CCH Inc.

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CCH Inc.

2700 Lake Cook Road
Riverwoods, Illinois 60015-3888
U.S.A.
(708) 940-4600
Fax: (708) 267-2987

Public Company
Incorporated: 1927
Employees: 5,100
Stock Exchanges: NASDAQ
Sales: $579 million
SICs: 2741 Miscellaneous Publishing; 7389 Business
Services Nec; 7374 Data Processing and Preparation

Best known as the publisher of the Standard Federal Tax Reporter, CCH Inc., publishes a wide array of topical law reports for legal, accounting, and business applications. The company markets over 600 products—including loose-leaf Reporters, magazines, casebooks, bound books, and electronic products—which provide concise, detailed information on laws and regulations enacted by federal and state governmental agencies. Since the early 1990s, CCH has been moving away from print media, replacing its traditional black pressboard binders with reports available on CD-ROM, floppy disk, audio cassette, and online databases. CCH operates two primary businesses in the United States: ProSystem fx, which develops and markets tax preparation software for the accounting industry; and Legal Information Services, which provides tax-related information on corporate, credit, securities, and intellectual property matters. The company also has divisions in Canada, Europe, Asia, Australia, and New Zealand.

The company’s present organization is the result of a merger in 1927 between two competitors, Corporation Trust Co. and Commerce Clearing House. The larger of the two, Corporation Trust, was founded in 1892 by Oakleigh Thorne to publish materials that aided lawyers in “organizing, qualifying, registering and representing” businesses under the varying state laws of that time. Sales expanded as governmental legislation of business activities became more complex, compelling even the most knowledgeable lawyers and accountants to rely on guidebooks for accurate explanations. One of Corporation Trust’s first clients was the United States Steel Corp., and in 1903, the company asked Corporation Trust to track and report on the activities of various state and federal legislative bodies. The company organized its first legislative reporting department, and soon was selling reports to customers such as American Tobacco Company (now American Brands Inc.), Prudential Insurance, and American Telephone and Telegraph Company.

Ten years later, the company’s growth took another giant step when the United States government passed the Tariff Act of 1913, effectively instituting the nation’s first income tax. While the measure was being debated, Corporation Trust had published reports on the progress of various tax-related bills as they passed through the House and Senate. The company established its first income tax department and by December 1913 had signed up 1,000 subscribers to its first Income Tax Reporter —a 400-page loose-leaf binder that summarized the Act and provided space for updates on tax laws as influenced by court and administrative rulings. The tax department served as the breeding ground for what CCH called “the art of loose-leaf reporting,” which led to the decision to report on legislative developments on a topic-by-topic basis.

Tax law reporting became a lucrative business for Corporation Trust, but the company was not without competition. In 1913 a professor and two students at New York University founded a publishing house called Prentice Hall to publish an economics book they had written. Soon Prentice Hall began publishing its own guide books on the new tax laws, and also a binder on income tax laws that seemed to be a knock-off of Corporation Trust’s binder system. The most essential development in the history of CCH, however, was when a company called Commerce Clearing House published a bound income tax guide so successful that the founder, William KixMiller, abandoned the company’s other business reporting to focus solely on income tax guides. Demand for easy-to-read tax guides became even greater as the U.S. government raised tax rates to prepare itself for World War I. The economic constrictions of war forced Corporation Trust to temporarily abandon its legislative reporting service and decrease the output of all other departments, focusing strictly on income tax publications. By 1920 approximately 20 other competitors had entered the tax guide field. Corporation Trust held the largest share of the market, but Prentice Hall and Commerce Clearing House were rapidly gaining market share.

The postwar era remained highly competitive for legal and business reference publishers, with Corporation Trust, Prentice Hall, and Commerce Clearing House all seeking to exploit new market niches. When Commerce Clearing House created the Business Law Reference Reporter, Prentice Hall sued the company for copyright infringement. The protracted legal battle, although ultimately inconclusive, severely damaged Commerce Clearing House’s financial reserves. In 1927, in order to preserve his business, KixMiller merged Commerce Clearing House with Corporation Trust. The new corporation took the name Commerce Clearing House, Inc., (CCH) although Corporation Trust (and the Thorne family) assumed the controlling interest in the company.

By 1929 the two companies had effectively merged their operations under one roof in the burgeoning Printer’s Row district of Chicago. In 1930 the company reorganized itself as a corporation in the state of Delaware, with home offices in Chicago, and opened its first company-owned printing operations. CCH acquired a total of eight separate “reporters,” ranging in subject matter from the Public Utility Index-Digest to the Motor Carrier Reporter. Business was further boosted in 1933 with the enactment of President’s Franklin D. Roosevelt’s New Deal program, a transformation of government that created an enormous need for reporters to assist businesses in understanding the new laws. CCH created individual reporters covering labor, social security, liquor control, food and drug, securities, and bankruptcy regulations.

As the entry of the United States into World War II appeared imminent, CCH began publishing the War Law Reporter as well as an unprecedented number of publications on the federal tax code that helped decipher an enormous increase enacted in federal tax rates. When the United States entered World War II, the company devoted the majority of its efforts to publishing various federal, state, and local tax reporters, and company printing operations supported the U.S. Government with special publishing projects. The postwar years were profitable for CCH, despite a shortage of material goods that made expansion difficult. CCH established Commerce Clearing House, Canadian Ltd., in 1945 and a second editorial office in San Francisco in 1946. During this period business also expanded when several competing publishing houses went out of business and recommended CCH publications to their subscribers.

With the dawn of the Cold War, demand for CCH’s war law reporting continued. In 1950, when the United States entered the Korean War, CCH was the first to come out with a reporter on the Defense Production Act of 1950 and subsequent “emergency controls.” The company developed the Emergency Business Control Law Reporters, a flexible series of loose-leaf reports focusing on individual topics such a prices, materials, and market stabilization. CCH also created a publication in cooperation with the New York Stock Exchange, which set the stage for the company’s later introduction of guides to the American, Pacific, Midwest, Boston, and Philadelphia stock exchanges.

In 1961 CCH went public on the NASDAQ exchange. The following year the company began venturing into European markets with the publication of Common Market Reports as well as a series on world tax rates published through a joint project with Harvard University. In 1963 the company began publication of a guide to British taxes for use by Canadian and American businesses. CCH benefitted once again from important governmental policy initiatives, publishing the Employment Services Reporter in 1964 as a means of assisting businesses in understanding the Civil Rights Act. The following year, when the Social Security Act was passed, the company published 3.8 million books explaining the intricacies of Medicare and Medicaid regulations. The company also grew through acquisition, acquiring National Quotation Bureau, Inc., in 1963 and Facts on File, a publisher of news summaries, in 1965, as well as a majority share in Computax Services Inc., a computerized tax preparation service. International expansion continued throughout the decade, and in 1968 CCH gained a foothold in Australia by founding Commerce Clearing House, Australia. Sales that year were $37.8 million.

The company continued to add new publications through the 1970s, focusing on its traditional areas of tax and business law, as well as on emerging topics such as computer law, workplace safety regulations, and consumer safety reports. In 1974 CCH raised its holdings in Computax shares from just over 50 percent to 96 percent. Although the company had been unprofitable for several years, by 1973 Computax was the leader in the growing industry of computer-based tax preparation, preparing 700,000 returns per year. Throughout the 1970s Computax profits rose and fell as it struggled to keep abreast of changes in the computer industry that were prompting more and more businesses to prepare their tax returns internally.

CCH’s tax publication division grew sharply during the late 1970s and early 1980s, fueled by increasingly complex tax measures such as the 1,200-page Deficit Reduction Act of 1984. CCH’s Standard Federal Tax Reporters (to which subscriptions could be bought for $925 per year) dominated the market and enjoyed a strong reputation for quality and accuracy. Prentice Hall, the company’s nearest competitor, held only a third of CCH’s market share in tax publications, and the two had had virtually no new competitors since 1935. The company’s balance sheet was so impressive it prompted Fortune magazine to declare that “the financial achievements of Commerce Clearing House have been nothing short of splendid.” The company posted nearly $40 million in earnings in 1984 and held a cash reserve of $75 million.

CCH’s sparkling performance was not long-lived, however. Net income slipped from $53 million in 1987 to $31 million in 1991, largely due to a lackluster performance by Computax, which prompted the division to lay off 150 of its 650 employees and consolidate its 31 tax-processing bureaus. Sales were slipping in CCH’s publishing division as well, as CCH’s core clients—law and accounting firms—had experienced financial difficulties in the late 1980s, prompting many to cancel their subscriptions to the Standard Federal Tax Reporter. Other long-time clients switched to online databases such as Westlaw and Lexis/Nexis for tax-related information. And a new competitor, Research Institute of America, had entered the field. Bankrolled by parent company Thompson Corp., Research Institute was able to capture market share with user-friendly products at low prices.

In 1991 Richard Merrill stepped down as chief executive and was replaced by a three-member executive committee consisting of Edward L. Massie, president of the publishing division, Ralph Whitley, head of Computax, and Oakleigh Thorne IV, the great-great grandson of the company’s founder, who had moved up in the ranks after earning his MBA from Columbia University in the late 1980s. The three-man committee was assigned the task of restructuring the company’s operations and marketing strategies, which had remained much the same in the company’s 80-year history.

The three-member committee earmarked $86 million to position the company in the burgeoning market of electronic media. Many publications were made available on CD-ROM (a move that allowed all 36,000 pages of information in the Standard Federal Tax Reporter to fit neatly onto one disk), through a new online service called CCH ACCESS, and on audio cassettes and floppy disks. Under Whitley’s direction, Computax’s mail-in tax preparation services were replaced by a series of tax-compliance software packages that allowed accountants to file returns using their personal computers.

The restructuring of Computax led to the elimination of more than 1,500 jobs at its 31 bureaus nationwide. In addition, CCH eliminated 245 printing and shipping positions by closing printing plants in Chicago and Clark, New Jersey, and transferring operations to a plant in St. Petersburg, Florida, the company’s most efficient operation. Other plants were converted into CD-ROM production facilities. The company posted a loss of $64.2 million in 1992, resulting from a one-time charge of $100.5 million related to the restructuring of its computer system and accounting for retiree benefits. Restructuring continued in 1993 as CCH sold Facts on File, Inc., and the National Quotation Bureau Co. to Smith McDonell Stone and Co., and purchased Matthew Bender & Co., parent company of Bender’s Federal Tax Service, and eight state tax services and related tax publications, from Times Mirror Company.

Profits in 1993 were a slim $6.3 million; in 1994 they tripled to $18.9 million, fueled by gains at Computax and by Legal Information Services’s electronic publishing ventures. This was still below the company’s earnings of $40 million a decade earlier, but was not unusual given the difficulties many publishing firms experienced in the early 1990s. As it neared its 60th anniversary, CCH was seeking to transform itself from one of the nation’s leading print providers of legal, tax, and business information into a leading player in the rapidly expanding field of electronic publishing.

Principal Subsidiaries

CCH Publishing Inc.; Legal Information Services; Computax Inc.; CCH Canada; CCH Europe; CCH Asia; CCH Australia; CCH New Zealand; Matthew Bender & Co; McCord Co.