services and capabilities can help educators with that transition. Separately, we provide fee-based teacher training sessions through our educational services offerings for educators adopting the Common Core State Standards. These services constitute part of our growing suite of professional services provided to improve educational effectivenessStates rely heavily on large federal programs, such as Title I and IDEA to augment their contributions for assessments. Classroom assessment decisions are primarily made at the district level, relying on state and local funding. Professional Learning The professional learning market segment includes consulting and support services to assist individual schools and educators.

Our sales force utilizes a strategic, consultative approach that involves stakeholders at every level of the decision-making process, from state legislators and school districts toin raising student achievement, implementing new programs and technology effectively, developing effective teachers, principals and leaders, as well as school administrators and teachers. Our approach positions us to flexibly respond to schools’school-district turnaround and teachers’ needs, as demonstrated by our growing suiteimprovement solutions. We believe all districts and schools contract for some level of professional services. These services may include support forup-front training,in-classroom coaching, institutes, author workshops, professional learning communities, leadership development, technical support and maintenance, and program management.

Professional learning is directly addressed in ESSA. ESSA restructured Title II, the section of the law addressing teacher quality, and eliminated federal “highly qualified teacher” requirements. ESSA prohibits U.S. Department of Education mandates and incentives to evaluate teachers based on student test scores, which in recent years have channeled resources and attention to the development of educator evaluation systems, measurement tools, and related training. Title II now focuses instead on the role of the profession in improving student achievement, including new requirements to ensure professional development is not only sustained (“noone-day workshops”), but also“job-embedded”, “data-driven,” and “personalized.” It is expected that school districts will need to focus their applications for teacher training to ensure teacher alignment with high quality standards as well as priorities for funds tolow-performing schools where comprehensive support and improvement plans are focused on improving educational effectiveness at both the institutionalin place. There are also significant funding opportunities for professional learning as part of state programs, especially in states where they have consolidated program funding and instructor levels.

educators. We believe that as we continuethe 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 monetize our content across newly developed channels, we will beginthe implementation of new or revised standards at the state level is expected to realize even greater sales while incurring lower incremental costs, which will further improve our operating margins.continue. In addition, there is expected to be a need to develop new teachers as we distribute more of our content in digital formats, our operating margins will benefit from lower development and distribution costs relative to print products. We have embraced this gradual shift to digital through our “hybrid” offerings of print and digital products that allow for flexibility in the delivery of an education curriculum while allowing us to benefit from better margins as more and more schools make the transition to digital. Because of these factors, we believe our business model is scalable since we should be able to generate future revenue without materially increasing our costs as we

believe our current infrastructure, warehousing and fulfillment capabilities can support increased sales. Our debt balance of $243.1 million as of December 31, 2014, current cash and short-term investment position of $743.3 million as of December 31, 2014 and total available liquidity of $963.4 million as of December 31, 2014 provide the flexibilitynext several years are expected to continue to investsee the “greening” of the teaching force, with approximately 200,000 new teachers entering the work force every year and roughly 50% attrition rate among new teachers.

Trade Publishing

Trade Publishing market includes children’s, fiction, nonfiction, culinary and reference titles. While digital formats have gained some traction in new projectsthis market, print remains the primary format in which trade books are produced and pursue selective acquisitions.distributed. In recent years, eBooks sales in the industry have declined while the market overall grew.

Our Products and Services

We areHMH is organized along two reportablereporting segments: Education and Trade Publishing. Our primary segment measures are net sales and Adjusted EBITDA. The Education segment is our largest business, representing approximately 87% of our total net sales for the year ended December 31, 2017 and 88% of our total net sales for each of the years ended December 31, 2014, 20132016 and 2012.2015.

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Education

Our Education segment provides educational products, technology platformsintegrated solutions that engage learners, empower educators 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 learning outcomes, professional development and school reform services. With an in-house content development team supplemented by external specialists, we develop programs that can be aligned to state standards and customized for specific state requests. In addition, our Education segment offers a wide range of educational, cognitive and developmental standardized testing products in print and digital online formats, targeting the educational and clinical assessment markets.improve student outcomes. The principal marketsprinciple customers for our Education products are elementaryK-12 school districts, which purchase core curriculum, supplemental and secondary school systems.

The Education segment includes, in addition to our Houghton Mifflin Harcourt brand, such brands as Heinemann, Riverside, Holt McDougal, Great Source, Rigby, Saxon, Steck-Vaughn,intervention solutions and Math in Focus. These brands offer solutions in reading, language arts, mathematics, intervention, social studies, science and world languages, as well as curriculum resources, professional development services and an array of highly regarded educational, cognitive and developmental assessment products. These brands, collectively, benefit from a market share greater than 40% in our addressable market, which is the portion of the total market in which we sell our products and services, as well as strong relationships with its customers. Most of these relationships have been developed over many years through a service-based approach, which entails a member of our sales force interacting with the customer and providing a product or service tailored to meet the customer’s needs.learning services.

The Education segment net sales and Adjusted EBITDA were $1,209.1$1,223.0 million and $298.5$253.6 million, $1,207.9$1,207.1 million and $343.2$225.7 million, and $1,128.6$1,251.1 million and $329.7$269.4 million for the years ended December 31, 2014, 20132017, 2016 and 2012,2015, respectively.

Our Education productsofferings consist of the following offerings:following:

enabling local educators to tailor their education programs in a cost-effective way that is irrespective of adoption schedules. Included with this group of products are professional books and developmental resources aimed at empowering pre-K-12 teachers, our Benchmark Assessment System, which allows teachers to evaluate students’ reading levels three times a year, and our Leveled Literacy Intervention System, which is a supplementary intervention program for children struggling with reading and writing. The author base includes prominent experts in teaching, such as Irene FountasMATH 180, READ 180 Universal, System 44 and Gay Su Pinnell, who support the practice of other teachers through books, videos, workshops and classroom tools. iRead. The Supplemental and Intervention Products group generatesproducts within this area generate net sales and earnings that do not vary greatly with the adoption cycle. In addition, the development of supplementalcycle and intervention materials tends to require significantly less capital investment than the development of a Comprehensive Curriculumcore curriculum program.

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Trade Publishing

Our Trade Publishing segment, which dates back tofounded in 1832, 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 marketsprinciple distribution channels for Trade Publishing products are retail stores (both physical and online) and wholesalers. Reference materials are also sold to schools, colleges, libraries, office supply distributors and other businesses.

Our Trade Publishing segment 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 encompassinclude literary fiction, culinary, andnon-fiction in hardcover,e-book and paperback formats, including the Mariner Books paperback line. Among the general interest properties are the popular J.R.R. Tolkien titles, and the prolific The Best American series. The general interest group also publishes the CliffsNotes series of test prepSeries and study guides, branded field guides, such as the Peterson Field Guides and Taylor’s Gardening Guides and extensive culinary works. With the 2012 acquisition of certain culinary and reference assets, we bolstered our catalog and increased our market share in those two niches. In culinary, our catalog now includes major cookbook brands such as Betty Crocker and Better Homes and Gardens in addition to recent best sellers including theHow to Cook Everything series. Our catalog features numerous Nobel series and Pulitzer Prize winners and Newbery and Caldecott medal winners, including a 2014 and 2013 Caldecott Honor winner and a 2014 Pulitzer Prize winner.Whole30. In young readers publishing, a segment in which we demonstrated growth in 2014, our list addresses a broad age group and includes an array of products for the preschool/early learning market, including board books, picture booksrecognized characters and workbooks. This list includes recognized characterstitles such as Curious George andMartha Speaks,, both

successful television programs featured on PBS,Five Little Monkeys,,Gossie & Gertie,Friends, Polar Express, Little Blue Truck, and many more. We also publish novels for young adults, a growing genre, which we bolstered with additional editorial talent in 2014. In the reference category, we are the publisherincluding titles from Lois Lowry, author of the American HeritageThe Giver, and Webster’s New World dictionaries, and related titles.

Even before e-books gained prominence in the market, we had developed in-house experience in converting, structuring, storing and distributing dictionary and other reference content for digital platforms, and applied our knowledge and tools in the digital space to consumer trade content including e-books and applications. In addition to traditional conversions of print to digital content, we now develop our content digitally in various formats with minimal incremental investment, and we employ in-house programmers and developers to produce new digital content based on our trade products. For example, we have brought the Curious George character to multiple digital platforms with the development of a prominent website, curiousgeorge.com, which is an award-winning interactive learning tool for pre-school children, and a suite of Curious George apps, which both entertain and educate early learners at home. As such, we have an established and flexible solution for converting, manipulating and distributing trade content to the many emerging digital consumer platforms such as e-readers and tablets. We continue to actively publish into the sizable consumer market for e-books, book or character-based applications and other digital products with net sales from e-books reaching $24.0 million for the year ended December 31, 2014, and now representing approximately 15% of our Trade Publishing segment net sales for the same period. We continue to focus on the development of innovative new digital products which capitalize on our content, our digital expertise, and the growing consumer demand for these products. In addition, we are increasingly leveraging the strength of our Trade Publishing brands and characters, such as Curious George, together with our expertise in developing educational solutions, to further penetrate the large and growing consumer market for at-home educational products and services.Kwame Alexander.

For the years ended December 31, 2014, 20132017, 2016 and 2012,2015, Trade Publishing net sales and Adjusted EBITDA were approximately $163.2$184.5 million and $12.7$16.1 million, $170.7$165.6 million and $24.4$6.3 million, and $157.1$164.9 million and $28.8$7.7 million, respectively.

Our Industry

K-12 comprehensive curriculum or basal market

The U.S. K-12 comprehensive curriculum or basal market provides educational programs and assessments to approximately 55.0 million students across approximately 132,000 elementary and secondary schools. Basal programs cover curriculum standards in a particular subject and include a comprehensive offering of teacher and student materials required to conduct the class throughout the year. Products and services in basal programs include students’ print and digital offerings and a variety of supporting materials such as teacher’s editions, formative assessments, whole group instruction materials, practice aids, educational games and services.

Comprehensive curriculum programs are the primary source of classroom education for 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 publishing industry, are highly predictable and are expected to trend upward over the longer term.

In addition, the market for comprehensive curriculum programs is 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.

The majority of states are in the process of implementing or transitioning to new curriculum standards in the two most important subject areas, mathematics and English language arts. For the most part, these new standards are based on the Common Core State Standards, the product of a multi-state effort to establish a single set of

content standards in mathematics and English language arts for grades K-12. Forty-six states and the District of Columbia have adopted the Common Core State Standards or curriculum standards based on them. Most of these states are administering new student assessments aligned to the new standards, including tests developed by two multistate testing consortia, the Smarter Balanced Assessment Consortium and the Partnership for Assessment of Readiness for College and Careers, beginning in the 2014-15 school year. Schools in these states will need to augment and replace instructional materials, including comprehensive curriculum programs, to align to the new standards and to prepare students for the new state assessments.

Instructional material adoption process

The process through which materials and curricula are selected and procured for classroom use varies throughout the United States. Twenty states, known as adoption states, approve and procure new basal programs usually every six to eight years on a state-wide basis, and individual schools or school districts typically purchase instructional materials from the state approved list, although in some adoption states districts may be permitted to select materials not on the state list. In all remaining states, known as open states or open territories, each individual school or school district can procure materials at any time, though usually according to a five to ten year cycle. In adoption states, the states approve curriculum and often provide dedicated funding for educational and instructional materials, while in open states, local school districts approve curriculum and provide funding.

The following chart illustrates the current adoption and open states:

The student population in adoption states represents over 50% of the U.S. elementary and secondary school-age population. A number of adoption states provide categorical state funding for instructional materials, that is, funds that typically cannot be used for any purpose other than to purchase instructional content or, in some cases, technology equipment used to deliver instruction. In some states, categorical instructional materials funds can be used only for the purchase of materials on the state-approved list.

In adoption states, the state education board’s decision to approve a certain program developed by an educational content provider depends on recommendations from instructional materials committees, which are often comprised of educators and curriculum specialists. Such committees typically recommend a program only if it aligns to the state’s educational content standards. To ensure the approval and subsequent success of a new instructional materials program, educational content providers typically conduct extensive market research, including: discussions of the planned curriculum with the state-level curriculum advisors to secure their support; development of prototype instructional materials that are focus-tested with educators, often against competing programs, to gather feedback on the program’s content and design; and incorporation of qualitative input from existing customers in terms of classroom needs.

In open territories, the procurement process is typically characterized by a presentation and provision of sample materials to instructional materials selection committees, which subsequently evaluate and recommend a particular program to district level school boards. Products are generally customized to meet the states’ curriculum standards with similar research methods as in adoption states.

We believe that a content provider’s ultimate success in a given state will depend on a variety of factors, including the quality of its programs and materials, the strength of its relationships with key decision-makers and the magnitude of its marketing and sales efforts. As a result, educational content providers often implement formal market research efforts that include educator focus groups, prototypes of student and ancillary materials and comparisons against competing products. At the same time, marketing and editorial staffs work closely together to incorporate the results of research into products, while developing the most up-to-date, research- and needs-based curricula.

Supplemental and Intervention materials market

The supplemental and intervention materials market includes a wide range of product offerings targeted at addressing specific needs in a district generally not addressed through a comprehensive curriculum solution. These products are typically offered in the form of print, digital, service and blended product solutions. The development of supplemental materials and solutions tends to require significantly less capital investment than the development of a basal program. These materials and solutions enable local educators to tailor their education programs in a cost-effective way that is not tied to adoption schedules.

Supplemental products and services are funded through state and local resources as well as government funding allocations as designated through Title I of the Elementary and Secondary Education Act (“ESEA”) and the Individuals with Disabilities Education Act (“IDEA”). Title I distributes funding to those schools and school districts which are comprised of a relatively high percentage of students from low income families as defined by the ESEA. In addition, Title I appropriates money for the education system for the prevention of dropouts and the improvement of schools. IDEA governs how states and public agencies provide early intervention, special education and related services to children with disabilities. In recent years, the supplemental materials that schools have purchased have changed as the demands and expectations for educators and students have changed. Educational institutions have increasingly purchased digital solutions along with traditional supplemental materials and, with the growing emphasis on accountability, demand for targeted intervention solutions, school reform and turnaround services has been on the rise.

Assessment market

The assessment market includes summative, formative or in-classroom, and diagnostic assessments. Summative assessments are concluding or “final” exams that measure students’ proficiency in a particular subject or group of subjects on an aggregate level or against state standards. Formative assessments are on-going, in-classroom tests that occur throughout the school year and monitor progress in certain subjects or curriculum units. Diagnostic assessments are designed to pinpoint areas of need and are often administered by specialists to identify learning difficulties and qualify individuals for special services under the requirements of IDEA.

Many states and districts are also utilizing teacher evaluation systems that measure teacher performance based on standardized test scores and other elements required to meet certain benchmarks set by policymakers. Certain federal agencies are shifting the focus to children at even younger ages to provide intervention before significant achievement gaps are realized. As a result, this has led to additional opportunities in the early childhood development market.

Many states are implementing new statewide student assessment programs in the 2014-15 school year, including those promulgated by the Smarter Balanced Assessment Consortium and the Partnership Assessment of Readiness for College and Careers. Presently, 21 states are participating in the Smarter Balanced Assessment Consortium, while 12 states and the District of Columbia are participating in the Partnership Assessment of Readiness for College and Careers.

As states plan for the upcoming new assessments, and districts continue to transition to new standards based on the Common Core State Standards, demand for quality measures which help the districts prepare for the content coverage and item types anticipated on the new assessments should continue to increase.

International market

The global education market continues to demonstrate strong macroeconomic growth characteristics. There are 1.4 billion students out of a 7.2 billion world population. Population growth is a leading indicator for pre-primary school enrollments, which have a subsequent impact on secondary and higher education enrollments. Globally, according to United Nations Educational, Scientific and Cultural Organization (“UNESCO”), rapid population growth has caused pre-primary enrollments to grow by 16.2% worldwide from 2007 to 2011. Additionally, the global population is expected to be approximately 9.0 billion by 2050, as countries develop and improvements in medical conditions increase the birth rate.

Internationally, 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. According to the Book Industry Study Group and the Association of American Publishers, the size of the K-12 U.S. export market is estimated at $100 million, of which we have a growing market share.

Our immediate strategy is to expand our addressable market through working with local distributors to localize our K-12 content for sale into public and private schools in targeted international markets and to sell digitized content through key distributors into global school and consumer markets.

Trade Publishing market

The Trade Publishing market includes 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 e-books, has developed rapidly over the past several years, as the industry evolves to embrace new technologies for developing, producing, marketing and distributing trade works.

Seasonality

In the K-12 market, we typically receive payments for products and services from individual school districts, and, to a lesser extent, individual schools and states. In the case of testing and assessment products and services, payment is received from the individually contracted parties. In the Trade Publishing market, payment is received for products from book distributors and retail booksellers.

Approximately 88%87% of our net sales for the year ended December 31, 20142017 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 pastour latest three completed fiscal years, approximately 67%68% of consolidated net sales were realized in the second and third quarters. Sales ofK-12 instructional materials and customized testingassessment products are also cyclical, with some years offering more sales opportunities than others. The amount of funding available at the state level for educational materials also has a significant effect onyear-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 affectyear-to-year net sales performance.

Competition

We sell our products in highly competitive markets. In these markets, product quality, innovation and customer service and perceived stability and longevity are major differentiating factors in generating sales growth.between companies. Other factors affecting sales growth in the K-12 market include the level of student enrollment in subjects that are up for adoption and the level of spending per student appropriated in each state and/or school district. Profitability is affected by industry developments including:competition include: (i) competitive selling,pricing, sampling and gratis costs; (ii) development costs for customized instructional materialsdigitization and assessment programs;innovative delivery; and (iii) higher technology costs dueeducational effectiveness of the program. In addition to the increased number of textbook program components being developed in digital formats. There are three primary traditional comprehensivenational curriculum publishers, in the K-12 market, whichwe also compete with a variety of specialized or

regional publishers that focus on select disciplines and/or geographic regions.regions in theK-12 market. There are also multiple competitors in the Trade Publishing, supplemental and assessment markets.segments offering 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 Pearson Education, Inc., McGraw Hill Education, Cengage Learning, Inc., Scholastic Corporation, Curriculum Associates, LLC, Benchmark Education, LLC, Accelerate Learning, Inc., and K12Amplify 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.

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Printing and binding; raw materials

We outsource the printing and binding of our products, with approximately 75%50% of our printing currentlyrequirements handled by one major supplier and one print services broker who negotiates on our behalf with an extended supplier base.supplier. We have procurement agreements that provide volume and scheduling flexibility and price predictability. We have a longstanding relationship with these parties. Approximately 20%18% of our printed materials (consisting primarily of teacher’s editions and other ancillary components) are printed outside of the United States and approximately 80%82% of our printed materials (including most student editions) are printed within the United States. 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 adoption states require us to usein-state textbook depositories for educational materials sold in that particular state. We utilize delivery firms including United Parcel Service Inc., FedEx Freight, CH Robinson Worldwide Inc., YRC Freight, SAIA and USF Holland, Inc. to facilitate the principally ground transportation of products.

Employees

As of December 31, 2014,2017, we had approximately 3,3003,800 employees, none of which were covered by collective bargaining agreements. These employees are substantially located in the United States with approximately 230218 employees located outside of the United States. We believe that relations with employees are generally good.

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, all 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 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

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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.

Additional information

Houghton Mifflin Harcourt Company was incorporated as a Delaware corporation on March 5, 2010, and was established as the holding company of the current operating group. The Company changed its name from HMH Holdings (Delaware), Inc. on October 22, 2013.Houghton Mifflin Harcourt was formed in December 2007 with the acquisition of Harcourt Education Group, then the second-largestK-12 U.S. publisher, by Houghton Mifflin Group. We are headquartered in Boston, Massachusetts. Our corporate website iswww.hmhco.com. We make available our annual reports on Form10-K, quarterly reports on Form10-Q, current reports on Form8-K and amendments to these reports, as well as other information, free of charge through our corporate website under the “Corporate Governance”“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 is not part of this Annual Report or any other report we file with or furnish to the SEC.

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Item 1A. Risk Factors

Our business and results of operations may be adversely affected by many factors outside of our control, including changes in federal, state and local education funding, general economic conditions and/orand 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 procurement process.

The performance and growth of our U.S. educational comprehensive curriculum, supplemental and assessment businesses depend in part on federal and state education funding, which in turn is dependent on the robustness of state finances and the level of funding allocated to educational programs. State, local and municipal finances were and continue tolevels can be adversely affected by the recent U.S. economic recession andtax collections, which are affected bytypically sensitive to general economic conditions, and factors outside of our control, as well as increasing costsby political and financial liabilities of under-funded public pension plans. In response to general economic conditions or budget shortfalls, states and districts may reduce educational spending to protect against existing or expected economic conditions or seek cost savings to mitigate budget deficits. Most public school districts, the primary customers for K-12 products and services, depend largely onpolicy choices made by state and local governments. A reduction in funding levels, whether due to purchase materials. Inan economic downturn or legislative action, or a failure of projected funding increases to materialize, can constrain resources available to school districts in states that primarily rely on local tax proceeds, significant reductions in those proceeds for any reason can severely restrict districtmaking purchases of instructional materials. In districtsmaterials and adversely affect our business and results of operations.

Some states, that primarily rely onincluding a majority of adoption states, provide dedicated state funding for the purchase of instructional content and/or classroom technology, and expenditures for instructional materials a reduction in state fundsthose states tend to be highly dependent on appropriation of those funds. If dedicated funding is not appropriated, or loosening ofif 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 reduceto be significantly reduced and our net sales. Additionally,sales may be adversely impacted.

In addition, many school districts, including most large urban districts, receive substantial amountsfederal funding through Federal education programs, funding for which may be reduced as a result of Congressional budget actions.

Federal and/or state legislative changes can also affect the funding available for educational expenditure, which include the impact of education reform, such as the reauthorizationTitle I of 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 aslow-income students and families, students with disabilities, and English language learners as well as to support programs to improve the implementationquality of Common Core State Standards. Existinginstruction, 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 and funding streams could be changed or eliminated in connection with legislation to reauthorize the ESEA and/or the federal appropriations process, in ways that could negatively affect demand and sources of funding for ourprofessional learning products and services. Our business, results of operations

Federal and financial condition may be materially adversely affected by many factors outside of our control, including, but not limited to, delays in the timing of adoptions,state legislative and policy changes in curricula and changes in student testing processes. There can be no assurances that states or districts will have sufficient funding to purchase our products and services, that we will win their business in our competitive marketplace or that schools or districts that have historically purchased our products and services will do so again in the future.

There is considerable political controversy in many states surrounding the adoption and implementation of Common Core State Standards. Legislation has been introduced in a number of states to drop Common Core standards, and some states are considering revisions to and/or rebranding of the standards. These developments could disrupt local adoptions of instructional materials and require modifications to our programs offered for sale in states that adopt such changes.

Similarly, changes in the state procurement process for textbooks, supplemental materials and student tests, particularly in adoption states, can also affect our marketsbusiness. For example, recent changes to federal education law in the Every Student Succeeds Act (“ESSA”) give states greater latitude in how they approach assessment and sales. Aaccountability, support and improvement of low performing schools, as well as accounting for the expenditure of federal program funds. The recent changes in ESSA also provided for new requirements regarding evidence of effectiveness of educational products and services purchased with federal funds. The recent changes in ESSA and state legislation and administrative policy decisions on matters such as assessment and accountability, curriculum and intervention with respect thereto could affect demand for our products.

State instructional materials adoptions, which account for a significant portion of our net sales is derived from sales ofK-12 instructional materials, pursuant toare highly cyclical adoption schedules. and pose significant inherent risks that could materially impact our results of operations.

Due to the revolving and staggered nature of “predetermined” state adoption schedules, sales ofK-12 instructional materials have traditionally been cyclical, with some years offering more and/or larger sales opportunities than others. In addition, changes in curricula and changes in the student testing processes can negatively affect our programs and therefore the sizeSince a large portion of our marketsales are derived from state adoptions, our overall results can be materially affected from year to year by the adoption schedule, particularly in any given year.

large adoption states. For example, over the next few years adoptions are scheduled or have already begun in one or more of the primary subjects of reading, language arts and literature, social studies, science and mathematics in, among others, theother states, of California, Florida and Texas, and Florida,which are the three largest adoption states. The inabilityOur failure to succeedsecure approval for our programs or perform according to our expectations in these states, or reductions in their anticipated funding levels,larger new adoption opportunities could materially and adversely affect our net sales for the year of the adoption and in subsequent years.

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In any state adoption, there is the inherent the risk that one or more of our programs will not be approved by a particular state board of education or other adopting authority. For example, ourK-8 social studies materials were not adopted in California in 2017. While school districts in most adoption states, including California, 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 larger 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 may 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, which could adversely affect 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. Allowing districts flexibility

We may not be able to use state funds previously dedicated exclusively to the purchaseexecute on our long-term growth strategy or achieve expected benefits from actions taken in furtherance of

instructional materials our strategy, which could materially and other items such as technology hardware and training could adversely affect district expenditures on state-adopted instructional materials in the future.

Decreases in federal and state education funding and negative trends or changes in general economic conditions can have a material adverse effect on 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.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.

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Introduction ofOur investments in new products, services 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 maintain a competitive position,address these needs, we must continue to investare investing in new contentproducts, new technology and infrastructure, and a new wayscommon platform to deliverintegrate our products, services and services.solutions. These investments may not be profitable or may be less profitable than what we have experienced historically.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 particular,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 contextexpected 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 current focusdigital products and platforms could result in liability, loss of revenue or harm to our reputation.

Some states and school districts require that newly purchased digital instructional materials conform to certain technical standards for accessibility by persons with disabilities, which could have an adverse effect on keyour net sales and/or lead us to incur additional costs.

Some states and school districts have adopted certain technical standards for accessibility by persons with disabilities that apply to school websites and electronically-delivered content. While we are committed to designing and developing our electronically-delivered products for theK-12 market in a manner accessible to persons with disabilities and strive to conform to relevant technical standards, it is possible that some of our digital opportunities, including e-books,products may be deemed to benon-conforming with those standards in all respects. This could limit our ability to compete for sales in states and districts that have adopted those standards, which could have an adverse effect on our net sales. To the market is evolving andextent that we decide to add accessibility features to existing products, we may be unsuccessfulincur costs that we would not otherwise have incurred.

Changes in establishing ourselves as a significant competitor. Newproduct distribution channels and concentration of retailer power may restrict our ability to grow and affect our profitability in our Trade Publishing segment.

Distribution channels such as digital platforms, the internet, online retailers and ecommerce sites, digital delivery platforms, (e.g., tabletsexpanding social media, digital discovery and e-readers), present bothmarketing platforms, combined with the increased concentration of retailer power, pose threats and provide opportunities to our traditional consumer publishing models of our Trade Publishing segment, potentially impacting both sales volumesvolume and pricing.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.

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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. 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 theK-12 market. There are multiple competitors in the Trade Publishing, supplemental and assessment segments offering content that school districts increasingly are using as part of their core classroom instructional materials. Our larger competitors in the educational market include Pearson Education, Inc., McGraw Hill Education, Cengage Learning, Inc., Scholastic Corporation, 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 educational resources. In addition, the market shift toward digital education solutions has induced both established technology companies and newstart-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 theK-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 andlow-cost open education resources could adversely affect our net sales and exert downward pressure on prices for our education products.

In theK-12 market, we face growing competition from free, openly licensed content, often referred to as open education resources (“OER”). Free orlow-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 a few, including New York and Texas, are funding development of OER or have done so in the past. Twenty states have signed on to the U.S Department of Education’s GoOpen campaign, which seeks to support users of OER and promote coordination and sharing of OER among states. The increased availability of free andlow-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.

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

Our business is seasonal. ForApproximately 87% of our net sales for the year ended December 31, 2014, we2017 were derived approximately 88% of net sales from our Education Segment. For salessegment, which is a markedly seasonal business. Purchases of educationalK-12 products purchasesare typically are made primarily in the second and third quarters of the calendar year in preparation for the beginning of the school year, though testing net sales are primarily generatedassessment purchases have modest seasonality in the second and fourth quarters. 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 normallytypically incur a net cash deficit from all of our activities through the middle of 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

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or that they will be higher than our net sales for our other quarters or in the prior-year periods. In addition,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 ofK-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 inbetween a quarter withand the same quarter of the previousprior year, inbetween a quarter withand the prior consecutive quarter or between a fiscal year withand the prior fiscal year.

Agreements with Resellers.

We have entered into agreements with resellers from timeyear, which can make it difficult for us to time pertaining to certain defined products and channels. These agreements have been both exclusive and non-exclusive and have pertained to specific products as well as specific channels. Depending onforecast the timing of when orders with resellers occur, an individual transaction with a reseller could potentially be material to the quarter or year in which it occurs. Furthermore, there is no assurance that future orders from resellers will occur within similar timeframes as past orders or be of similar magnitude. Some of our agreements have performance metrics which allow for one or both parties to terminate the agreement. If such termination were to occur, our sales could be materially impacted.

Receivables to our two largest resellers comprised approximately 17.0% of our December 31, 2014 accounts receivable balance. If such resellers are unable to remit contractual payments when due or at all,customer purchases and assess our financial results and cash position for the quarter and year could be materially impacted.

Our business is and will continue to be impacted by the rate of and state of technological change, including the digital evolution and other disruptive technologies, and the presence and development of open-sourced content could continue to increase, which could adversely affect our net sales.

Our industry has been impacted by the digitalization of content and proliferation of distribution channels, either over the internet, or via other electronic means, replacing traditional print formats. The digital migration brings the need for change in product distribution, consumers’ perception of value and the publisher’s position between retailers and authors. Such digitalization increases competitive threats both from large media players and

from smaller businesses, online and mobile portals. If we are unable to continue to adapt and transition to the move to digitalization at the rate of our competitors, our ability to effectively competeperformance until late in the marketplace will be affected.

In recent years, there have been initiatives by non-profit organizations such as the Gates Foundation and the Hewlett Foundation to develop educational content that can be “open sourced” and made available to educational institutions for free or nominal cost. To the extent that such open sourced content is developed and made available to educational customers and is competitive with our instructional materials, our sales opportunities and net sales could be adversely affected.

Technological changes and the availability of free or relatively inexpensive information and materials may also affect changes in consumer behavior and expectations. Public and private sources of free or relatively inexpensive information and lower pricing for digital products may reduce demand and impact the prices we can charge for our products and services. To the extent that technological changes and the availability of free or relatively inexpensive information and materials limit the prices we can charge or demand for our products and services, our business, financial position and results of operations may be materially adversely affected.

Changes in product distribution channels and/or customer bankruptcy may restrict our ability to grow and affect our profitability in our Trade Publishing segment.

New distribution channels such as digital formats, the internet, online retailers, growing delivery platforms (e.g., tablets and e-readers), combined with the concentration of retailer power, pose threats and provide opportunities to our traditional consumer publishing models in our Trade Publishing segment, potentially impacting both sales volumes and pricing. The economic slowdown combined with the trend in distribution channels toward the use of e-books has created contraction in the consumer books retail market that has increased the risk of bankruptcy of major retail customers. Additional bankruptcies of traditional “bricks and mortar” retailers of Trade Publishing could negatively affect our business, financial condition and results of operations.

Expansion of our investments and business outside of our traditional core U.S. market may result in lower than expected returns and incremental risks.

To take advantage of international growth opportunities and to reduce our reliance on our core U.S. market, we are increasing our investments in a number of countries and emerging markets, including Asia and the Middle East, some of which are inherently more risky than our investments in the U.S. market. Political, economic, currency, reputational and corporate governance risks, including fraud, as well as unmanaged expansion, are all factors which could limit our returns on investments made in these markets. For example, political instability in the Middle East has caused uncertainty in the region, which could affect our results of operations in the region. Also, certain international customers require longer payment terms, increasing our credit risk. As we expand internationally, these risks will become more pertinent to us and could have a bigger impact on our business.

We operate in a highly competitive environment that is subject to rapid change and we must continue to invest and adapt to remain competitive.

Our businesses operate in highly competitive markets, with significant established competitors, such as Pearson Education, Inc., McGraw Hill Education, Cengage Learning, Inc., Scholastic Corporation, K12 Inc. and John Wiley & Sons, Inc. These markets continue to change in response to technological innovations and other factors. Profitability is affected by developments in our markets beyond our control, including: changing U.S. federal and state standards for educational materials; rising development costs due to customers’ requirements for more customized instructional materials and assessment programs; changes in prevailing educational and testing methods and philosophies; higher technology costs due to the trend toward delivering more educational content in both traditional print and electronic formats; market acceptance of new technology products, including online or computer-based testing; an increase in the amount of materials given away in the K-12 markets as part of a

bundled pack; the impact of the expected increase in turnover of K-12 teachers and instructors on the market acceptance of our products; customer consolidation in the retail and wholesale trade book market and the increased dependence on fewer but stronger customers; rising advances for popular authors and market pressures to maintain competitive retail pricing; a material increase in product returns or in certain costs such as paper; and overall uncertain economic issues that affect all markets.

We cannot predict with certainty the changes that may occur and the effect of those changes on the competitiveness of our businesses, and the acceleration of any of these developments may materially and adversely affect our profitability.

The means of delivering our products may be subject to rapid technological change. Although we have undertaken several initiatives and invested significant amounts of capital to adapt to and benefit from these changes, we cannot predict whether technological innovations will, in the future, make some of our products, particularly those printed in traditional formats, wholly or partially obsolete. If this were to occur, we might be required to invest significant resources to further adapt to the changing competitive environment. In addition, we cannot predict whether end customers will have sufficient funding to purchase the equipment needed to use our new technology products.

In order to maintain a competitive position, we must continue to invest in new offerings and new ways to deliver our products and services. These investments may not be profitable or may be less profitable than what we have experienced historically. We could experience threats to our existing businesses from the rise of new competitors due to the rapidly changing environment within which we operate.

There is a risk that technology companies may offer educational materials that compete with our products.

While our educational content is protected by copyright law, there is nothing to prevent technology companies from developing their own educational digital products and offering educational content to schools. Technology companies are free to distribute materials with and on their technology devices and platforms. Many technology companies have substantial resources that they could devote to expand their business, including the development of educational digital products. Furthermore, while we have entered into digital distribution agreements with a number of technology companies, our agreements are non-exclusive arrangements and there is nothing to prevent such technology companies from developing and distributing other educational content to the K-12 market. There is a risk that a technology company with significant resources could license or acquire their own educational content and compete with us, 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. As a result, there is a risk that technology companies may own direct relationships with our customers, and accordingly, they may have a significant influence over the pricing and distribution strategies for digital and print education materials.year.

Our history of operations includes periods of operating and net losses, and we may incur operating and net losses in the future. Our significant netSuch losses andmay impact our significant amount of indebtedness led us to declare bankruptcy in 2012.liquidity.

For the years ended December 31, 2014, 20132017, 2016 and 2012,2015, we generated operating losses of $85.4$113.5 million, $86.6$310.8 million and $120.7$116.1 million, respectively, and net losses of $111.5$103.2 million, $111.2$284.6 million and $87.1$133.9 million, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” and the consolidated financial statements included elsewhere in this Annual Report for more information regarding our results of operations during these periods. 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 tradingmarket price of our common stock may decline significantly.

Our net losses in recent years were impacted from general economic conditions, reductions in significant markets, federal, state and local budget shortfalls and the contraction of spending throughout most states, non-cash charges associated with our 2010 recapitalization, among other things. In addition, we had a significant amount of indebtedness prior to May 2012. During May 2012, as a result of our financial position, results of operations and significant amount of indebtedness, we filed a voluntary petition for bankruptcy under Chapter 11 of the United States Bankruptcy Code. On June 22, 2012, we emerged from bankruptcy pursuant to a pre-packaged plan of reorganization. Although we have significantly less interest expense as a result of our emergence from bankruptcy and have decreased our selling and administrative expenses, we may not generate sufficient net sales in future periods to pay for all of our operating or other expenses, which could have a material adverse effect on our business, results of operations and financial condition.

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 books andprint, digital andweb-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 these products.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. WeMoreover, we conduct business in certain other countries where the extent of effective legal protection for intellectual property rights is uncertain,uncertain. It is possible we could be involved in expensive and this uncertainty could affect future growth. Moreover,time-consuming litigation to maintain, defend or enforce our intellectual property.

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, particularlyincluding 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 Health Insurance Portability and Accountability Act in connection with our self-insured health plan and certain of our products, (iii) the Payment Card Industry Data Security Standards in connection with collection of credit card information from customers, and (iv) various EU data protection and privacy laws. Our brands and customer relationships are important assets. Our failure to comply with applicable privacy laws, rules, regulations and standards or adequately prevent the improper use or disclosure of the personal data we hold

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could lead to penalties, significant remediation costs, reputational damage to our brands and customer relationships, potential cancellation of existing business and diminished ability to compete for future business.

We are subject to risks based on Information Technology (“IT”) systems and technological change.systems. A major data privacy breach in security or unanticipated ITinformation technology system failure maycould interrupt the availability of our internet-based products and services, result in corruption and/or loss of data cause liability, reputational damage to our brands and business and/or result in financial loss.

Our business is dependent on information technology.technology systems to support our complex operational and logistical arrangements across our businesses. We either provide software and/or internet-based products and services to our customers or wecustomers. We also use complex ITinformation 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 development and service delivery in our educational businesses, including with respect to information technology security (including viruscapability, reliability and hacker attacks), e-commerce,security, enterprise resource planning, system implementations and upgrades. Our growth strategy includes a consumer e-commerce strategyFailures of our information technology systems and an integrated solutions strategy that further subjects us to technological risks. Ifproducts (including because of operational failure, natural disaster, computer virus or hacker attacks) could interrupt the availability of our e-commerceinternet-based products and integrated solutions expansion strategy is not successful, our businessservices, result in corruption or loss of data or breach in security and growth prospects may be adversely affected. Additionally, the failure to recruit and retain staff with relevant skills may constrain our ability to grow as we combine traditional publishing products with online service offerings.

Across our businesses we hold large volumes of personal data, including that of employees, customers and students. Failure to adequately protect such personal data could lead to penalties, significant remediation costs,result in liability, reputational damage potential cancellation of existing contracts and inability to compete for future business. Weour brands and/or adversely impact our operating results.

While we have policies, processes, internal controls and cybersecurity mechanisms in place intended to ensure the stability of our information technology, provide security from unauthorized access to our systems and maintain business continuity, but 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 possible security threats. Our brand, reputation, especially in theK-12 market, and consequently our operating results may be adversely impacted by unanticipated system failures, corruption, loss of data corruption 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 may 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.

We relyare dependent on third-party software development as parta small number of our digital platform.

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 software product development and the ability of those third parties to meetprint and bind our needsproducts and to supply paper, a principal material for our products. If we were to lose our relationship with our 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 one key third-party print vendor that handles approximately 50% of our printing requirements, and we expect a small number of print vendors

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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 obligations underbusiness 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 contractskey print vendor and/or paper merchant, a material change in our relationship with them.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.

We may not be able to identify and complete any future acquisitions or achieve the expected benefits from any previous or 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. Ifso 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 previous or future acquisitions into our existing business, achieve anticipated operating advantages andand/or realize anticipated cost savings may not be realized.or other synergies. The acquisition and integration of companiesbusinesses involve a number of risks, including: use of available cash, issuance of equity or debt securities, incurrence of new borrowingsindebtedness or borrowings under our revolving credit facility to consummate the acquisition;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; diversion of management’s attention from existing operations to the integration of acquired companies; integration of companies’ existing systems into our systems; difficulties in the assimilation and retention of employees; andacquisition also may have potential adverse effects on our operating results.

We may not be ableIf we are unable to maintain the levels offinance or complete any future acquisition on terms satisfactory to us (or at all) and/or we are unable to successfully integrate any previous or future acquisitions into our existing business, achieve anticipated operating efficiency that acquired companies achieved independently. Successful integration of acquired operations will depend upon our ability to manage those operations and to eliminate redundant and excess costs. We may not be able to achieve theadvantages and/or realize anticipated cost savings andor other benefits that we would hope to achievesynergies from acquisitions, whichany such acquired business, it could materially and adversely affect our business, financial condition and results of operations.

We may not be ableIf we are unable to attract, retain or attract theand focus a strong leadership team, a dynamic sales force, software engineers and other key management, creative, editorialpersonnel, it could have an adverse effect on our business and sales personnel that we needability to remain competitive, financial condition and grow.results from operations.

Our success depends, in part, on our ability to continue to attract, focus and retain key managementa strong leadership team, a dynamic sales force, software engineers and other personnel.key personnel at economically reasonable compensation levels. We operate in a number of highly visiblecompetitive industry segments wherethat continue to change to adapt to customer needs and technological advances and in which there is intense competition for experienced and highly effective individuals, including authors. Our successful operations in these segments may increase the market visibility of members of key management, creative and editorial teams and result in their recruitment by other businesses. There can be no assurance thatpersonnel. If we can continueare unable to timely attract and retain the necessary talented employees, including executive officers and other key members of management and, if we fail to do so,personnel with relevant skills for our evolving industry segments it could adversely affect our business.business and ability to remain competitive, financial condition and results of operations.

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In late summer / early fall of 2017, we added, through new hires and promotion, seven new members to our executive leadership team to serve under our President and Chief Executive Officer, who assumed his role in April 2017. Additional changes to our leadership team in the future could slow implementation of key initiatives, lead to changes in or create uncertainty about our business strategies and/or impact management’s attention to operations. Any such inefficiencies and uncertainty, as well as any failure of our new leadership team to timely and successfully transition into their roles could have a material adverse effect on our business, financial condition and results from operations and/or increase volatility in our stock price.

In addition, our sales personnel make up approximately 15% of our employees, and our business results depend largely upon the experience and knowledge of local market dynamics and long-standing customer relationships of suchour sales personnel. Our inability to attract, retain or hireand focus effective sales peopleand other key personnel at economically reasonable compensation levels could materially and adversely affect our ability to operate profitably and grow our business.

AIf 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 Trade publishing business and certain aspects of ourK-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.

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 operatingsuch 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 printing, paper and distributionbinding costs for product-related manufacturing.

We offer competitive salary and benefit packages in order to attract and retain the quality 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, and anyas well as trends specific to the employee skillsets we require. We could experience changes in pension costs and funding requirements due to poor investment returns and/or changes in pension laws and regulations.

Paper is one of our principal raw materials and, for the year ended December 31, 2014, our paper purchases totaled approximately $57 million while our manufacturing costs totaled approximately $267 million. As a result, our business may be negatively impacted by an increase in paper prices.materials. Paper prices fluctuate based on the

worldwide demand for and supply forof paper in general and for the specific types of paper used by us.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. Wemarketplace, including our demands. As a result, we may need to find alternative sources for paper from time to time. OurIn addition, we have extensive printing and binding requirements. We outsource the printing and binding of our books, workbooks and workbooks areother printed byproducts to third parties, and we typically haveunder multi-year contracts for the production of books and workbooks.contracts. Increases in any of ourthese operating costs and expenses could materially and adversely affect our business, profitability, and our business, financial condition and results of operations.

We make significant investments in information technology data centers and other technology initiatives, as well as significant investments in the development of programs for the K-12 marketplace. Although we believe we are prudent in our investment strategies and execution of our implementation plans, there is no assurance as to the ultimate recoverability of these investments.

We also have other significant operating costs, and unanticipated increases in these costs could adversely affect our operating margins. Higher 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.

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We may not realize expected benefits from our operational efficiency and cost-savings initiatives, including those under our 2017 Restructuring Plan, and such initiatives may lead to unintended consequences that could have a material effect on our results of operations.

On an ongoing basis, we assess opportunities for improved operational effectiveness and efficiency and better alignment of expenses with net sales, while preserving our ability to make the investments in content and our people that we believe are important to our long-term success. In March 2017, we committed to certain actions under the 2017 Restructuring Plan in order to improve our operational efficiency, better focus on the needs of our customers andright-size our cost structure to create long-term shareholder value. These actions include making organizational design changes across layers of the Company below the executive team and otherright-sizing initiatives expected to result in reductions in force, consolidating and/or subletting certain office space under real estate leases as well as other potential operational efficiency and cost-reduction initiatives. We have substantially completed the organizational design change actions and expect to complete the remaining actions by the end of 2018.

We estimate annualized cost savings of approximately $70.0 million to $80.0 million exiting 2018 as a result of these actions and estimate that implementation of these actions are expected to result in total charges of approximately $45.0 million to $49.0 million, of which approximately $35.0 million to $39.0 million of these charges are estimated to result in future cash outlays.

Expected costs, savings and operational efficiency benefits under such initiatives, including those under our 2017 Restructuring Plan, may differ materially from our estimates and expectations based on many factors, including timing of actions thereunder and higher than expected costs of implementation. In addition, such initiatives may lead to unintended consequences, such as management and employee distraction, inability to attract and retain key personnel, attrition beyond planned reductions, and reduced morale and productivity, which could have a material effect on our results of operations.

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

WeIn the ordinary course of business, we are involved in legal actions, claims litigation and claimsother matters arising from our business practicesoperations 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, has become extensiveparticularly with respect to proprietary photographs and images, is common in the educational publishing industry. At present, there are various suits pending or threatened which claim that we exceeded the print run limitation or other restrictions in licenses granted to us to reproduce photographs in our instructional materials. A number of similar claims against us have already been settled. While management does not expect any of these mattersthe 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 or change in applicable legal standards 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 business lines has been exhausted and there can be no assurance that our liability insurance for other business lines will cover all events or that the limits of such coverage will be sufficient to fully cover all potential liabilities.liabilities thereunder.

Operational disruption to our business caused by a major disaster or other external threats or the loss of one of our key third-party print vendors 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 as well as relationships with third-party print vendors. We have also outsourced some support functions, including application maintenance support, to third-party providers.facilities. Failure to recover from a major disaster (such as fire, flood or other natural disaster) at a key facility or the disruption of supply from a key third-party vendor, developer or distributor (e.g., due to bankruptcy) could restrict our ability to service our customers. External threats, suchother external threat (such as terrorist attacks, strikes, weather andor political upheaval,unrest or other external factors) at a key center or facility could affect our business and employees, disruptingdisrupt our daily business activities.

We currently rely on two key third-party print vendorsactivities and/or restrict our ability to handle approximately 76% ofsupply products and services to 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 relationships with, our key print vendors could have a material adverse effect on our business and cost of sales. There can be no assurance that our relationships with our print vendors will continue or that their businesses or operations will not be affected by major disasters or external factors. If we were to lose one of our key printcustomers.

vendors, if our relationships with these vendors were to adversely change or if their businesses were impacted by general economic conditions or the factors described above, our business and results of operations may be materially and adversely affected.21

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 tests.programs. The surety bonds are partially backstopped by letters of credit. As of December 31, 2014,2017, our contingent liability for all letters of credit was approximately $20.2$25.2 million, of which $2.4$0.1 million were issued to backstop $11.3$2.5 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.

We may beOur substantial level of indebtedness could adversely affected by significant changes in interest rates.affect our financial condition and results of operations.

Our financing indebtedness, including borrowings under our revolving credit facility, bears interest at variable rates. As of December 31, 2014,2017, we had $243.1approximately $780.0 million ($768.2 million, net of aggregate principal amount indebtednessdiscount and issuance costs) outstanding under our term loan facility and no amounts outstanding under our revolving credit facility. Our substantial outstanding indebtedness could have important consequences, including the following:

If market interest rates increase, variable-rate debt will create higher debt service requirements, whichAny of the foregoing could adversely affecthave a material adverse effect on our cash flow. Ifbusiness, financial condition, results of operations, prospects and ability to satisfy our obligations. In addition, we enter into agreements limiting exposure to higher interest ratesmay incur substantial additional indebtedness in the future. The terms of the agreements governing our existing indebtedness do not, and any future these agreementsdebt may not, offer complete protectionfully prohibit us from this risk.doing so. If new indebtedness is added to our current indebtedness levels, the related risks that we now face could substantially intensify.

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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 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 term loan facility and revolving credit facilitySenior Secured Credit Facilities restrict 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 prices that we believe are fair and proceeds that we do receive may not be adequate to meet any debt service obligations then due.

Despite our current leverage, we may still be able to incur substantially more debt. This could further exacerbate the risks that we face.

We may be able to incur substantial additional indebtedness, including additional secured indebtedness, in the future. The terms of the credit agreements do, and the agreements governing our existing and future

indebtedness may restrict, but will not completely prohibit, us from doing so. As of December 31, 2014, we had approximately $220.0 million of borrowing base availability under our revolving credit facility. This may have the effect of reducing the amount of proceeds in the event of a liquidation. If new debt or other liabilities are added to our current debt levels, the related risks that we now face could intensify.

We may record future goodwill or additional indefinite-lived intangibles impairment charges related to our reporting units, which could materially adverselyhave 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. We assess goodwill for impairment at the reporting unit level and, in evaluating the potential for impairment of goodwill, 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 reporting unit or small changes in other key assumptions may result in future goodwill impairment charges, which could materially adversely impact our results of operations. We had goodwill and indefinite-lived intangible assets of approximately $532.9 million and $439.7 million and $531.8 million and $440.0 million as of December 31, 2014 and 2013, respectively. There were no goodwill impairment charges for the years ended December 31, 2014, 2013 and 2012. For the years ended December 31, 2014, 2013 and 2012, impairment charges for indefinite-lived intangible assets were $0.4 million, $0.5 million, and $5.0 million, respectively.

Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress the price of our common stock.

Additional sales of a substantial number of our shares of common stock in the public market, or the perception that such sales may occur, could have a material adverse effectimpact on the priceour results of operations.

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

In keeping with the past practice of payments, school districts typically payup-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 could materially impair our abilitybusiness in unforeseen ways.

The shift to raise capital through the salesales of additional shares. As of February 12, 2015, we had 142,172,861 shares of common stock issued and outstanding that were freely tradable without restriction under the Securities Act of 1933, as amended (the “Securities Act”), except for any shares held or acquired by our directors, executive officers and other affiliates (as that term is defined in the Securities Act), which are restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Actgreater digital content or an exemption from registration is available. The sale of such shares by our directors, executive officers or other stockholdersincrease in consumable print core programs may affect the public market, or the perception that these sales may occur, could cause the market pricecomparability of our common stockrevenue to decrease significantly.prior periods and cause increases or decreases in our sales to be reflected in our results of operations on a delayed basis.

A significant amount of sharesAsK-12 instructional materials transition from printed to digital products, an increasing percentage of our common stock have been registeredrevenues are derived from time-based digital products. Our customers typically pay for resale under a shelf registration statement. Pursuant to the Company’s investor rights agreement, certain of our stockholders have certain demand and piggyback rights that have, in the past, and may, in the future, require us to file registration statements registering their common stock or to include sales of such common stock in registration statements thatpurchased productsup-front; however, we may file for ourselves or other stockholders. Any shares of common stock sold under these registration statements will be freely tradable in the public market. In the event such rights are exercised and a large number of common stock is sold in the public market, such sales could reduce the trading price of our common stock. These sales also could impede our ability to raise future capital. Additionally, we will bear all expenses in connection with any such registrations, except that the selling stockholders may be responsible for their pro rata shares of underwriters’ fees, commissions and discounts, stock transfer taxes and certain legal expenses.

Affiliates of Paulson & Co., Inc. ownrecognize a significant portion of our outstanding common stocktime-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 a longer periods similar to time-based digital products. As more product offerings move to a consumable print format, more revenue will be deferred and have the right to nominate one director for election torecognized over a longer period of time.

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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 boardresults of directors.operations.

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.

As of February 12, 2015, investment fundsa global learning company, we are subject to taxation at the federal, state or provincial and managed accounts affiliated with Paulson & Co., Inc. (“Paulson”) beneficially owned,local levels in the aggregate, approximately 22.5% of our outstanding common stock. We

have entered into an amendedU.S. and restated director nomination agreement with these stockholders, under which Paulson has the right to nominate one director for election to our board of directors, so long as Paulson holds at least 15% of our issuedvarious other countries and outstanding common stock, and we have agreed to take certain actions in furtherance of Paulson’s rights under the director nomination agreement. In addition, if requested by Paulson, we have agreed to cause the director nominated by Paulson to be designated as a member of each committee of our board of directors, unless the designation would violate legal restrictions or the rules and regulations of the national securities exchange on which our common stock is listed.jurisdictions. As a result, our effective tax rate is derived from a combination of their ownership interests and director nomination rights,applicable tax rates in the stockholders affiliated with Paulsonvarious places that we operate. Our effective tax rate, however, may havebe different than experienced in the abilitypast due to influencenumerous factors, including changes in the outcome of matters that require approvalmix of our stockholders orprofitability from country to otherwise influencecountry, the Company. The interestsresults of examinations and audits of our tax filings, adjustments to the value of our uncertain tax positions, changes in accounting for income taxes and changes in tax laws, including the 2017 Tax Act. Any of these stockholders might conflict with, or differ from, other stockholder interests, and mayfactors could cause us to pursue transactionsexperience an effective tax rate significantly different from previous periods or take actions that could enhance their equity investments, even though such transactionsour current expectations.

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 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 actions may involve risksterminating agreements and collecting receivables under certain foreign legal systems; compliance under local privacy laws, rules, regulations and standards; the need to other stockholders.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.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

Our principal executive office is located at 222 Berkeley125 High Street, Boston, Massachusetts 02116.02110. 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, 2014.2017. 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.

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.

Item 3. Legal Proceedings

We are involved in ordinarylegal actions, claims, litigation and routine litigation andother matters incidental to our business. Specifically, there have been various settled, pendingLitigation alleging infringement of copyrights and threatened litigation that allege we exceededother intellectual property rights, particularly with respect to proprietary photographs and images, is common in the print run limitation or other restrictions in licenses granted to us to reproduce photographs in our instructional materials. While