Harcourt Brace and Co.
Harcourt Brace and Co.
Wholly Owned Subsidiary of Harcourt General, Inc.
Incorporated: 1919 as Harcourt, Brace and Company
Sales: $919.5 billion
SICs: 2731 Book Publishing & Printing; 2721 Periodicals
Publishing & Printing
Harcourt Brace and Co. ranks among the world’s largest publishers, with activities in educational, scientific, technical, medical, professional and trade segments of the industry. While the company’s publishing endeavors are diverse, its greatest activity centers around elementary-, secondary-, and college-level textbooks. Harcourt Brace is recognized as one of the nation’s leading publishers of elementary and secondary school textbooks, and ranks among America’s top five publishers of college textbooks. A subsidiary, The Psychological Corporation, is believed to be the largest for-profit publisher of educational, psychological, clinical and professional tests. The company’s BAR/BRI program was America’s largest bar examination review program in the early 1990s. It is also the largest publisher of journals for the scientific and medical communities, offering about 240 scholarly journals each year. Although the majority of Harcourt Brace’s activities are centered in the United States, the publisher also has operations in London, Tokyo, Sydney, Toronto, and Montreal.
The publishing firm was established at the close of World War I, when two former classmates from Columbia University, Alfred Harcourt and Donald C. Brace, left their positions at Henry Holt & Company and started their own trade publishing house in New York. The year was 1919, and the firm was known as Harcourt, Brace and Howe. Alfred Harcourt had served as acquisitions editor and salesman in his 15 years with Holt; Donald Brace worked in manufacturing and production. Will D. Howe, an author and editor, had headed the English department at Indiana University. He left the new firm less than a year after its founding, when the name was changed to Harcourt, Brace and Company.
Three months after its incorporation, Harcourt, Brace and Company published its first book, Organizing for Work by H.L. Gantt. In the months and years that followed, Harcourt, Brace and Company enjoyed one success after another. John Maynard Keynes’s The Economic Consequences of Peace was considered a milestone in publishing history. Other notable works included Sinclair Lewis’s Free Air, Main Street, and Arrow-smith, the latter winning a Pulitzer Prize. Lewis had followed his editor, Harcourt, from Henry Holt.
In its first decade, Harcourt, Brace and Company diversified into a number of genres, including religious works and college and high school textbooks. The house also published some of the nation’s most outstanding trade books and authors. Throughout its history, Harcourt, Brace and Company would be recognized as an innovator in the publishing industry. In the 1920s the company offered women employees equal career opportunities, a practice virtually nonexistent in the trade at that time. This philosophy was attributed in part to Ellen Knowles Eayres, the firm’s first employee, who later married Alfred Harcourt.
The head of the first children’s book department, from 1946 to 1972, was Margaret McElderry. Well known and well liked, she is credited with the discovery of many famous children’s authors, Joan Walsh Anglund and Eleanor Estes among them.
During World War II Harcourt, Brace and Company published Men Must Act by Lewis Mumford, an anti-fascist book. It was offered free, in an advertisement in The New York Times, to the first 500 New Yorkers to respond. The response was unexpected: all 500 copies were given away by noon, and it was estimated that another 2,000 people were turned away.
The house retained many famous authors throughout the years, but in 1955 several of them followed a well respected Harcourt editor, Robert Giroux, who left to become a partner in Parrar, Straus & Giroux. Among the more than 17 authors who left with him were T.S. Eliot, Flannery O’Connor, John Berryman, and Bernard Malamud.
In 1942 Alfred Harcourt resigned as president, leaving control of the company’s operations in the hands of Donald Brace. In 1955, one year after Harcourt’s death, William Jovanovich was elected president of Harcourt, Brace and Company. Donald Brace died in September of that year at the age of 74. William Jovanovich, a Colorado native, had joined the company in 1947 as a textbook salesman with a salary of $50 per week. Six years later he headed the school department, and in 1955 he was president of the company. While Jovanovich, at the time, was the youngest director with the company and owned no stock, he was the strong leader that the families of the two founders had sought.
Once at the helm, Jovanovich set a clear path for turning the company into a conglomerate. Two of his first goals were to take the company public and to merge with World Book Company, incorporated in 1905. Both moves were accomplished in 1960. Harcourt, Brace & World, Inc. was formed as a result, and took its position as the largest publisher of elementary, secondary, and college materials in the nation. The company would be lead by aggressive and determined Jovanovich until 1990. The company would diversify into dozens of publishing markets as well as into businesses totally unrelated to publishing by acquiring more than 40 companies.
In publishing, the late 1960s saw the acquisition of two educational filmstrip production companies; several farm and trade publications; and Academic Press, Inc., an international concern that published physical and applied science books and journals. Each year during the 1970s, except 1975, the company acquired at least one publishing or education-related firm.
In 1970 Jovanovich became chairman of the company, and its name was changed from Harcourt, Brace & World, Inc. to Harcourt Brace Jovanovich, Inc. (HBJ). Among the most notable acquisitions of the 1970s were The Psychological Corporation, in 1970, publishers of aptitude, diagnostic, achievement, and psychological tests; Beckley-Cardy Company, in 1972, a school supply house; Bay Area Review Course, Inc. and BRI Bar Review Institute, Inc. in 1974, the two being among the nation’s best bar exam review courses; and Pyramid Communications, Inc. in 1974, renamed Jove Publications, Inc., a mass market paperback publisher of romance, inspirational, sports, and health books. Also in 1984 Drake-Beam & Associates, now Drake Beam Morin, Inc., an outplacement counseling firm, was acquired. By 1978 HBJ was publishing about 2,300 titles— from newsletters to romances—and 75 magazines, with revenues hovering around $360 million.
The 1970s were not without their drawbacks. In 1974 operations at four German publishing houses purchased in 1970 were terminated because of poor profits. Price controls affected profits at Academic Press for a number of years. Jove/HBJ, an experimental imprint, was failing, and it was sold in 1979. HBJ’s trade division operated at a deficit beginning early in the decade. In 1977 HBJ lost $1.6 million on its general interest books alone.
In early 1978 Jovanovich cut the company’s budget, firing six of the trade division’s top personnel; he put himself in charge of hardcover adult and juvenile works. The discharge came several days after HBJ regrouped its operations and created an office of the president. Jovanovich claimed the firings had nothing to do with this reorganization.
Three executive vice-presidents were elected to fill the office of the president: Robert L. Edgell, Robert R. Hillebrecht, and Jack O. Snyder. HBJ was reorganized into five operational groups: university and scholarly publishing, school materials and assessment, periodicals and insurance, business publications and broadcasting, and popular enterprises. This latter group, headed by Hillebrecht, included the marine parks known as Sea World, an acquisition of 1976.
To acquire Sea World, Inc., HBJ had borrowed $46.7 million. Sea World was composed of three marine parks, located in San Diego, California; Cleveland, Ohio; and Orlando, Florida; and was considered some of the world’s finest living museums. In 1977 Sea World helped push the company’s gross sales to $281.7 million.
In 1980 Jovanovich told The New York Times that he was again looking for new acquisitions, and the decade would see HBJ’s attention turned to theme parks, insurance, and more publishing. In 1980 HBJ purchased a commercial insurance broker for the dental profession. In 1982 HBJ bought three publishing concerns, acquiring business periodicals serving a number of specialized industries. Acquisitions made in 1984 and 1985 diversified HBJ into 11 new periodical markets. Also in 1985, HBJ acquired three insurance operations. The largest, purchased for $130 million, were Federal Home Life Insurance Company and PHF Life Insurance Company of Battle Creek, Michigan.
In 1982 HBJ announced that it would move its headquarters from New York City to Orlando, Florida, and the trade department to San Diego, California. Business Week, March 31, 1982, quoted Jovanovich as saying “We’re moving because the continued profitability of publishing is in jeopardy.” A projected annual savings in rent and operation expenses of $20 million topped Jovanovich’s reasons for the move. “Too much time is spent lunching, and not enough is spent reading. Many of our writers don’t live in New York anyway,” Jovanovich noted.
HBJ planned to use the employee pension fund, which, the company stated, was “hugely overfunded,” to finance the new corporate headquarters. The investment, according to Jovanovich, would yield a considerable return—15 percent of the building’s cost in annual rent. In September 1983, the U.S. Labor Department prohibited the use of the fund, and HBJ was required to return all monies to the fund. The move, complete in 1984, included the construction of an eight story, 385,000 square-foot office building across from Sea World. The new HBJ headquarters cost the company $20 million. The move, as of 1986, cost HBJ a total of $35 million.
Once established in its new home, HBJ went on another theme park buying spree, spending a total of $67.7 million. In September 1984 HBJ bought Stars Hall of Fame in Orlando, which was soon converted to Places of Learning. The company acquired Florida Cypress Gardens, Inc., a botanical garden and entertainment park near Winter Haven, Florida, in 1985 through a $22.6 million stock trade. In December 1986 HBJ acquired Marine-land Amusements Corporation in Rancho Palos Verdes, California.
Near the end of that year, HBJ made the biggest purchase in its history, the $500 million acquisition of the educational and professional publishing division of CBS Inc. The division’s primary subsidiaries included W.B. Saunders, the world’s largest publisher of medical and health science textbooks and materials; and Holt, Rinehart and Winston, Inc. (HRW), one of the nation’s top textbook publishers. In an ironic twist, HRW was the evolutionary product of Henry Holt & Company—the firm from which Harcourt, Brace and Howe had started. The purchase made HBJ the largest publisher of elementary school and high school textbooks.
In 1987 Robert Maxwell, the chairman of British Printing and Communications Corporation (BPCC), set his sights on acquiring Harcourt Brace Jovanovich. Maxwell was looking for a U.S. publisher to add to his stable, and offered more than $2 billion for the company. HBJ was not interested. Takeover threats had prompted Jovanovich into action twice before in HBJ’s history—once in 1978 by Marvin Josephson, and again in 1981 by Warner Communications. Neither the action nor the results in either case had been far reaching.
In a press release dated May 26, 1987, HBJ announced its plan to fight the BPPC proposal through a recapitalization distribution. The plan included a $40-per-share special dividend and the issuance of new preferred stock.
Within two days, Maxwell announced he had withdrawn his offer, but HBJ had paid a hefty price. To fend off the takeover, HBJ had more than tripled its debt, from $837 million to $2.9 billion, requiring bank loans for a substantial portion of that figure. The withdrawal of his offer notwithstanding, on June 1 Maxwell tried to block the reorganization plan. At the close of business June 2, more than 3.3 million HBJ shares had changed hands, with the price skyrocketing to $63.75. A number of companies, along with Maxwell’s BPCC, opposed HBJ’s reorganization. After an Orange County, Florida, judge ruled in HBJ’s favor in late June, Maxwell withdrew.
In August 1987 HBJ began its attempt to cover the cost of the takeover defense by selling assets. Among the first to go were HBJ’s two VHF television stations and three corporate jets, the sales of which brought in about $20 million. Two book clubs were next on the auction block. In November HBJ announced the sale of its 110 trade magazines and Beckley-Cardy for $334 million. The buyer was Edgell Communications Inc., a new, private corporation formed in part by Robert Edgell, a former HBJ executive.
By year’s end HBJ had met its performing-asset sale requirement under its credit agreements. The company had sold more than $370 million in assets. Speculation continued, however, as did the rumors as to which property HBJ would sell next and to whom. On January 1, 1988, William Jovanovich announced that the HBJ theme parks were not for sale.
Several months later, HBJ eliminated 729 jobs from its theme park operations. While neither the HBJ publishing or insurance divisions were affected, the layoff included more than 343 positions at Florida-based theme parks, and 17 percent of the work force at Sea World in San Antonio, Texas.
On March 30, 1988, Ralph D. Caulo, age 53, was announced as HBJ’s newly elected president and chief operating officer. Caulo, who joined HBJ in 1967 as a textbook sales manager, had served as an executive vice-president in Orlando, heading the school publishing division. William Jovanovich had been chief executive, president, and chairman since 1970. On December 17, 1988, at age 68, William Jovanovich resigned his position as president and chief executive officer of Harcourt Brace Jovanovich, retaining only his position as chairman.
During the late 1980s some analysts believed the company’s financial situation to be anything but hopeful. Forced to sell revenue-generating assets to repay debt, HBJ had undermined its long-range solvency. William Jovanovich claimed that “HBJ could repay its obligations without now selling major assets.”
In November 1989, HBJ sold all six of its theme parks and related land holdings to Anheuser-Busch Companies. The price was $1.1 billion, which went to retire the bank loans. The year also saw significant structural changes within HBJ operations. Elementary and secondary textbook divisions were divided. HBJ would now publish kindergarten through eighth grade textbooks, while subsidiary Holt, Rinehart and Winston (HRW) would publish those for grades seven through twelve. HBJ and HRW school department heads resigned, as did six executives in the elementary and secondary divisions. Ralph Caulo resigned as president, and Peter Jovanovich was elected in his place.
William Jovanovich’s son, Peter William Jovanovich, was born in New York City in 1949, and had joined the HBJ trade department in 1980. Along with the leadership of the company his father had long enjoyed, Peter inherited HBJ’s $1.6 billion debt. Wall Street analysts and institutional investors openly expressed concern regarding Jovanovich’s ability to pull the company from its troubles. HBJ’s operating loss for 1989 reached $242 million, with annual interest payments at $350.8 million. The firm’s share price had plummeted from nearly $44 late in 1984 to around $3 by 1989.
The declining stock price was devastating for investors and employees alike. The company had eliminated its $74 million defined benefit pension plan in 1984 in favor of a $24 million employee stock ownership plan, or ESOP. The ESOP became employees’ only source of retirement benefits, and the “extra” $50 million reverted to the company. In light of its plummeting market value, HBJ began offering a new defined contribution plan in 1989, but did not (and frankly could not) offer compensation to employees and retirees who had suffered significant losses.
In April 1990 HBJ confirmed its intentions to sell additional assets. Speculation by analysts targeted HBJ’s professional publishing division, including W.B. Saunders as one possibility, estimating a sale price at around $600 million. Another option would be the company’s insurance operations, which in 1989 had $456.3 million in revenues. Still other sources disclosed the possibility of a renewed interest in HBJ by BPCC chairman Robert Maxwell.
On May 29, 1990, William Jovanovich retired from his 36-year tenure as chairman of HBJ, naming John S. Herrington as his successor. The New York Times, May 30, 1990, quoted Roger Straus, chairman of Parrar, Straus & Giroux: “It is very sad. Bill was a great publisher in his time, but he went too far in resisting Maxwell. Now I suspect that he does not want to be there for the dismemberment.” HBJ’s 1990 annual report paid brief homage to its long-time leader, calling him “the soul of HBJ.” A lawyer, Herrington had joined the board of directors in 1989 after serving as secretary of energy to U.S. President Ronald Reagan.
In September 1990 Vice-Chairman and Chief Operating Officer J. William Brandner, HBJ’s second in command, resigned. HBJ announced that his departure was part of a budget cut that was expected to help curb operating expenses without hindering operations. In the same month, HBJ hired a spokesman—a first in its 71-year history. C. Anson Franklin had served as assistant energy secretary under Herrington and as assistant press secretary in the Reagan administration. Franklin’s job, in addition to serving as liaison between the company, its shareholders, and the press, was to improve HBJ’s community and company communications.
In spite of its serious financial difficulties, HBJ continued to publish great books. In 1990 HBJ’s Octavio Paz was awarded the Nobel Prize for Literature. The poet, age 76, was the first Mexican writer to receive literature’s highest recognition, awarded by the Swedish Academy of Letters. He is the author of Convergences: Essay on Art and Literature, and One Earth, Four or Five Worlds: Reflections on Contemporary History. That same year, HBJ’s Charles Simic won the Pulitzer Prize for Poetry.
With the publisher’s stock hovering at $1.25 per share, and its long-term debt at an astounding $1.76 billion, HBJ’s board of directors decided to make the ultimate asset sale, seeking a merger partner in 1990. After negotiations with nine potential partners, HBJ entered negotiations with General Cinema Corporation and approved a merger in January 1991. Although its initial offer expired, General Cinema announced a revised merger plan in August 1991. The $1.5 billion deal, which culminated in November, made HBJ a wholly-owned subsidiary of General Cinema.
While some analysts criticized General Cinema’s chairman, Richard A. Smith, for the acquisition, others believed that his company’s cash hoard could be used to virtually eliminate HBJ’s debilitating debt. Although its revenues had increased to $1.4 billion in 1991, HBJ suffered an $81 million loss that year due in part to $128 million debt payments. In 1992 alone, debt reduction cut annual interest payments by $250 million, thereby enabling HBJ to record a net profit of $107.98 million that year.
Mid-1992, Richard T. Morgan, former chief executive officer of Macmillan, Inc., replaced Peter Jovanovich as president and CEO of Harcourt Brace Jovanovich. General Cinema was renamed Harcourt General in 1993 to reflect both the spin-off of its theater business to shareholders, and the increased importance of its publishing business, which was renamed Harcourt Brace and Co. that year. By this time, Harcourt Brace contributed 26 percent of its parent’s annual revenues and nearly 40 percent of operating earnings. Harcourt General’s 1993 annual report suggested the company might make acquisitions to bolster its core publishing business, but also warned that a cyclical decline in textbook purchases could depress 1994 revenues and earnings.
Academic Press, Canada Limited (Ontario); Academic Press, Inc.; AP Journals, Inc.; Books for Professionals, Inc.; Devices for Learning, Inc.; Foundation for Marine Animal Husbandry, Inc.; Grune & Stratton, Inc.; Harcourt Brace & Company Australia Pty. Limited (Australia); Harcourt Brace Export Educational Development Group, Inc.; Harcourt Brace Export Corporation; Harcourt Brace FSC, Inc. (U.S. Virgin Islands); Harcourt Brace International Corporation; Harcourt Brace Japan, Inc. (99.17 percent); Harcourt Brace Real Properties Corporation; Harcourt Brace General Insurance, Inc.; Holt, Rinehart and Winston Limited (England); Holt, Rinehart and Winston Publishing Asia Limited (99 percent) (Hong Kong); HRW and WBS Canada Corporation, Inc.; HRW Distributors, Inc.; Human Nature, Inc.; Innovation Research, Inc.; Johnson Reprint Company Limited (England); T & A D Poyser Limited (England); The Psychological Corporation Limited (England); Seminar Press Limited (England); AP Export Company, Inc.; Coronado Publishers, Inc.; Johnson Reprint Corporation (N.Y.); Learned & Tested, Inc., The Educational Company; Miller Accounting Publications, Inc.
Fabrikant, Geraldine, “General Cinema’s Big Bet on Harcourt Brace’s Revival,” New York Times, January 6, 1992, pp. DI, D9.
Montgomery, Leland, “General Cinema: The Value of Camouflage,” Financial World, September 1, 1992, p. 17.
Tebbel, John, A History of Book Publishing in the United States, New York: R.R. Bowker Company, 1972–1981.
Vosti, Curtis, “The Haunting Side of ESOPs,” Pensions & Investments, March 2, 1992, p. 30.
—updated by April Dougal Gasbarre