 31, 2020 and 2019. The fair value of debt is deemed to be the amount at which the instrument could be exchanged in an orderly transaction between market participants at the measurement date.

	December 31, 2020				December 31, 2019
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
$380,000 Term loan	$	346,091	$	331,382	$	361,294	$	360,391
$306,000 Senior secured notes		297,601	$	304,297		295,893		301,441

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Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consisted of the following at December 31, 2020, 2019 and 2018:

	2020			2019			2018
Net change in pension and benefit plan liabilities	$	(48,966	)	$	(39,757	)	$	(41,557	)
Foreign currency translation adjustments		(6,650	)		(6,420	)		(5,909	)
Unrealized loss on short-term investments		(90	)		(90	)		(99	)
Net change in unrealized loss on derivative    instruments		(18	)		(1,005	)		2,381
	$	(55,724	)	$	(47,272	)	$	(45,184	)

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Net Loss Per Share (Tables)

12 Months Ended

Dec. 31, 2020

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share (“EPS”):

	For the Year			For the Year			For the Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2020			2019			2018
Numerator
Loss from continuing operations	$	(479,838	)	$	(213,833	)	$	(137,457	)
Earnings from discontinued operations,    net of tax		—			—			12,833
Gain on sale of discontinued operations,    net of tax		—			—			30,469
Income from discontinued operations, net    of tax		—			—			43,302
Net loss attributable to common stockholders	$	(479,838	)	$	(213,833	)	$	(94,155	)
Denominator
Weighted average shares outstanding
Basic and diluted		125,455,487			124,152,984			123,444,943
Net loss per share attributable to common    Stockholders
Basic and diluted:
Continuing operations	$	(3.82	)	$	(1.72	)	$	(1.11	)
Discontinued operations		—			—			0.35
Net loss	$	(3.82	)	$	(1.72	)	$	(0.76	)

Summary of Anti-Dilutive Securities Excluded from Computation of Diluted EPS

The following table summarizes our weighted average outstanding common stock equivalents that were anti-dilutive attributable to common stockholders during the periods, and therefore excluded from the computation of diluted EPS:

	For the Year		For the Year		For the Year
	Ended		Ended		Ended
	December 31,		December 31,		December 31,
	2020		2019		2018
Stock options		1,897,212		2,765,826		3,406,171
Restricted stock units		4,133,531		3,342,923		2,793,680

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Segment Reporting (Tables)

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Consolidated Net Income (Loss)

Although we exclude these amounts from segment Adjusted EBITDA from continuing operations, they are included in reported consolidated net loss and are included in the reconciliation below.

	Year Ended December 31,
			HMH		Corporate/
(in thousands)	Education		Books & Media		Other
2020
Net sales	$	839,553	$	191,739	$	—
Segment Adjusted EBITDA		145,862		26,627		(40,649	)
2019
Net sales	$	1,210,646	$	180,028	$	—
Segment Adjusted EBITDA		196,907		14,908		(46,077	)
2018
Net sales	$	1,122,689	$	199,728	$	—
Segment Adjusted EBITDA		210,604		21,942		(40,418	)

Summary of Net Sales

The following table disaggregates our net sales by major source:

	Year Ended December 31, 2020
			HMH
(in thousands)	Education		Books & Media		Consolidated
Core solutions (1)	$	459,350	$	—	$	459,350
Extensions businesses (2)		380,203		—		380,203
Books & Media		—		191,739		191,739
Net sales	$	839,553	$	191,739	$	1,031,292

	Year Ended December 31, 2019
			HMH
(in thousands)	Education		Books & Media		Consolidated
Core solutions (1)	$	578,675	$	—	$	578,675
Extensions businesses (2)		631,971		—		631,971
Books & Media		—		180,028		180,028
Net sales	$	1,210,646	$	180,028	$	1,390,674

	Year Ended December 31, 2018
			HMH
(in thousands)	Education		Books & Media		Consolidated
Core solutions (1)	$	538,166	$	—	$	538,166
Extensions businesses (2)		584,523		—		584,523
Books & Media		—		199,728		199,728
Net sales	$	1,122,689	$	199,728	$	1,322,417

(1) Comprehensive solutions primarily for reading, literature, math, science and social studies programs.

(2) Primarily consists of our Heinemann brand, intervention, supplemental and professional services.

Consolidated Statements of Operations

Reconciliation of Segment Adjusted EBITDA to the consolidated statements of operations is as follows:

	Years Ended December 31,
(in thousands)	2020			2019			2018
Education Adjusted EBITDA	$	145,862		$	196,907		$	210,604
HMH Books & Media Adjusted EBITDA		26,627			14,908			21,942
Total Segment Adjusted EBITDA		172,489			211,815			232,546
Corporate/Other Adjusted EBITDA		(40,649	)		(46,077	)		(40,418	)
Interest expense		(65,959	)		(48,778	)		(45,680	)
Interest income		899			3,157			2,550
Depreciation expense		(50,715	)		(61,475	)		(75,116	)
Amortization expense—film asset		(13,953	)		(9,835	)		(6,057	)
Amortization expense		(171,821	)		(201,382	)		(170,903	)
Non-cash charges—stock compensation		(11,573	)		(13,968	)		(13,248	)
Non-cash charges—loss on derivative instruments		672			(899	)		(1,374	)
Non-cash charges—asset impairment charges		(279,000	)		—			—
Inventory obsolescence related to strategic transformation plan		—			(9,758	)		—
Fees, expenses or charges for equity offerings, debt    or acquisitions/dispositions		(1,080	)		(6,327	)		(2,883	)
Restructuring/severance and other charges		(33,643	)		(21,742	)		(11,478	)
Gain on investments		2,091			—			—
Gain on sale of assets		—			—			201
Loss on extinguishment of debt		—			(4,363	)		—
Loss before taxes		(492,242	)		(209,632	)		(131,860	)
(Provision) benefit for income taxes		12,404			(4,201	)		(5,597	)
Net loss from continuing operations	$	(479,838	)	$	(213,833	)	$	(137,457	)

Segment Information

Segment information as of December 31, 2020 and 2019 is as follows:

(in thousands)	2020		2019
Total assets—Education segment	$	1,520,504	$	1,971,553
Total assets—HMH Books & Media segment		175,710		186,318
Total assets—Corporate and Other		324,912		355,301
Total consolidated assets	$	2,021,126	$	2,513,172

Schedule of Long-Lived Assets

The following represents long-lived assets (property, plant, and equipment) outside of the United States, which are substantially in Ireland. All other long-lived assets are located in the United States.

(in thousands)	2020		2019
Long-lived assets—International	$	228	$	113

Schedule of Net Sales by Geographic Region

The following is a schedule of net sales by geographic region:

(in thousands)
Year Ended December 31, 2020
Net sales—U.S.	$	997,178
Net sales—International		34,114
Total net sales	$	1,031,292
Year Ended December 31, 2019
Net sales—U.S.	$	1,327,833
Net sales—International		62,841
Total net sales	$	1,390,674
Year Ended December 31, 2018
Net sales—U.S.	$	1,249,568
Net sales—International		72,849
Total net sales	$	1,322,417

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Valuation and Qualifying Accounts (Tables)

12 Months Ended

Dec. 31, 2020

Valuation And Qualifying Accounts [Abstract]

Valuation and Qualifying Accounts

	Balance at								Balance at
	Beginning					Utilization of			End
	of Year		Net Charges			Allowances			of Year
2020
Allowance for doubtful accounts	$	3,015	$	1,589		$	(615	)	$	3,989
Reserve for returns		16,679		33,847			(35,952	)		14,574
Reserve for royalty advances		119,695		16,552			(39,592	)		96,655
Deferred tax valuation allowance		583,505		81,475			(2,412	)		662,568
2019
Allowance for doubtful accounts	$	2,173	$	1,909		$	(1,067	)	$	3,015
Reserve for returns		18,559		41,654			(43,534	)		16,679
Reserve for royalty advances		117,797		16,500			(14,602	)		119,695
Deferred tax valuation allowance		562,392		23,707			(2,594	)		583,505
2018
Allowance for doubtful accounts	$	2,508	$	128		$	(463	)	$	2,173
Reserve for returns		20,580		36,395			(38,416	)		18,559
Reserve for royalty advances		103,606		17,301			(3,110	)		117,797
Deferred tax valuation allowance		571,653		(7,667	)		(1,594	)		562,392

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Quarterly Results of Operations (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2020

Quarterly Financial Information Disclosure [Abstract]

Quarterly Results of Operations

	Three Months Ended
	March 31,			June 30,			September 30,			December 31,
2020:
Net sales	$	189,925		$	251,216		$	386,590		$	203,561
Gross profit		63,450			90,389			167,415			65,986
Operating (loss) income		(338,176	)		(22,212	)		272			(68,973	)
Net loss		(345,973	)		(38,168	)		(12,552	)		(83,145	)
Net loss per share attributable to    common stockholders
Basic:
Net loss	$	(2.77	)	$	(0.30	)	$	(0.10	)	$	(0.66	)
Diluted:
Net loss	$	(2.77	)	$	(0.30	)	$	(0.10	)	$	(0.66	)
2019:
Net sales	$	194,635		$	388,896		$	565,668		$	241,475
Gross profit		57,893			156,055			273,481			59,065
Operating (loss) income		(101,835	)		(30,253	)		77,871			(108,947	)
Net (loss) income		(117,362	)		(40,613	)		69,260			(125,118	)
Net (loss) income per share attributable to    common stockholders
Basic:
Net (loss) income	$	(0.95	)	$	(0.33	)	$	0.56		$	(1.01	)
Diluted:
Net (loss) income	$	(0.95	)	$	(0.33	)	$	0.55		$	(1.01	)

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Basis of Presentation - Additional Information (Detail) Student in Millions, Educator in Millions	12 Months Ended
	Dec. 31, 2020 Student Country Educator Segment	Dec. 31, 2019	Dec. 31, 2018
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Services provided, number of students | Student	50
Services provided, number of countries | Country	150
Services provided, number of educators | Educator	3
Number of business segments | Segment	2
Seasonal Concentration Risk [Member] | Consolidated Net Sales [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Consolidated net sales, realized percentage	66.00%	66.00%	66.00%
Seasonal Concentration Risk [Member] | Consolidated Net Sales [Member] | Education [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Consolidated net sales, realized percentage	81.00%

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Impact of the COVID-19 Pandemic - Additional Information (Detail)			3 Months Ended			12 Months Ended
	Sep. 30, 2020 USD ($) Employee	Sep. 04, 2020 Employee	Dec. 31, 2020 USD ($)	Sep. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Oct. 01, 2019
Unusual Or Infrequent Item [Line Items]
Goodwill impairment				$ 0	$ 262,000,000.0	$ 279,000,000	$ 0	$ 0
Percentage of fair value in excess of carrying value	18.00%			18.00%	12.00%				18.00%
Goodwill Impairment Charge [Member]
Unusual Or Infrequent Item [Line Items]
Prior period correction amounts			$ 17,000,000.0
Income Tax Benefit [Member]
Unusual Or Infrequent Item [Line Items]
Prior period correction amounts			$ 1,000,000.0
2020 Restructuring Plan [Member]
Unusual Or Infrequent Item [Line Items]
Restructuring program, positions eliminated percentage	22.00%
Restructuring program, number of positions eliminated | Employee	525
Restructuring program, cash expenditure	$ 33,600,000					$ 758,000
Restructuring program, completion month and year	2020-10
Retirement Incentive Program [Member] | 2020 Restructuring Plan [Member]
Unusual Or Infrequent Item [Line Items]
Minimum eligible age of employees to offer voluntary retirement program		55 years
Minimum years of employee service to offer voluntary retirement program		5 years
Number of employees eligible to participate in voluntary retirement program | Employee		165
Percentage of employee base, eligible to participate in voluntary retirement program		5.00%

XML

Significant Accounting Policies and Recent Accounting Standards - Additional Information (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2020	Mar. 31, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Oct. 01, 2019
Significant Accounting Policies [Line Items]
Advertising costs			$ 12,100,000	$ 12,600,000	$ 12,000,000.0
Impairment charges			279,000,000
Percentage of fair value of education reporting unit in excess of carrying value	18.00%	12.00%				18.00%
Goodwill impairment	$ 0	$ 262,000,000.0	279,000,000	0	0
Impairment of intangible assets			0	0	0
Impairment charges relating to goodwill and intangibles			0	0	0
Operating lease, asset			126,850,000	132,247,000
Operating lease, liability			141,683,000	143,679,000
Adjustment to accumulated deficit			(4,255,830,000)	(3,775,992,000)
Net change in unrealized gain (loss) on derivative financial instruments, net of tax			987,000	(3,386,000)	3,541,000
Allowance for doubtful accounts			4,000,000.0	3,000,000.0
Increase in allowance for doubtful accounts			1,600,000
Allowance for doubtful accounts, write-offs			600,000
Reserve balance			96,700,000	119,700,000
Decrease in advance royalties reserve			$ 23,000,000.0
Interest Rate Hedging [Member]
Significant Accounting Policies [Line Items]
Net change in unrealized gain (loss) on derivative financial instruments, net of tax				(3,400,000)	3,500,000
Total hedge liability included within current other liabilities				1,000,000.0
Derivative contracts maturity date			Jul. 22, 2020
Accounting Standards Update 2016-02 [Member]
Significant Accounting Policies [Line Items]
Operating lease, asset			$ 148,000,000.0
Operating lease, liability			161,000,000.0
Accounting Standards Update 2016-02 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Significant Accounting Policies [Line Items]
Adjustment to accumulated deficit			$ 800,000
Minimum [Member]
Significant Accounting Policies [Line Items]
Acquired publication rights and customer-related intangibles, amortization period			3 years
Maximum [Member]
Significant Accounting Policies [Line Items]
Acquired publication rights and customer-related intangibles, amortization period			20 years
Pre-publication Costs [Member]
Significant Accounting Policies [Line Items]
Impairment charges			$ 0	0	0
Amortization expense for pre-publication cost, year 1			33.00%
Amortization expense for pre-publication cost, year 2			27.00%
Amortization expense for pre-publication cost, year 3			20.00%
Amortization expense for pre-publication cost, year 4			13.00%
Amortization expense for pre-publication cost, year 5			7.00%
Amortization period of acquisition costs			7 years
Amortization of intangible assets, cost of sales			$ 126,200,000	149,500,000	109,300,000
Software Developments Costs [Member]
Significant Accounting Policies [Line Items]
Impairment charges			$ 0	$ 0	$ 0

XML

Significant Accounting Policies and Recent Accounting Standards - Summary of Estimated Useful Lives of Property, Plant, and Equipment (Detail)	12 Months Ended
	Dec. 31, 2020
Building and Building Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful life	10 years
Building and Building Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful life	35 years
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful life	2 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful life	15 years
Capitalized Software and Internal-use Software [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful life	3 years
Capitalized Software and Internal-use Software [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful life	5 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful life	Lesser of useful life or lease term
Film and Media [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful life	Revenue earned

XML

Acquisitions - Additional Information (Detail) - USD ($) $ in Thousands	Jan. 14, 2019	Dec. 31, 2020	Dec. 31, 2019
Business Acquisition [Line Items]
Goodwill		$ 437,977	$ 716,977
PV Waggle LLC [Member]
Business Acquisition [Line Items]
Business acquisition, purchase price	$ 5,400
Other liabilities	700
Other intangible assets	5,200
Goodwill	$ 900

XML

Discontinued Operations - Additional Information (Detail) - USD ($)			3 Months Ended	12 Months Ended
	Oct. 02, 2018	Sep. 12, 2018	Dec. 31, 2018	Dec. 31, 2018	Oct. 01, 2018
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from sale of business				$ 140,000,000
Riverside Business [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash consideration received					$ 140,000,000.0
Proceeds from sale of business	$ 135,000,000.0
Gain on sale of business			$ 30,500,000
Goodwill		$ 67,000,000.0
Goodwill impairment, discontinued operation		$ 0

XML

Discontinued Operations - Summary of Amounts Included in Discontinued Operations (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Income from discontinued operations, net of tax	$ 43,302
Riverside Business [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net sales	56,562
Costs	37,714
Amortization	4,954
Earnings from discontinued operations before taxes	13,894
Income tax expense	1,061
Income from discontinued operations, net of tax	$ 12,833

XML

Balance Sheet Information - Accounts Receivable (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Accounts Receivable [Line Items]
Accounts receivable	$ 171,395	$ 204,119
Allowance for bad debt	(4,000)	(3,000)
Accounts Receivable, Net, Total	152,832	184,425
Allowance for Bad Debt [Member]
Accounts Receivable [Line Items]
Allowance for bad debt	(3,989)	(3,015)
Reserve for Book Returns [Member]
Accounts Receivable [Line Items]
Allowance for bad debt	$ (14,574)	$ (16,679)

XML

Balance Sheet Information - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Balance Sheet Details [Line Items]
Depreciation	$ 50,715	$ 61,475	$ 75,116
Property, plant, and equipment acquired under finance lease agreements	100	300
Amortization expense	20,056	26,557	34,713
Increase in net contract liabilities from increase in contract liabilities	56,700
Aggregate amount of transaction price allocated to remaining performance obligations	$ 970,300
Percentage of transaction recognized	73.00%
Deferred commissions	$ 30,659	29,291
Amortization of deferred commissions	12,900	13,200	10,500
Contract cost	14,700	5,600
Amortization contract cost	$ 3,800	4,600
Minimum [Member]
Balance Sheet Details [Line Items]
Period of duration for recognition of transaction	1 year
Maximum [Member]
Balance Sheet Details [Line Items]
Period of duration for recognition of transaction	3 years
Film and Media [Member]
Balance Sheet Details [Line Items]
Amortization expense	$ 14,000	9,800	6,100
Property, Plant, and Equipment [Member]
Balance Sheet Details [Line Items]
Depreciation	64,700	$ 71,300	$ 81,200
Capital leases 2021	$ 100
Accounts Receivable [Member] | Customer Concentration Risk [Member]
Balance Sheet Details [Line Items]
Concentration Risk, percentage	10.00%	10.00%

XML

Balance Sheet Information - Schedule of Inventories (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Finished goods	$ 155,759	$ 203,103
Raw materials	11,204	9,956
Inventories	$ 166,963	$ 213,059

XML

Balance Sheet Information - Balances of Major Classes of Assets and Accumulated Depreciation and Amortization (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Offsetting [Abstract]
Land and land improvements	$ 4,939	$ 4,939
Building and building equipment	11,160	10,239
Machinery and equipment	14,985	12,970
Capitalized software and internal-use software	641,027	598,317
Leasehold improvements	24,266	22,974
Film and media	29,845	22,055
Property, Plant and Equipment, Gross, Total	726,222	671,494
Less: Accumulated depreciation and amortization	(633,020)	(571,106)
Property, plant, and equipment, net	$ 93,202	$ 100,388

XML

Balance Sheet Information - Summary of Changes in Contract Assets and Contract Liabilities (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Investments Debt And Equity Securities [Abstract]
Contract with customer assets	$ 580	$ 109
Contract with customer liabilities	905,284	$ 848,106
Contract with customer assets change	471
Contract with customer liabilities change	$ 57,178
Contract with customer assets percentage change	432.11%
Contract with customer liabilities percentage change	6.74%

XML

Balance Sheet Information - Summary of Net Sales Recognised from Changes in Contract Assets and Contract Liabilities (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Net sales recognized in the period from:
Amounts included in contract liabilities at the beginning of the period	$ 295,675	$ 229,557	$ 220,769

XML

Goodwill and Other Intangible Assets - Schedule of Change in the Carrying Amount of Goodwill Relates to the Education Segment (Details) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2020	Mar. 31, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Goodwill And Intangible Assets Disclosure [Abstract]
Balance at December 31, 2019		$ 716,977,000	$ 716,977,000
Impairment	$ 0	$ (262,000,000.0)	(279,000,000)	$ 0	$ 0
Balance at December 31, 2020			$ 437,977,000	$ 716,977,000

XML

Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2020	Mar. 31, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Goodwill and Other Intangible Assets [Line Items]
Accumulated impairment losses on goodwill			$ 279,000,000.0
Impairment charge for goodwill	$ 0	$ 262,000,000.0	279,000,000	$ 0	$ 0
Amortization expense			20,056,000	26,557,000	34,713,000
Definite-lived, Publishing Rights and Customer Related and Other Intangibles [Member]
Goodwill and Other Intangible Assets [Line Items]
Amortization expense			$ 45,600,000	51,900,000	$ 61,600,000
PV Waggle LLC [Member]
Goodwill and Other Intangible Assets [Line Items]
Intangible asset recorded on acquisition				$ 5,200,000

XML

Goodwill and Other Intangible Assets - Schedule of Other Intangible Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Goodwill and Other Intangible Assets [Line Items]
Cost	$ 1,954,970	$ 1,954,970
Accumulated Amortization	(1,526,386)	(1,480,745)
Total	428,584	474,225
Trademarks and Trade Names [Member]
Goodwill and Other Intangible Assets [Line Items]
Trademarks and tradenames: indefinite-Lived	161,000	161,000
Cost	164,130	164,130
Accumulated Amortization	(53,610)	(38,948)
Total	110,520	125,182
Publishing Rights [Member]
Goodwill and Other Intangible Assets [Line Items]
Cost	1,180,000	1,180,000
Accumulated Amortization	(1,159,482)	(1,139,426)
Total	20,518	40,574
Customer Related and Other [Member]
Goodwill and Other Intangible Assets [Line Items]
Cost	449,840	449,840
Accumulated Amortization	(313,294)	(302,371)
Total	$ 136,546	$ 147,469

XML

Goodwill and Other Intangible Assets - Estimated Aggregate Amortization Expense (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Trademarks and Trade Names [Member]
Goodwill and Other Intangible Assets [Line Items]
2021	$ 14,408
2022	10,608
2023	6,808
2024	6,715
2025	6,437
Thereafter	65,544
Total	110,520	$ 125,182
Publishing Rights [Member]
Goodwill and Other Intangible Assets [Line Items]
2021	11,642
2022	7,569
2023	1,307
Total	20,518	$ 40,574
Other Intangible Assets [Member]
Goodwill and Other Intangible Assets [Line Items]
2021	10,333
2022	10,134
2023	9,954
2024	8,503
2025	8,315
Thereafter	89,307
Total	$ 136,546

XML

Debt - Long-Term Debt (Detail) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Long term debt	$ 643,692,000	$ 657,187,000
Less: Current portion of long-term debt	(19,000,000)	(19,000,000)
Total long-term debt, net of discount and issuance Costs	624,692,000	638,187,000
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Revolving credit facility	0
Term Loan Due November 22, 2024 [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Long term debt	346,091,000	361,294,000
Senior Secured Notes Due February 15, 2025 [Member] | Senior Secured Notes [Member]
Debt Instrument [Line Items]
Long term debt	$ 297,601,000	$ 295,893,000

XML

Debt - Long-Term Debt (Parenthetical) (Detail) - USD ($) $ in Thousands		12 Months Ended
	Nov. 22, 2019	Dec. 31, 2020	Dec. 31, 2019
Senior Secured Notes [Member]
Debt Instrument [Line Items]
Term loan, face amount	$ 306,000
Term loan, due date	Feb. 15, 2025
Term Loan Due November 22, 2024 [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Term loan, face amount	$ 380,000	$ 380,000	$ 380,000
Term loan, due date	Nov. 22, 2024	Nov. 22, 2024	Nov. 22, 2024
Senior Secured Notes Due February 15, 2025 [Member] | Senior Secured Notes [Member]
Debt Instrument [Line Items]
Term loan, face amount		$ 306,000	$ 306,000
Term loan, due date		Feb. 15, 2025	Feb. 15, 2025

XML

Debt - Long - Term Debt Repayments Due (Detail) $ in Thousands	Dec. 31, 2020 USD ($)
Equity Method Investments And Cost Method Investments [Abstract]
2021	$ 19,000
2022	19,000
2023	19,000
2024	304,000
2025	306,000
Long-term debt repayments amount	$ 667,000

XML

Debt - Additional Information (Detail)			12 Months Ended
	Nov. 22, 2019 USD ($)	Jul. 22, 2015	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Aug. 17, 2015 USD ($)
Debt Instrument [Line Items]
Debt outstanding amount			$ 667,000,000
Loss on extinguishment of debt				$ (4,363,000)
Net change in unrealized gain (loss) on derivative financial instruments			987,000	(3,386,000)	$ 3,541,000
Reclassified from other comprehensive loss to earnings			1,900,000
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Deferred financing fees, net	$ 1,100,000
Revolving Credit Facility, maximum borrowing capacity	250,000,000.0
Revolving Credit Facility, outstanding			$ 0
Financial covenants, description			As of December 31, 2020, the minimum fixed charge coverage ratio covenant under our revolving credit facility was not applicable, due to our level of borrowing availability. The minimum fixed charge coverage ratio, which is only tested in limited situations, is 1.0 to 1.0 through the end of the facility.
Revolving Credit Facility [Member] | Letter Of Credit Subfacility [Member]
Debt Instrument [Line Items]
Revolving Credit Facility, current capacity	50,000,000.0
Revolving Credit Facility [Member] | Swingline [Member]
Debt Instrument [Line Items]
Revolving Credit Facility, current capacity	20,000,000.0
Revolving Credit Facility [Member] | Subfacility [Member]
Debt Instrument [Line Items]
Revolving Credit Facility, maximum borrowing capacity	100,000,000.0
Minimum [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Fixed charge coverage ratio		1.0	1.0
Interest Rate Hedging [Member]
Debt Instrument [Line Items]
Aggregate notional amount of derivative instruments						$ 400,000,000.0
Net change in unrealized gain (loss) on derivative financial instruments				(3,400,000)	$ 3,500,000
Total hedge liability included within current other liabilities				1,000,000.0
Interest rate derivative contracts outstanding			$ 0
Interest Rate Hedging [Member] | Maximum [Member]
Debt Instrument [Line Items]
Unrealized gain (loss) on interest rate derivative instruments			$ 100,000	100,000
Interest Rate Hedging [Member] | Cash Flow Hedging [Member] | Designated as Hedging Instrument
Debt Instrument [Line Items]
Aggregate notional amount of derivative instruments	29,500,000
Interest Rate Hedging [Member] | Cash Flow Hedging [Member] | Not Designated as Hedging Instrument
Debt Instrument [Line Items]
Aggregate notional amount of derivative instruments	29,500,000
Senior Secured Notes [Member]
Debt Instrument [Line Items]
Term loan, face amount	$ 306,000,000.0
Debt instrument, interest rate, stated percentage	9.00%
Term loan, due date	Feb. 15, 2025
Debt instrument basis spread	9.00%
Repayment frequency			Interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2020
Deferred financing fees				5,400,000
Deferred financing fees, net				4,100,000
Senior Secured Notes [Member] | Selling, General and Administrative Expenses [Member]
Debt Instrument [Line Items]
Deferred financing expense				1,300,000
Senior Secured Notes [Member] | Senior Secured Notes Due February 15, 2025 [Member]
Debt Instrument [Line Items]
Term loan, face amount			$ 306,000,000	$ 306,000,000
Term loan, due date			Feb. 15, 2025	Feb. 15, 2025
Percentage of outstanding borrowing commitment issued as discount			2.00%
Term Loan Facility [Member]
Debt Instrument [Line Items]
Deferred financing fees				$ 7,200,000
Deferred financing fees, net				2,900,000
Percentage of principal for subject to prepayment premium			1.00%
Debt outstanding amount	$ 800,000,000.0
Loss on extinguishment of debt	4,400,000
Term Loan Facility [Member] | Selling, General and Administrative Expenses [Member]
Debt Instrument [Line Items]
Deferred financing expense				4,300,000
Term Loan Facility [Member] | Term Loan Due November 22, 2024 [Member]
Debt Instrument [Line Items]
Term loan, face amount	$ 380,000,000.0		$ 380,000,000	$ 380,000,000
Term loan, due date	Nov. 22, 2024		Nov. 22, 2024	Nov. 22, 2024
Debt instrument basis spread			7.25%
Percentage of outstanding borrowing commitment issued as discount			4.00%
Amount to be repaid quarterly	$ 4,800
Term Loan Facility [Member] | Term Loan Due November 22, 2024 [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt instrument basis spread	6.25%
Term Loan Facility [Member] | Term Loan Due November 22, 2024 [Member] | Alternate Base Rate [Member]
Debt Instrument [Line Items]
Debt instrument basis spread	5.25%

XML

Leases - Schedule of Lease Assets and Liabilities (Detail) - USD ($) $ in Thousands		Dec. 31, 2020	Dec. 31, 2019
Leases Assets
Operating lease assets		$ 126,850	$ 132,247
Total leased assets		126,850	132,247
Current
Operating lease liabilities		9,669	8,685
Noncurrent
Operating lease liabilities		132,014	134,994
Total lease liabilities		$ 141,683	$ 143,679
Weighted average remaining lease term Operating leases		8 years 2 months 12 days	9 years 7 months 6 days
Weighted average discount rate Operating leases	[1]	12.56%	12.46%

[1] Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

XML

Leases - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2020	Dec. 31, 2019
Operating Lease, Cost		$ 34.9	$ 39.9
Sublease Income		2.1	2.3
Lease term	10 years
Option to renew additional years	5 years
Estimated fixed lease payments	$ 9.8
Selling, General and Administrative Expenses [Member]
Lease, Cost		$ 32.8	$ 37.6

XML

Leases - Summary of Undiscounted Cash Flows (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Leases [Abstract]
2021	$ 24,143
2022	25,395
2023	27,838
2024	29,034
2025	28,370
Thereafter	110,993
Total lease payments	245,773
Less: interest	(104,090)
Present value of lease liabilities	$ 141,683	$ 143,679

XML

Leases - Supplemental Cash Flow Information Related to Leases (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities Operating cash flows for operating leases	$ 28,639	$ 31,245

XML

Restructuring, Severance and Other Charges - Additional Information (Detail) $ in Thousands					3 Months Ended			4 Months Ended	12 Months Ended
		Sep. 30, 2020 USD ($) Employee	Sep. 04, 2020 Employee	Oct. 15, 2019	Dec. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)		Dec. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)		Dec. 31, 2018 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring/severance and other charges									$ 33,643	$ 21,742		$ 11,478
Severance and other charges					$ 12,400	$ 12,400		$ 19,600	19,600	12,400
Operating Lease Assets [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring costs										3,400
Severance Costs [Member]
Restructuring Cost and Reserve [Line Items]
Payments for severance cost									800	3,200		5,700
Restructuring/severance and other charges										2,500		6,800
Other Accruals [Member]
Restructuring Cost and Reserve [Line Items]
Payments for severance cost												$ 1,000
2020 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring program, positions eliminated percentage		22.00%
Restructuring program, number of positions eliminated | Employee		525
Restructuring program, completion month and year		2020-10
Payments for severance cost		$ 33,600							758
Restructuring/severance and other charges	[1]							$ 33,643	33,643
2020 Restructuring Plan [Member] | Severance Costs [Member]
Restructuring Cost and Reserve [Line Items]
Payments for severance cost									758
2020 Restructuring Plan [Member] | Retirement Incentive Program [Member]
Restructuring Cost and Reserve [Line Items]
Minimum eligible age of employees to offer voluntary retirement program			55 years
Minimum years of employee service to offer voluntary retirement program			5 years
Number of employees eligible to participate in voluntary retirement program | Employee			165
Percentage of employee base, eligible to participate in voluntary retirement program			5.00%
2019 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring program, positions eliminated percentage				10.00%
Payments for severance cost									$ 3,196
Percentage of reduction in content development expenditures				20.00%
Description of workforce reduction									The workforce reductions were completed in the first quarter of 2020.
Restructuring/severance and other charges					$ 15,800	$ 15,820	[1]			$ 15,820	[1]
2019 Restructuring Plan [Member] | Severance Costs [Member]
Restructuring Cost and Reserve [Line Items]
Payments for severance cost									$ 3,196
2019 Restructuring Plan [Member] | Cost of Sales [Member]
Restructuring Cost and Reserve [Line Items]
Inventory obsolescence charge									$ 9,800

[1] All restructuring charges are included within Corporate and Other.

XML

Restructuring, Severance and Other Charges - Summary of Restructuring/Severance Total Costs (Detail) - USD ($) $ in Thousands		3 Months Ended			4 Months Ended	12 Months Ended
		Dec. 31, 2019	Dec. 31, 2019		Dec. 31, 2020	Dec. 31, 2020	Dec. 31, 2019		Dec. 31, 2018
Condensed Comprehensive Income [Line Items]
Restructuring charges						$ 33,643	$ 21,742		$ 11,478
2020 Restructuring Plan [Member]
Condensed Comprehensive Income [Line Items]
Restructuring charges	[1]				$ 33,643	33,643
2020 Restructuring Plan [Member] | Severance and Termination Benefits [Member]
Condensed Comprehensive Income [Line Items]
Restructuring charges	[1]				$ 33,643	$ 33,643
2019 Restructuring Plan [Member]
Condensed Comprehensive Income [Line Items]
Restructuring charges		$ 15,800	$ 15,820	[1]			15,820	[1]
2019 Restructuring Plan [Member] | Severance and Termination Benefits [Member]
Condensed Comprehensive Income [Line Items]
Restructuring charges	[1]		$ 15,820				$ 15,820

[1] All restructuring charges are included within Corporate and Other.

XML

Restructuring, Severance and Other Charges - Summary of Restructuring Liabilities Comprised of Accruals for Severance and Termination Benefits (Detail) - USD ($) $ in Thousands			3 Months Ended			4 Months Ended	12 Months Ended
		Sep. 30, 2020	Dec. 31, 2019	Dec. 31, 2019		Dec. 31, 2020	Dec. 31, 2020	Dec. 31, 2019		Dec. 31, 2018
Condensed Comprehensive Income [Line Items]
Charges							$ 33,643	$ 21,742		$ 11,478
2020 Restructuring Plan [Member]
Condensed Comprehensive Income [Line Items]
Severance/restructuring and other accruals, Beginning balance							758
Charges	[1]					$ 33,643	33,643
Cash payments		$ (33,600)					(758)
Severance/restructuring and other accruals, Ending balance			$ 758	$ 758				758
2020 Restructuring Plan [Member] | Severance and Termination Benefits [Member]
Condensed Comprehensive Income [Line Items]
Charges	[1]					33,643	33,643
Cash payments							(14,332)
Severance/restructuring and other accruals, Ending balance						19,311	19,311
2019 Restructuring Plan [Member]
Condensed Comprehensive Income [Line Items]
Severance/restructuring and other accruals, Beginning balance							1,690
Charges			15,800	15,820	[1]			15,820	[1]
Cash payments							(3,196)
Severance/restructuring and other accruals, Ending balance			1,690	1,690		758	758	1,690
2019 Restructuring Plan [Member] | Severance and Termination Benefits [Member]
Condensed Comprehensive Income [Line Items]
Severance/restructuring and other accruals, Beginning balance							11,649
Charges	[1]			15,820				15,820
Cash payments							(11,370)	(4,171)
Severance/restructuring and other accruals, Ending balance			$ 11,649	$ 11,649		$ 279	$ 279	$ 11,649

[1] All restructuring charges are included within Corporate and Other.

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Restructuring, Severance and Other Charges - Components of Severance/Restructuring and Other Charges (Detail) - USD ($) $ in Thousands			12 Months Ended
		Sep. 30, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Severance Costs [Member]
Restructuring Cost and Reserve [Line Items]
Cash payments			$ (800)	$ (3,200)	$ (5,700)
Other Accruals [Member]
Restructuring Cost and Reserve [Line Items]
Cash payments					(1,000)
2020 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Severance/restructuring and other accruals, Beginning balance			758
Cash payments		$ (33,600)	(758)
Severance/restructuring and other accruals, Ending balance				758
2020 Restructuring Plan [Member] | Severance Costs [Member]
Restructuring Cost and Reserve [Line Items]
Severance/restructuring and other accruals, Beginning balance			758
Cash payments			(758)
Severance/restructuring and other accruals, Ending balance				758
2019 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Severance/restructuring and other accruals, Beginning balance			1,690
Severance/other expense			2,534
Cash payments			(3,196)
Severance/restructuring and other accruals, Ending balance			758	1,690
2019 Restructuring Plan [Member] | Severance Costs [Member]
Restructuring Cost and Reserve [Line Items]
Severance/restructuring and other accruals, Beginning balance			1,420
Severance/other expense			2,534
Cash payments			(3,196)
Severance/restructuring and other accruals, Ending balance			758	1,420
2019 Restructuring Plan [Member] | Other Accruals [Member]
Restructuring Cost and Reserve [Line Items]
Severance/restructuring and other accruals, Beginning balance	[1]		$ 270
Severance/restructuring and other accruals, Ending balance	[1]			270
2018 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Severance/restructuring and other accruals, Beginning balance				1,690	1,640
Severance/other expense					6,821
Cash payments					(6,771)
Severance/restructuring and other accruals, Ending balance					1,690
2018 Restructuring Plan [Member] | Severance Costs [Member]
Restructuring Cost and Reserve [Line Items]
Severance/restructuring and other accruals, Beginning balance				1,420	341
Severance/other expense					6,821
Cash payments					(5,742)
Severance/restructuring and other accruals, Ending balance					1,420
2018 Restructuring Plan [Member] | Other Accruals [Member]
Restructuring Cost and Reserve [Line Items]
Severance/restructuring and other accruals, Beginning balance				$ 270	1,299
Cash payments					(1,029)
Severance/restructuring and other accruals, Ending balance					$ 270

[1] In connection with the adoption of the new leasing standard on January 1, 2019, the restructuring liabilities related to office space consolidation were reclassed on the balance sheet as a reduction of operating lease assets.

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Income Taxes - Components of Loss Before Taxes by Jurisdiction (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Schedule Of Components Of Income Loss Before Income Taxes [Line Items]
Loss before taxes	$ (492,242)	$ (209,632)	$ (131,860)
U.S. [Member]
Schedule Of Components Of Income Loss Before Income Taxes [Line Items]
Loss before taxes	(494,456)	(213,541)	(134,884)
Foreign [Member]
Schedule Of Components Of Income Loss Before Income Taxes [Line Items]
Loss before taxes	$ 2,214	$ 3,909	$ 3,024

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Income Taxes - Total Income Tax by Jurisdiction (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Income tax expense (benefit)
Income tax expense (benefit)	$ (12,404)	$ 4,201	$ 5,597
U.S. [Member]
Income tax expense (benefit)
Income tax expense (benefit)	(12,691)	4,273	3,701
Foreign [Member]
Income tax expense (benefit)
Income tax expense (benefit)	$ 287	$ (72)	$ 1,896

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Income Taxes - Components of (Benefit) Expense for Income Taxes Attributable to Loss from Continuing Operations (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Current
Foreign	$ 182	$ (730)	$ 1,562
U.S.—Federal		0	(63)
U.S.—State and other	1,769	396	(1,042)
Total current	1,951	(334)	457
Deferred
Foreign	105	658	334
U.S.—Federal	(5,505)	1,908	2,329
U.S.—State and other	(8,955)	1,969	2,477
Total deferred	(14,355)	4,535	5,140
Income tax (benefit) expense	$ (12,404)	$ 4,201	$ 5,597

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Income Taxes - Reconciliation of Income Tax Rate Computed at Statutory Tax Rate (Detail)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Statutory rate	21.00%	21.00%	21.00%
Permanent items	(0.90%)	(3.60%)	(2.60%)
Foreign rate differential			(0.10%)
State and local taxes	2.00%	(7.90%)	6.80%
Cancellation of debt income		(1.30%)
Increase in valuation allowance	(15.50%)	(10.00%)	(26.60%)
Tax credits	(0.20%)	(0.20%)	(2.70%)
Goodwill impairment	(3.90%)
Effective tax rate	2.50%	(2.00%)	(4.20%)

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Income Taxes - Components of Net Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Thousands		Dec. 31, 2020	Dec. 31, 2019
Tax assets related to
Net operating loss and other carryforwards		$ 326,504	$ 272,378
Returns reserve/inventory expense		39,095	41,824
Pension benefits		6,879	6,624
Postretirement benefits		4,480	4,475
Deferred interest	[1]	226,227	259,375
Deferred revenue		141,775	113,029
Stock-based compensation		2,806	3,298
Deferred compensation		6,525	6,152
Research and development		12,435	10,302
Operating lease liabilities		33,963	35,890
Other, net		8,263	6,769
Valuation allowance		(662,569)	(583,505)
Deferred assets		146,383	176,611
Tax liabilities related to
Indefinite-lived intangible assets		(53,400)	(89,879)
Definite-lived intangible assets		(21,578)	(25,503)
Depreciation and amortization expense		(45,279)	(48,984)
Operating lease assets		(30,245)	(32,887)
Other, net		(9,877)	(7,709)
Deferred liabilities		(160,379)	(204,962)
Net deferred tax liabilities		$ (13,996)	$ (28,351)

[1] The deferred interest tax asset represents disallowed interest deductions under Section 163(j) (Limitation on Deduction for interest on Certain Indebtedness) of the Internal Revenue Code of 1986, as amended (“IRC”) for the current and prior years. At December 31, 2020 and 2019, we had gross deferred interest deductions totaling $900.2 million and $984.5 million, respectively. The disallowed interest is able to be carried forward indefinitely and utilized in future years pursuant to IRC Section 163(j). A full valuation allowance has been provided against deferred tax assets, excluding $2.4 million of foreign deferred tax assets which are expected to be realized, net of deferred tax liabilities resulting from indefinite-lived intangibles.

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Income Taxes - Components of Net Deferred Tax Assets and Liabilities (Parenthetical) (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Gross deferred interest deductions	$ 900.2	$ 984.5
Foreign deferred tax assets	$ 2.4

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Income Taxes - Deferred Tax Assets and Liabilities Reflected on Consolidated Balance Sheet (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Non-current deferred tax assets	$ 2,415	$ 2,520
Non-current deferred tax liabilities	(16,411)	(30,871)
Net deferred tax liabilities	$ (13,996)	$ (28,351)

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Income Taxes - Reconciliation of Gross Amount of Unrecognized Tax Benefits (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Reconciliation Of Unrecognized Tax Benefits Excluding Amounts Pertaining To Examined Tax Returns Roll Forward
Beginning balance	$ 15,680	$ 15,680	$ 15,680
Ending balance	$ 15,680	$ 15,680	$ 15,680

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income Taxes [Line Items]
Operating loss carry forwards reduced by reserve of uncertain tax positions	$ 123,600
Valuation allowance	662,569	$ 583,505
Increase (decrease) in valuation allowance	79,100
Continuing operations	76,700
Other comprehensive income	$ 2,400
Canada [Member]
Income Taxes [Line Items]
Loss carryforwards, description	expire between 2033 and 2037
Research and Development Credit Carryforwards [Member]
Income Taxes [Line Items]
Loss carryforwards	$ 4,200
Loss carryforwards, description	expire between 2021 and 2036
Alternative Minimum Tax Credit Carryforward [Member] | Puerto Rico [Member]
Income Taxes [Line Items]
Loss carryforwards	$ 2,800
Federal Tax [Member]
Income Taxes [Line Items]
Loss carryforwards	$ 1,058,800
Loss carryforwards, description	will expire between 2034 and 2037
Federal Tax [Member] | Expiry Between 2034 And 2037 [Member]
Income Taxes [Line Items]
Loss carryforwards	$ 612,500
Federal Tax [Member] | Post Tax Reform
Income Taxes [Line Items]
Loss carryforwards	$ 446,300
Loss carryforward, limitations on use by percentage of taxable income	80.00%
State and Local Jurisdiction [Member]
Income Taxes [Line Items]
Loss carryforwards	$ 1,419,500
Loss carryforwards, description	expire between 2021 and 2040
State and Local Jurisdiction [Member] | Canada [Member]
Income Taxes [Line Items]
Operating loss Carry forwards	$ 700
Foreign [Member]
Income Taxes [Line Items]
Loss carryforwards	7,300
Foreign [Member] | Ireland [Member]
Income Taxes [Line Items]
Operating loss Carry forwards	$ 142,600

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Retirement and Postretirement Benefit Plans - Summary of Accumulated Benefit Obligations ("ABO"), Change in Projected Benefit Obligation ("PBO"), and Funded Status of our Plans (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Change in PBO
APBO at beginning of period	$ 16,684	$ 15,812
Interest cost on PBO	426	582
Actuarial loss (gain)	2,857	1,878
Benefits paid	(2,097)	(1,712)
APBO at end of period	18,121	16,684	$ 15,812
Change in plan assets
Fair market value at beginning of period	145,716
Company contribution	1,913	1,646
Benefits paid	(2,097)	(1,712)
Fair market value at end of period	153,754	145,716
Unfunded status	(18,121)	(16,684)
Pension Plans [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
ABO at end of period	179,408	169,364
Change in PBO
APBO at beginning of period	169,364	162,096
Interest cost on PBO	4,388	6,045	5,300
Plan settlements	(4,990)
Actuarial loss (gain)	18,447	12,507
Benefits paid	(7,801)	(11,284)
APBO at end of period	179,408	169,364	162,096
Change in plan assets
Fair market value at beginning of period	145,716	132,776
Actual return	16,060	22,955
Company contribution	4,769	1,269
Plan settlements	(4,990)
Benefits paid	(7,801)	(11,284)
Fair market value at end of period	153,754	145,716	$ 132,776
Unfunded status	$ (25,654)	$ (23,648)

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Retirement and Postretirement Benefit Plans - Amounts Recognized in Consolidated Balance Sheets (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Compensation And Retirement Disclosure [Abstract]
Current liabilities	$ (1,593)
Noncurrent liabilities	(24,061)	$ (23,648)
Net amount recognized	$ (25,654)	$ (23,648)

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Retirement and Postretirement Benefit Plans - Additional Year-End Information for Pension Plans with ABO in Excess of Plan Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value of plan assets	$ 153,754	$ 145,716
Projected Benefit Obligation [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
PBO	179,408	169,364
Accumulated Benefit Obligation [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
ABO	$ 179,408	$ 169,364

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Retirement and Postretirement Benefit Plans - Weighted Average Assumptions used to Determine Benefit Obligations (Detail)	Dec. 31, 2020	Dec. 31, 2019
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	2.20%	3.10%

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Retirement and Postretirement Benefit Plans - Net Periodic Benefit Cost Components (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost on APBO	$ 426	$ 582
Amortization of net loss	2,400	900	$ 900
Service cost	67	58
Pension Plans [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost on APBO	4,388	6,045	5,300
Expected return on plan assets	(7,419)	(7,659)	(7,985)
Amortization of net loss	2,325	1,028	1,420
Settlement loss recognized	1,100
Net pension (income) expense recognized for the period	394	(586)	(1,265)
Other Post Retirement Plans [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost on APBO	426	582	672
Amortization of net loss	(7)	(164)
Service cost	67	58	128
Amortization of unrecognized prior service cost	42	42	(690)
Net periodic postretirement benefit expense	$ 528	$ 518	$ 110

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Retirement and Postretirement Benefit Plans - Significant Actuarial Assumptions used to Determine Net Periodic Pension Cost (Detail) - Pension Plans [Member]	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Discount rate	3.10%	4.20%	3.60%
Expected long-term rate of return on assets	5.50%	5.50%	5.50%

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Retirement and Postretirement Benefit Plans - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Compensation And Retirement Disclosure [Line Items]
Defined benefit plan qualifying age	55 years
Defined benefit plan service period	5 years
Defined benefit plan contributions by plan participants, percentage	50.00%
Contribution expense	$ 6,800,000	$ 7,400,000	$ 7,600,000
Discretionary contributions	$ 0	$ 0	$ 0
Maximum [Member]
Compensation And Retirement Disclosure [Line Items]
Defined benefit plan contributions by employer, percentage	3.00%
Pension Plans [Member]
Compensation And Retirement Disclosure [Line Items]
Long-term rate of return	5.50%	5.50%	5.50%
Defined benefit plan expected contributions	$ 3,300,000
Pension Plans [Member] | Equity Securities [Member]
Compensation And Retirement Disclosure [Line Items]
Current targeted asset allocation	34.00%
Pension Plans [Member] | Fixed Income Securities [Member]
Compensation And Retirement Disclosure [Line Items]
Current targeted asset allocation	56.00%
Pension Plans [Member] | Real-estate Investments Trust Managers [Member]
Compensation And Retirement Disclosure [Line Items]
Current targeted asset allocation	5.00%
Pension Plans [Member] | Hedge Fund [Member]
Compensation And Retirement Disclosure [Line Items]
Current targeted asset allocation	5.00%
Other Post Retirement Plans [Member]
Compensation And Retirement Disclosure [Line Items]
Defined benefit plan expected contributions	$ 1,600,000

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Retirement and Postretirement Benefit Plans - Summary of Assets Percentage Invested by Class (Detail)	Dec. 31, 2020	Dec. 31, 2019
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Percentage of assets invested in each asset class	100.00%	100.00%
Equity Securities [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Percentage of assets invested in each asset class	33.50%	32.60%
Fixed Income Securities [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Percentage of assets invested in each asset class	52.70%	54.50%
Real Estate [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Percentage of assets invested in each asset class	7.00%	8.00%
Other [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Percentage of assets invested in each asset class	6.80%	4.90%

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Retirement and Postretirement Benefit Plans - Summary of Fair Value of Pension Plan Assets by Asset Category (Detail) - USD ($) $ in Thousands		Dec. 31, 2020	Dec. 31, 2019
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		$ 153,754	$ 145,716
Cash and Cash Equivalents [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		1,914	1,413
U.S. Equity [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		27,765	28,993
Non-U.S. Equity [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		15,544	12,474
Emerging Markets Equity [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		8,259	5,537
Government Bonds [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		28,855	20,316
Corporate Bonds [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		46,228	37,925
Mortgage Backed Securities [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		9	7,943
Asset-backed Securities [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		810	3,255
Commercial Mortgage-Backed Securities [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		604	1,930
International Fixed Income [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		4,485	5,741
Real Estate [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		10,689	11,609
Hedge Fund [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		8,228	7,043
Other [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset		364	1,537
Not Subject to Leveling [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	153,754	145,716
Not Subject to Leveling [Member] | Cash and Cash Equivalents [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	1,914	1,413
Not Subject to Leveling [Member] | U.S. Equity [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	27,765	28,993
Not Subject to Leveling [Member] | Non-U.S. Equity [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	15,544	12,474
Not Subject to Leveling [Member] | Emerging Markets Equity [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	8,259	5,537
Not Subject to Leveling [Member] | Government Bonds [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	28,855	20,316
Not Subject to Leveling [Member] | Corporate Bonds [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	46,228	37,925
Not Subject to Leveling [Member] | Mortgage Backed Securities [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	9	7,943
Not Subject to Leveling [Member] | Asset-backed Securities [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	810	3,255
Not Subject to Leveling [Member] | Commercial Mortgage-Backed Securities [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	604	1,930
Not Subject to Leveling [Member] | International Fixed Income [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	4,485	5,741
Not Subject to Leveling [Member] | Real Estate [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	10,689	11,609
Not Subject to Leveling [Member] | Hedge Fund [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	8,228	7,043
Not Subject to Leveling [Member] | Other [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined benefit plan asset	[1]	$ 364	$ 1,537

[1] Investments that are valued using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy

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Retirement and Postretirement Benefit Plans - Estimated Future Benefit Payments (Detail) - Pension Plans [Member] $ in Thousands	Dec. 31, 2020 USD ($)
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
2021	$ 14,030
2022	12,817
2023	12,581
2024	12,789
2025	13,356
2026–2030	$ 61,944

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Retirement and Postretirement Benefit Plans - Summary of Accumulated Postretirement Benefit Obligation Changes in Plan Assets and Funded Status of Plan (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Defined Benefit Plans And Other Postretirement Benefit Plans Disclosures [Abstract]
APBO at beginning of period	$ 16,684	$ 15,812
Service cost (benefits earned during the period)	67	58
Interest cost on APBO	426	582
Employee contributions	184	66
Actuarial loss (gain)	2,857	1,878
Benefits paid	(2,097)	(1,712)
APBO at end of period	18,121	16,684
Change in plan assets
Fair market value at beginning of period	145,716
Company contributions	1,913	1,646
Employee contributions	184	66
Benefits paid	(2,097)	(1,712)
Fair market value at end of period	153,754	145,716
Unfunded status	$ (18,121)	$ (16,684)

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Retirement and Postretirement Benefit Plans - Summary of Accrued Postretirement Benefits (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Defined Benefit Plans And Other Postretirement Benefit Plans Disclosures [Abstract]
Current liabilities	$ (1,555)	$ (1,571)
Noncurrent liabilities	(16,566)	(15,113)
Net amount recognized	$ (18,121)	$ (16,684)

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Retirement and Postretirement Benefit Plans - Amounts Not Yet Reflected in Net Periodic Benefit Cost and Recognized in Accumulated Other Comprehensive (Loss) Income (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Accumulated other comprehensive (loss) income	$ (48,966)	$ (39,757)	$ (41,557)
Pension Plans [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Accumulated other comprehensive (loss) income	(44,219)	(35,010)
Net actuarial loss	(44,219)	(35,010)
Postretirement Benefit Costs [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Net (loss) gain	(1,050)	1,771
Prior service cost	(384)	(426)
Accumulated other comprehensive (loss) income	$ (1,434)	$ 1,345

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Retirement and Postretirement Benefit Plans - Weighted Average Actuarial Assumptions Used to Determine APBO (Detail) - Accumulated Postretirement Benefit Obligation [Member]	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Schedule Of Defined Benefit Plans Actuarial Assumptions Used In Calculating Net Benefit Obligations [Line Items]
Discount rate	2.20%	3.10%
Health care cost trend rate assumed for next year	5.50%	5.80%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)	4.50%	4.50%
Year that the rate reaches the ultimate trend rate	2038	2038

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Retirement and Postretirement Benefit Plans - Significant Actuarial Assumptions used to Determine Post Retirement Benefit Cost (Detail) - Other Post Retirement Plans [Member]	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Discount rate	3.10%	4.20%	3.60%
Health care cost trend rate assumed for next year	5.80%	6.10%	6.30%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)	4.50%	4.50%	4.50%
Year that the rate reaches the ultimate trend rate	2038	2038	2038

XML

Retirement and Postretirement Benefit Plans - One Percentage Point Changes in Assumed Health Care Cost (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Defined Benefit Plans And Other Postretirement Benefit Plans Disclosures [Abstract]
Effect on total of service and interest cost components	$ 2	$ 8
Effect on postretirement benefit obligation	87	85
Effect on total of service and interest cost components	(2)	(7)
Effect on postretirement benefit obligation	$ (77)	$ (76)

XML

Retirement and Postretirement Benefit Plans - Summary of Change in Other Comprehensive Loss (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Defined Benefit Plan Disclosure [Line Items]
Net loss arising during the period	$ (12,621)
Amortization of prior service credit	42
Amortization of net gain (loss)	3,370
Total accumulated other comprehensive loss recognized during the period	(9,209)	$ 1,800	$ (2,056)
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Net loss arising during the period	(9,807)
Amortization of net gain (loss)	3,377
Total accumulated other comprehensive loss recognized during the period	(6,430)
Other Post Retirement Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Net loss arising during the period	(2,814)
Amortization of prior service credit	42
Amortization of net gain (loss)	(7)
Total accumulated other comprehensive loss recognized during the period	$ (2,779)

XML

Retirement and Postretirement Benefit Plans - Summary of Estimated Amounts Amortized from Accumulated Other Comprehensive Income (Loss) Over Next Fiscal Year (Detail) $ in Thousands	Dec. 31, 2020 USD ($)
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Net gain (loss)	$ (3,389)
Defined benefit plan, amount to be amortized from accumulated other comprehensive income (loss) next fiscal year, total	(3,389)
Other Post Retirement Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Prior service credit (cost)	(42)
Defined benefit plan, amount to be amortized from accumulated other comprehensive income (loss) next fiscal year, total	$ (42)

XML

Retirement and Postretirement Benefit Plans - Expected Future Benefit Payments (Detail) - Other Post Retirement Plans [Member] $ in Thousands	Dec. 31, 2020 USD ($)
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
2021	$ 1,555
2022	1,488
2023	1,437
2024	1,389
2025	1,320
2026–2030	$ 5,686

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Stock-Based Compensation - Additional Information (Detail) - USD ($)			12 Months Ended
		May 19, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	May 19, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense			$ 11,573,000	$ 13,968,000	$ 13,248,000
Minimum price of options			$ 5.25
Maximum price of options			$ 22.80
Weighted average remaining contractual life			3 years 3 months 18 days
Weighted average remaining contractual life for options vested and expected to vest			3 years 3 months 18 days
Weighted average remaining contractual life for options exercisable			3 years 1 month 6 days
Intrinsic value of options outstanding			$ 0	100,000
Intrinsic value of options vested and expected to vest			0	100,000
Intrinsic value of options exercisable			0	0
Unrecognized compensation expense			$ 600,000
Unrecognized compensation expense, recognition period			9 months 18 days
Weighted average grant date fair value, options granted					$ 1.82
Fair value assumptions, expected term	[1]				4 years 9 months
Fair value assumptions, risk-free rate	[2]				2.84%
Expense associated with ESPP			$ 400,000	$ 400,000
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense, recognition period			1 year 6 months
Performance measurement period for award of restricted stock units			3 years
Fair value assumptions, expected term			3 years
Fair value of restricted stock units			$ 2,900,000		$ 3,100,000
Fair value assumptions, risk-free rate			0.40%	2.51%
Period to recognize expense on straight-line basis			3 years
Unrecognized compensation expense			$ 11,900,000
Restricted Stock Units [Member] | Grant Date One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value assumptions, stock price			$ 4.21	$ 7.75
Restricted Stock Units [Member] | Grant Date Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value assumptions, stock price				6.71
Restricted Stock Units [Member] | Grant Date Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value assumptions, stock price				$ 6.53
2015 Omnibus Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock available for future issuance			6,996,290			4,000,000
Number of shares authorized for issuance						6,615,476
Share based compensation, expiration period			7 years
2015 Omnibus Incentive Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation, vesting terms			1 year
2015 Omnibus Incentive Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation, vesting terms			4 years
2015 Omnibus Incentive Plan [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Increase in authorization of number of shares available for grant		3,630,000
2012 Management Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock available for future issuance						2,615,476
Common stock additional capital shares reserved for future issuance						10,604,071
Employees Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant						1,300,000
Employee stock purchase plan,description			At the beginning of each six-month offering period under the ESPP each participant is deemed to have been granted an option to purchase shares of our common stock equal to the amount of their payroll deductions during the period, but in any event not more than five percent of the employee’s eligible compensation, subject to certain limitations. Such options may be exercised only to the extent of accumulated payroll deductions at the end of the offering period, at a purchase price per share equal to 85% of the fair market value of our common stock at the beginning or end of each offering period, whichever is less.
Percentage of fair value expressed as purchase price of common stock			85.00%
Selling, General and Administrative Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense			$ 11,600,000	$ 14,000,000.0	$ 13,300,000

[1] The expected term is the number of years that we estimate that options will be outstanding prior to exercise. During 2018, we have used the simplified method for estimating the expected term as we do not have sufficient stock option exercise experience to support a reasonable estimate of the expected term. The simplified method represents the best estimate of the expected term.

[2] The risk-free interest rate is based on the U.S. Treasury yield for a period commensurate with the expected life of the option.

XML

Stock-Based Compensation - Summary of Option Activity (Detail)	12 Months Ended
	Dec. 31, 2020 $ / shares shares
Number of Shares
Outstanding at beginning of period | shares	2,765,826
Forfeited | shares	(868,614)
Outstanding at end of period | shares	1,897,212
Vested and expected to vest at end of the year | shares	1,883,100
Exercisable at end of year | shares	1,521,524
Weighted Average Exercise Price
Outstanding at beginning of period | $ / shares	$ 13.10
Forfeited | $ / shares	13.40
Outstanding at end of period | $ / shares	12.95
Vested and expected to vest at end of the year | $ / shares	12.97
Exercisable at end of year | $ / shares	$ 13.65

XML

Stock-Based Compensation - Fair Value of Each Option Granted was Estimated on Grant Date using Black-Scholes Valuation Model (Detail)	12 Months Ended
	Dec. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Expected term (years)	4 years 9 months	[1]
Expected dividend yield	0.00%
Expected volatility	35.30%	[2]
Risk-free interest rate	2.84%	[3]

[1] The expected term is the number of years that we estimate that options will be outstanding prior to exercise. During 2018, we have used the simplified method for estimating the expected term as we do not have sufficient stock option exercise experience to support a reasonable estimate of the expected term. The simplified method represents the best estimate of the expected term.

[2] During 2018, we estimated volatility for options granted based on our historical volatility.

[3] The risk-free interest rate is based on the U.S. Treasury yield for a period commensurate with the expected life of the option.

XML

Stock-Based Compensation - Summary of Restricted Stock Activity for Grants to Certain Executive Employees and Independent Members of Board of Directors (Detail) - Restricted Stock Units [Member]	12 Months Ended
	Dec. 31, 2020 $ / shares shares
Number of Units
Outstanding at beginning of the year | shares	3,846,608
Granted | shares	3,716,974
Vested | shares	(1,149,957)
Forfeited | shares	(723,816)
Outstanding at end of period | shares	5,689,809
Weighted-Average Grant Date Fair Value per Share
Outstanding at beginning of the year | $ / shares	$ 8.03
Granted | $ / shares	3.94
Vested | $ / shares	8.50
Forfeited | $ / shares	7.41
Outstanding at end of period | $ / shares	$ 5.34

XML

Stock-Based Compensation - Summary of Shares Issued or to be Issued in Connection with the ESPP (Detail) - Employees Stock Purchase Plan [Member] - $ / shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued or to be issued	516,563	212,476
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of purchase prices	$ 1.54	$ 4.73
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of purchase prices	$ 1.56	$ 4.90

XML

Fair Value Measurements - Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Financial assets
Financial assets	$ 262,601	$ 276,654
Financial liabilities
Financial liabilities		1,113
Foreign Exchange Derivatives [Member]
Financial liabilities
Financial liabilities		127
Interest Rate Derivatives [Member]
Financial liabilities
Financial liabilities		986
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets
Financial assets	262,135	276,654
Significant Other Observable Inputs (Level 2) [Member]
Financial assets
Financial assets	466
Financial liabilities
Financial liabilities		1,113
Significant Other Observable Inputs (Level 2) [Member] | Foreign Exchange Derivatives [Member]
Financial liabilities
Financial liabilities		127
Significant Other Observable Inputs (Level 2) [Member] | Interest Rate Derivatives [Member]
Financial liabilities
Financial liabilities		986
Money Market Funds [Member]
Financial assets
Financial assets	262,135	276,654
Money Market Funds [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets
Financial assets	262,135	$ 276,654
Foreign Exchange Derivatives [Member]
Financial assets
Financial assets	466
Foreign Exchange Derivatives [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets
Financial assets	$ 466

XML

Fair Value Measurements - Additional Information (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2020	Mar. 31, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets			$ 262,601,000	$ 276,654,000
Non-financial liabilities fair value			0	0
Impairment charge for goodwill	$ 0	$ 262,000,000.0	279,000,000	0	$ 0
Impairment of intangible assets			0	0	0
Non-marketable investments			4,400,000	2,300,000
Gains from non-marketable investments			2,091,000
Other Intangible Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impairment of intangible assets			0	0	$ 0
Foreign Exchange Forward Contracts [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Aggregate notional amount of derivative instruments			14,900,000	15,200,000
Interest Rate Derivatives [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Aggregate notional amount of derivative instruments			0
Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of counterparty default exposure			1,000,000.0	1,000,000.0
Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets			262,135,000	276,654,000
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets			262,135,000	276,654,000
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets			262,135,000	276,654,000
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Bank Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets			$ 19,100,000	$ 19,700,000

XML

Fair Value Measurements - Summary of Non-financial Assets Measured at Fair Value on Nonrecurring Basis (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Non-financial assets	$ 437,977
Total Impairment	279,000
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Non-financial assets	437,977
Goodwill [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Non-financial assets	437,977
Total Impairment	279,000
Goodwill [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Non-financial assets	$ 437,977

XML

Fair Value Measurements - Summary of Carrying Amounts and Estimated Fair Market Values of Debt (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Schedule Of Carrying Values And Estimated Fair Values Of Debt Instruments [Line Items]
Debt, carrying value	$ 643,692	$ 657,187
Term Loan [Member]
Schedule Of Carrying Values And Estimated Fair Values Of Debt Instruments [Line Items]
Debt, carrying value	346,091	361,294
Debt, estimated fair value	331,382	360,391
$306,000 Senior Secured Notes [Member]
Schedule Of Carrying Values And Estimated Fair Values Of Debt Instruments [Line Items]
Debt, carrying value	297,601	295,893
Debt, estimated fair value	$ 304,297	$ 301,441

XML

Commitments and Contingencies - Additional Information (Detail) - USD ($)	1 Months Ended		12 Months Ended
	Sep. 30, 2019	Apr. 30, 2019	Dec. 31, 2020	Dec. 31, 2019
Loss Contingencies [Line Items]
Guarantee expiration period			2022
Guarantee future payments			$ 10,100,000
Performance related surety bonds for which the Company is contingently liable			1,400,000	$ 2,500,000
Aggregate letter of credit			18,800,000	23,700,000
Letter of credit backed by performance related surety bonds			1,100,000	700,000
Indemnification liabilities			$ 0	$ 0
Minimum [Member]
Loss Contingencies [Line Items]
Liable for portion of damages	$ 1,400,000
Requirement of warranty insurance for damages limit amount	2,800,000
Unasserted Claim [Member]
Loss Contingencies [Line Items]
Unasserted claim, payments in the amount		$ 33,000,000.0
Unasserted Claim [Member] | Maximum [Member]
Loss Contingencies [Line Items]
Unasserted claim, payments in the amount	$ 1,400,000

XML

Stockholders' Equity - Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Equity [Abstract]
Net change in pension and benefit plan liabilities	$ (48,966)	$ (39,757)	$ (41,557)
Foreign currency translation adjustments	(6,650)	(6,420)	(5,909)
Unrealized loss on short-term investments	(90)	(90)	(99)
Net change in unrealized loss on derivative instruments	(18)	(1,005)	2,381
Accumulated other comprehensive loss	$ (55,724)	$ (47,272)	$ (45,184)

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Stockholders' Equity - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Equity [Abstract]
Amortization of defined benefit pension and postretirement benefit plans	$ (2.4)	$ (0.9)	$ (0.9)

XML

Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Nov. 22, 2019
Senior Secured Notes [Member]
Related Party Transaction [Line Items]
Term loan, face amount			$ 306,000
Debt instrument, interest rate, stated percentage			9.00%
Senior Secured Notes [Member] | Anchorage [Member]
Related Party Transaction [Line Items]
Term loan, face amount			$ 20,000
Debt instrument, interest rate, stated percentage			9.00%
Term Loan [Member] | Term Loan Due November 22, 2024 [Member]
Related Party Transaction [Line Items]
Term loan, face amount	$ 380,000	$ 380,000	$ 380,000
Term Loan [Member] | Anchorage [Member] | Term Loan Due November 22, 2024 [Member]
Related Party Transaction [Line Items]
Term loan, face amount			$ 15,000

XML

Net Loss Per Share - Computation of Basic and Diluted Earnings per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Numerator
Loss from continuing operations									$ (479,838)	$ (213,833)	$ (137,457)
Earnings from discontinued operations, net of tax											12,833
Gain on sale of discontinued operations, net of tax											30,469
Income from discontinued operations, net of tax											43,302
Net loss	$ (83,145)	$ (12,552)	$ (38,168)	$ (345,973)	$ (125,118)	$ 69,260	$ (40,613)	$ (117,362)	$ (479,838)	$ (213,833)	$ (94,155)
Denominator
Weighted average shares outstanding Basic and diluted									125,455,487	124,152,984	123,444,943
Net loss per share attributable to common stockholders
Continuing operations									$ (3.82)	$ (1.72)	$ (1.11)
Discontinued operations											0.35
Net loss									$ (3.82)	$ (1.72)	$ (0.76)

XML

Net Loss Per Share - Summary of Anti-Dilutive Securities Excluded from Computation of Diluted EPS (Detail) - shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted EPS	1,897,212	2,765,826	3,406,171
Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted EPS	4,133,531	3,342,923	2,793,680

XML

Segment Reporting - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2020 Segment
Segment Reporting [Abstract]
Number of reportable segments	2

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Segment Reporting - Consolidated Net Income (Loss) (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Segment Reporting Information [Line Items]
Net sales	$ 203,561	$ 386,590	$ 251,216	$ 189,925	$ 241,475	$ 565,668	$ 388,896	$ 194,635	$ 1,031,292	$ 1,390,674	$ 1,322,417
Segment Adjusted EBITDA									172,489	211,815	232,546
Education [Member]
Segment Reporting Information [Line Items]
Segment Adjusted EBITDA									145,862	196,907	210,604
HMH Books & Media [Member]
Segment Reporting Information [Line Items]
Segment Adjusted EBITDA									26,627	14,908	21,942
Operating Segments [Member]
Segment Reporting Information [Line Items]
Net sales									1,031,292	1,390,674	1,322,417
Operating Segments [Member] | Education [Member]
Segment Reporting Information [Line Items]
Net sales									839,553	1,210,646	1,122,689
Segment Adjusted EBITDA									145,862	196,907	210,604
Operating Segments [Member] | HMH Books & Media [Member]
Segment Reporting Information [Line Items]
Net sales									191,739	180,028	199,728
Segment Adjusted EBITDA									26,627	14,908	21,942
Corporate/Other [Member]
Segment Reporting Information [Line Items]
Segment Adjusted EBITDA									$ (40,649)	$ (46,077)	$ (40,418)

XML

Segment Reporting - Summary of Net Sales (Detail) - USD ($) $ in Thousands		3 Months Ended								12 Months Ended
		Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Net sales		$ 203,561	$ 386,590	$ 251,216	$ 189,925	$ 241,475	$ 565,668	$ 388,896	$ 194,635	$ 1,031,292	$ 1,390,674	$ 1,322,417
Operating Segments [Member]
Net sales										1,031,292	1,390,674	1,322,417
Operating Segments [Member] | Education [Member]
Net sales										839,553	1,210,646	1,122,689
Operating Segments [Member] | HMH Books & Media [Member]
Net sales										191,739	180,028	199,728
Core Solutions [Member] | Operating Segments [Member]
Net sales	[1]									459,350	578,675	538,166
Core Solutions [Member] | Operating Segments [Member] | Education [Member]
Net sales	[1]									459,350	578,675	538,166
Extension Businesses [Member] | Operating Segments [Member]
Net sales	[2]									380,203	631,971	584,523
Extension Businesses [Member] | Operating Segments [Member] | Education [Member]
Net sales	[2]									380,203	631,971	584,523
Books & Media [Member] | Operating Segments [Member]
Net sales										191,739	180,028	199,728
Books & Media [Member] | Operating Segments [Member] | HMH Books & Media [Member]
Net sales										$ 191,739	$ 180,028	$ 199,728

[1] Comprehensive solutions primarily for reading, literature, math, science and social studies programs.

[2] Primarily consists of our Heinemann brand, intervention, supplemental and professional services.

XML

Segment Reporting - Consolidated Statements of Operations (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Segment Reporting Information [Line Items]
Total Segment Adjusted EBITDA	$ 172,489	$ 211,815	$ 232,546
Interest expense	(65,959)	(48,778)	(45,680)
Interest income	899	3,157	2,550
Depreciation expense	(50,715)	(61,475)	(75,116)
Amortization expense—film asset	(13,953)	(9,835)	(6,057)
Amortization expense	(171,821)	(201,382)	(170,903)
Non-cash charges—stock compensation	(11,573)	(13,968)	(13,248)
Non-cash charges—loss on derivative instruments	672	(899)	(1,374)
Non-cash charges—asset impairment charges	(279,000)
Inventory obsolescence related to strategic transformation plan		(9,758)
Fees, expenses or charges for equity offerings, debt or acquisitions/dispositions	(1,080)	(6,327)	(2,883)
Restructuring/severance and other charges	(33,643)	(21,742)	(11,478)
Gain on investments	2,091
Gain on sale of assets			201
Loss on extinguishment of debt		(4,363)
Loss from continuing operations before taxes	(492,242)	(209,632)	(131,860)
(Provision) benefit for income taxes	12,404	(4,201)	(5,597)
Loss from continuing operations	(479,838)	(213,833)	(137,457)
Education [Member]
Segment Reporting Information [Line Items]
Total Segment Adjusted EBITDA	145,862	196,907	210,604
HMH Books & Media [Member]
Segment Reporting Information [Line Items]
Total Segment Adjusted EBITDA	26,627	14,908	21,942
Corporate/other [Member]
Segment Reporting Information [Line Items]
Total Segment Adjusted EBITDA	$ (40,649)	$ (46,077)	$ (40,418)

XML

Segment Reporting - Segment Information (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Segment Reporting Information [Line Items]
Total Assets	$ 2,021,126	$ 2,513,172
Education [Member]
Segment Reporting Information [Line Items]
Total Assets	1,520,504	1,971,553
HMH Books & Media [Member]
Segment Reporting Information [Line Items]
Total Assets	175,710	186,318
Corporate/other [Member]
Segment Reporting Information [Line Items]
Total Assets	$ 324,912	$ 355,301

XML

Segment Reporting - Schedule of Long-Lived Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Segment Reporting [Abstract]
Long-lived assets—International	$ 228	$ 113

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Segment Reporting - Schedule of Net Sales by Geographic Region (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Segment Reporting Information [Line Items]
Net sales	$ 203,561	$ 386,590	$ 251,216	$ 189,925	$ 241,475	$ 565,668	$ 388,896	$ 194,635	$ 1,031,292	$ 1,390,674	$ 1,322,417
U.S. [Member]
Segment Reporting Information [Line Items]
Net sales									997,178	1,327,833	1,249,568
International [Member]
Segment Reporting Information [Line Items]
Net sales									$ 34,114	$ 62,841	$ 72,849

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Valuation and Qualifying Accounts - Valuation and Qualifying Accounts (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at Beginning of Year	$ 119,700
Balance at End of Year	96,700	$ 119,700
Allowance for Bad Debt [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at Beginning of Year	3,015	2,173	$ 2,508
Net Charges	1,589	1,909	128
Utilization of Allowances	(615)	(1,067)	(463)
Balance at End of Year	3,989	3,015	2,173
Reserve for Book Returns [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at Beginning of Year	16,679	18,559	20,580
Net Charges	33,847	41,654	36,395
Utilization of Allowances	(35,952)	(43,534)	(38,416)
Balance at End of Year	14,574	16,679	18,559
Reserve for Royalty Advances [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at Beginning of Year	119,695	117,797	103,606
Net Charges	16,552	16,500	17,301
Utilization of Allowances	(39,592)	(14,602)	(3,110)
Balance at End of Year	96,655	119,695	117,797
Deferred Tax Valuation Allowance [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at Beginning of Year	583,505	562,392	571,653
Net Charges	81,475	23,707	(7,667)
Utilization of Allowances	(2,412)	(2,594)	(1,594)
Balance at End of Year	$ 662,568	$ 583,505	$ 562,392

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Quarterly Results of Operations (Unaudited) - Quarterly Results of Operations (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Quarterly Financial Information Disclosure [Abstract]
Net sales	$ 203,561	$ 386,590	$ 251,216	$ 189,925	$ 241,475	$ 565,668	$ 388,896	$ 194,635	$ 1,031,292	$ 1,390,674	$ 1,322,417
Gross profit	65,986	167,415	90,389	63,450	59,065	273,481	156,055	57,893
Operating (loss) income	(68,973)	272	(22,212)	(338,176)	(108,947)	77,871	(30,253)	(101,835)	(429,089)	(163,164)	(90,525)
Net loss	$ (83,145)	$ (12,552)	$ (38,168)	$ (345,973)	$ (125,118)	$ 69,260	$ (40,613)	$ (117,362)	$ (479,838)	$ (213,833)	$ (94,155)
Basic:
Net (loss) income	$ (0.66)	$ (0.10)	$ (0.30)	$ (2.77)	$ (1.01)	$ 0.56	$ (0.33)	$ (0.95)
Diluted:
Net (loss) income	$ (0.66)	$ (0.10)	$ (0.30)	$ (2.77)	$ (1.01)	$ 0.55	$ (0.33)	$ (0.95)

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Quarterly Results of Operations (Unaudited) - Additional Information (Detail) - USD ($)	3 Months Ended			12 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Mar. 31, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Quarterly Results Of Operations [Line Items]
Prior period adjustment description				Management believes these adjustments are not material to the current period financial statements or any prior periods
Goodwill impairment		$ 0	$ 262,000,000.0	$ 279,000,000	$ 0	$ 0
Goodwill Impairment Charge [Member]
Quarterly Results Of Operations [Line Items]
Prior period correction amounts	$ 17,000,000.0
Income Tax Benefit [Member]
Quarterly Results Of Operations [Line Items]
Prior period correction amounts	$ 1,000,000.0