Graham Holdings Company (NYSE: GHC) today reported net income
attributable to common shares of $57.1 million ($10.65 per share)
for the second quarter of 2019, compared to $46.6 million ($8.63
per share) for the second quarter of 2018.
The results for the second quarter of 2019 and 2018 were
affected by a number of items as described in the following
paragraphs. Excluding these items, net income attributable to
common shares was $50.2 million ($9.36 per share) for the second
quarter of 2019, compared to $64.5 million ($11.94 per share) for
the second quarter of 2018. (Refer to the Non-GAAP Financial
Information schedule at the end of this release for additional
details.)
Items included in the Company’s net income for the second
quarter of 2019:
- a $7.8 million reduction to operating expenses from property,
plant and equipment gains in connection with the spectrum repacking
mandate of the FCC (after-tax impact of $6.0 million, or $1.13 per
share);
- $6.6 million in expenses related to a non-operating Separation
Incentive Program at the education division (after-tax impact of
$5.1 million, or $0.95 per share);
- $7.8 million in net gains on marketable equity securities
(after-tax impact of $5.8 million, or $1.09 per share); and
- $0.1 million in non-operating foreign currency gains (after-tax
impact of $0.1 million, or $0.02 per share).
Items included in the Company’s net income for the second
quarter of 2018:
- an $0.8 million reduction to operating expenses from property,
plant and equipment gains in connection with the spectrum repacking
mandate of the FCC (after-tax impact of $0.6 million, or $0.11 per
share);
- $6.2 million in interest expense related to the settlement of a
mandatorily redeemable noncontroling interest ($1.14 per
share);
- $11.4 million in debt extinguishment costs (after-tax impact of
$8.6 million, or $1.60 per share);
- $2.6 million in net losses on marketable equity securities
(after-tax impact of $1.9 million or $0.36 per share); and
- $2.3 million in non-operating foreign currency losses
(after-tax impact of $1.7 million, or $0.32 per share).
Revenue for the second quarter of 2019 was $737.6 million, up
10% from $672.7 million in the second quarter of 2018, largely due
to the acquisition of two automotive dealerships that closed in
January 2019. Revenues grew at television broadcasting, healthcare,
and SocialCode, partially offset by declines at the education and
manufacturing divisions. The Company reported operating income of
$58.0 million for the second quarter of 2019, compared to $65.6
million for the second quarter of 2018. The operating income
decline is driven by lower earnings in the education and
manufacturing divisions, partially offset by improvements in
television broadcasting, healthcare and other businesses
results.
For the first six months of 2019, the Company reported net
income attributable to common shares of $138.8 million ($25.91 per
share), compared to $89.5 million ($16.40 per share) for the first
six months of 2018. The results for the first six months of 2019
and 2018 were affected by a number of items as described in the
following paragraphs. Excluding these items, net income
attributable to common shares was $88.7 million ($16.55 per share)
for the first six months of 2019, compared to $114.0 million
($20.93 per share) for the first six months of 2018. (Refer to the
Non-GAAP Financial Information schedule at the end of this release
for additional details.)
Items included in the Company’s net income for the six months of
2019:
- a $9.6 million reduction to operating expenses from property,
plant and equipment gains in connection with the spectrum repacking
mandate of the FCC (after-tax impact of $7.4 million, or $1.38 per
share);
- $6.6 million in expenses related to a non-operating Separation
Incentive Program at the education division (after-tax impact of
$5.1 million, or $0.95 per share);
- $31.9 million in net gains on marketable equity securities
(after-tax impact of $23.9 million, or $4.46 per share);
- $29.0 million gain from the sale of Gimlet Media (after-tax
impact of $21.7 million, or $4.06 per share);
- $0.6 million in non-operating foreign currency gains (after-tax
impact of $0.5 million, or $0.09 per share); and
- $1.7 million in income tax benefits related to stock
compensation ($0.32 per share).
Items included in the Company’s net income for the six months of
2018:
- a $1.1 million reduction to operating expenses from property,
plant and equipment gains in connection with the spectrum repacking
mandate of the FCC (after-tax impact of $0.8 million, or $0.15 per
share);
- $6.2 million in interest expense related to the settlement of a
mandatorily redeemable noncontrolling interest ($1.14 per
share);
- $11.4 million in debt extinguishment costs (after-tax impact of
$8.6 million, or $1.60 per share);
- $16.7 million in net losses on marketable equity securities
(after-tax impact of $12.7 million, or $2.30 per share);
- a $4.3 million gain on the Kaplan University Transaction
(after-tax impact of $1.8 million, or $0.33 per share);
- $2.1 million in non-operating foreign currency losses
(after-tax impact of $1.6 million, or $0.30 per share); and
- $1.8 million in income tax benefits related to stock
compensation ($0.33 per share).
Revenue for the first six months of 2019 was $1,429.8 million,
up 7% from $1,332.1 million in the first six months of 2018,
largely due to the acquisition of two automotive dealerships that
closed in January 2019. Revenues grew at television broadcasting,
healthcare and SocialCode, partially offset by declines at the
education and manufacturing divisions. The Company reported
operating income of $98.0 million for the first six months of 2019,
compared to $109.8 million for the first six months of 2018.
Operating results declined at the education, television
broadcasting and manufacturing businesses, partially offset by
improvements at healthcare and other businesses.
Division Results
Education
Education division revenue totaled $367.8 million for the second
quarter of 2019, down 1% from $370.0 million for the same period of
2018. Kaplan reported operating income of $26.3 million for the
second quarter of 2019, down 30% from $37.6 million for the second
quarter of 2018.
For the first six months of 2019, education division revenue
totaled $740.2 million, down 1% from revenue of $745.5 million for
the same period of 2018. Kaplan reported operating income of $51.9
million for the first six months of 2019, a 14% decline from $60.3
million for the first six months of 2018.
A summary of Kaplan’s operating results is as follows:
Three Months Ended
Six Months Ended
June 30
June 30
(in thousands)
2019
2018
% Change
2019
2018
% Change
Revenue
Kaplan international
$
188,580
$
184,303
2
$
374,336
$
367,885
2
Higher education
76,288
85,981
(11
)
159,068
185,811
(14
)
Test preparation
65,673
68,604
(4
)
126,823
127,755
(1
)
Professional (U.S.)
35,147
31,057
13
76,361
64,413
19
Kaplan corporate and other
2,369
442
—
4,671
727
—
Intersegment elimination
(294
)
(382
)
—
(1,042
)
(1,087
)
—
$
367,763
$
370,005
(1
)
$
740,217
$
745,504
(1
)
Operating Income (Loss)
Kaplan international
$
25,537
$
24,187
6
$
49,822
$
44,591
12
Higher education
2,721
11,219
(76
)
4,636
12,574
(63
)
Test preparation
4,289
6,120
(30
)
3,835
6,641
(42
)
Professional (U.S.)
4,745
4,780
(1
)
16,004
14,095
14
Kaplan corporate and other
(6,920
)
(7,100
)
3
(14,757
)
(14,846
)
1
Amortization of intangible assets
(3,377
)
(1,663
)
—
(6,944
)
(2,812
)
—
Impairment of long-lived assets
(693
)
—
—
(693
)
—
—
Intersegment elimination
3
11
—
(3
)
11
—
$
26,305
$
37,554
(30
)
$
51,900
$
60,254
(14
)
Kaplan International includes English-language programs, and
postsecondary education and professional training businesses
largely outside the United States. Kaplan International revenue
increased 2% for both the second quarter and first six months of
2019. On a constant currency basis, revenue increased 5% and 6% for
the second quarter and first six months of 2019, respectively.
Operating income increased to $25.5 million in the second quarter
of 2019, compared to $24.2 million in the second quarter of 2018.
Operating income increased to $49.8 million in the first six months
of 2019, compared to $44.6 million in the first six months of 2018.
Revenue and operating income increased due to improved results at
Pathways and UK Professional, offset by declines in Singapore and
English Language training.
Prior to the KU Transaction closing on March 22, 2018, Higher
Education included Kaplan’s domestic postsecondary education
businesses, made up of fixed-facility colleges and online
postsecondary and career programs. Following the KU Transaction
closing, the Higher Education division includes the results as a
service provider to higher education institutions. In the second
quarter and first six months of 2019, Higher Education revenue was
down 11% and 14%, respectively, due to the KU Transaction. In the
first six months of 2019, the Company recorded a portion of the
service fee with Purdue Global based on an assessment of its
collectability under the TOSA. This resulted in a decline in Higher
Education results for the first six months of 2019, as the Company
recorded the full service fee for Purdue Global for the first six
months of 2018. Following the transition from KU, Purdue Global
launched a planned marketing campaign to fully establish its new
brand. This significant marketing spend, which the Company
supports, impacts the cash generated by Purdue Global and its
current ability to fully pay the KHE service fee under the TOSA.
The Company will continue to assess the collectability of the
service fee with Purdue Global on a quarterly basis to make a
determination as to whether to record all or part of the service
fee in the future and whether to make adjustments to service fee
amounts recognized in earlier periods.
Kaplan Test Preparation (KTP) includes Kaplan’s standardized
test preparation programs. In September 2018, KTP acquired the test
preparation and study guide assets of Barron’s Educational Series,
a New York-based education publishing company. KTP revenue
decreased 4% and 1% for the second quarter and first six months of
2019, respectively. Excluding revenue from the Barron’s
acquisition, revenues were down 11% and 8%, respectively, due to
declines in demand for classroom-based offerings, offset in part by
growth in online-based programs. KTP operating results declined 30%
and 42% in the second quarter and first six months of 2019,
respectively, due primarily to revenue declines for classroom-based
offerings. Operating losses for the new economy skills training
programs were $2.0 million and $1.8 million for the first six
months of 2019 and 2018, respectively.
In the second quarter of 2019, the Company approved a Separation
Incentive Program (SIP) that will reduce the number of employees at
KTP and Higher Education. In connection with the SIP, the Company
recorded $6.6 million in non-operating pension expense in the
second quarter of 2019.
Kaplan Professional (U.S.) includes the domestic professional
and other continuing education businesses. In the second quarter
and first six months of 2019, Kaplan Professional (U.S.) revenue
was up 13% and 19%, due to the May 2018 acquisition of Professional
Publications, Inc. (PPI), an independent publisher of professional
licensing exam review materials that provides engineering,
surveying, architecture, and interior design licensure exam review
products, and the July 2018 acquisition of College for Financial
Planning (CFFP), a provider of financial education and training to
individuals through programs of study for professionals pursuing a
career in Financial Planning. Kaplan Professional (U.S.) operating
results declined in the second quarter of 2019, due to lower demand
for real estate and accountancy programs and increased spending for
sales and marketing. Kaplan Professional (U.S) operating results
increased 14% for the first six months of 2019, due mostly to
earnings from PPI and CFFP.
Kaplan corporate and other represents unallocated expenses of
Kaplan, Inc.’s corporate office, other minor businesses and certain
shared activities.
Television Broadcasting
Revenue at the television broadcasting division increased 2% to
$116.6 million in the second quarter of 2019, from $114.1 million
in the same period of 2018. The revenue increase is due to $4.8
million in higher retransmission revenues, offset by a $3.4 million
decrease in political advertising revenue. In the second quarter of
2019 and 2018, the television broadcasting division recorded $7.8
million and $0.8 million, respectively, in reductions to operating
expenses related to property, plant and equipment gains due to new
equipment received at no cost in connection with the spectrum
repacking mandate of the FCC. Operating income for the second
quarter of 2019 increased 8% to $44.5 million, from $41.1 million
in the same period of 2018, due to increased property, plant and
equipment gains, partially offset by higher network fees.
Revenue at the television broadcasting division increased 1% to
$224.9 million in the first six months of 2019, from $222.9 million
in the same period of 2018. The revenue increase is due primarily
to $14.4 million in higher retransmission revenues, offset by an
$8.6 million decrease in 2018 incremental winter Olympics-related
advertising revenue at the Company’s NBC stations and a $5.1
million decrease in political advertising revenue. In the first six
months of 2019 and 2018, the television broadcasting division
recorded $9.6 million and $1.1 million, respectively, in reductions
to operating expenses related to non-cash property, plant and
equipment gains due to new equipment received at no cost in
connection with the spectrum repacking mandate of the FCC.
Operating income for the first six months of 2019 decreased 2% to
$80.0 million from $81.7 million in the same period of 2018, due to
the decline in political advertising revenue, the absence of winter
Olympics-related advertising and increased network fees, partially
offset by increased property, plant and equipment gains.
Manufacturing
Manufacturing includes four businesses: Hoover, a supplier of
pressure impregnated kiln-dried lumber and plywood products for
fire retardant and preservative applications; Dekko, a manufacturer
of electrical workspace solutions, architectural lighting and
electrical components and assemblies; Joyce/Dayton, a manufacturer
of screw jacks and other linear motion systems; and Forney, a
global supplier of products and systems that control and monitor
combustion processes in electric utility and industrial
applications. In July 2018, Dekko acquired Furnlite, Inc., a
Fallston, NC-based manufacturer of power and data solutions for the
hospitality and residential furniture industry.
Manufacturing revenues declined 9% and 6% in the second quarter
and first six months of 2019, respectively, due to a decline at
Hoover from lower wood prices, partially offset by increases due to
the Furnlite acquisition. Manufacturing operating income declined
in the second quarter and first six months of 2019 due largely to
increased labor and other operating costs at Hoover and Dekko,
along with gains on inventory sales at Hoover in 2018.
Healthcare
The Graham Healthcare Group (GHG) provides home health and
hospice services in three states. Healthcare revenues increased in
the first six months of 2019, largely due to growth in home health
and hospice services. The improvement in GHG operating results in
2019 is due to increased revenues and the absence of integration
costs and other overall cost reduction in the first six months of
2019.
SocialCode
SocialCode is a provider of marketing solutions on social,
mobile and video platforms. In the third quarter of 2018,
SocialCode acquired Marketplace Strategy, a Cleveland-based Amazon
sales acceleration agency. SocialCode’s revenue increased 11% and
6% in the second quarter and first six months of 2019,
respectively. SocialCode reported operating losses of $1.0 million
and $5.0 million in the second quarter and first six months of
2019, respectively, compared to $1.7 million and $5.5 million in
the second quarter and first six months of 2018, respectively.
Other Businesses
On January 31, 2019, the Company acquired two automotive
dealerships, Lexus of Rockville and Honda of Tysons Corner, from
Sonic Automotive. The Company also announced it had entered into an
agreement with Christopher J. Ourisman, a member of the Ourisman
Automotive Group family of dealerships. Mr. Ourisman and his team
of industry professionals operate and manage the dealerships.
Graham Holdings Company holds a 90% stake. Revenues from other
businesses increased due mostly to the automotive dealership
acquisition. Operating results from other businesses also improved
in the first six months of 2019, due partly to the acquisition.
Other businesses also includes Slate and Foreign Policy, which
publish online and print magazines and websites; and three
investment stage businesses, Megaphone, Pinna and CyberVista.
Megaphone, Slate and CyberVista reported revenue increases in the
first six months of 2019. Losses from each of these five businesses
in the first six months of 2019 adversely affected operating
results.
On July 31, 2019, the Company announced the closing on its
acquisition of Clyde’s Restaurant Group (CRG). CRG owns and
operates thirteen restaurants and entertainment venues in the
Washington, DC metropolitan area, including Old Ebbitt Grill and
The Hamilton, two of the top twenty highest grossing independent
restaurants in the United States. CRG will be managed by its
existing management team as a wholly-owned subsidiary of the
Company.
Corporate Office
Corporate office includes the expenses of the Company’s
corporate office and certain continuing obligations related to
prior business dispositions.
Equity in Earnings of
Affiliates
At June 30, 2019, the Company held an 11% interest in
Intersection Holdings, LLC, a company that provides digital
marketing and advertising services and products for cities, transit
systems, airports, and other public and private spaces. The Company
also holds interests in a number of home health and hospice joint
ventures, and several other affiliates. The Company recorded equity
in earnings of affiliates of $1.5 million for the second quarter of
2019, compared to $0.9 million for the second quarter of 2018. The
Company recorded $3.1 million for the first six months of 2019,
compared to $3.5 million for the first six months of 2018.
Net Interest Expense, Debt
Extinguishment Costs and Related Balances
In connection with the auto dealership acquisition that closed
on January 31, 2019, a subsidiary of the Company borrowed $30
million to finance a portion of the acquisition and entered into an
interest rate swap to fix the interest rate on the debt at 4.7% per
annum. The subsidiary is required to repay the loan over a 10-year
period by making monthly installment payments.
On May 30, 2018, the Company issued 5.75% unsecured eight-year
fixed-rate notes due June 1, 2026. Interest is payable
semi-annually on June 1 and December 1. On June 29, 2018, the
Company used the net proceeds from the sale of the notes and other
cash to repay $400 million of 7.25% notes that were due February 1,
2019. The Company incurred $11.4 million in debt extinguishment
costs related to the early termination of the 7.25% notes.
The Company incurred net interest expense of $6.8 million and
$12.5 million for the second quarter and first six months of 2019,
respectively, compared to $15.3 million and $22.0 million for the
second quarter and first six months of 2018, respectively. The
Company incurred $6.2 million in interest expense related to the
mandatorily redeemable noncontrolling interest at the Graham
Healthcare Group settled in the second quarter of 2018. The higher
interest expense in 2018 is also due to both the $400 million
eight-year and ten-year notes outstanding for the month of June
2018.
At June 30, 2019, the Company had $506.4 million in borrowings
outstanding at an average interest rate of 5.1% and cash,
marketable equity securities and other investments of $724.5
million.
Non-operating Pension and
Postretirement Benefit Income, net
The Company recorded net non-operating pension and
postretirement benefit income of $12.3 million and $32.2 million
for the second quarter and first six months of 2019, respectively,
compared to $23.0 million and $44.4 million for the second quarter
and first six months of 2018, respectively.
In the second quarter of 2019, the Company recorded $6.6 million
in expenses related to a non-operating Separation Incentive Program
at the education division.
Gain (Loss) on Marketable Equity
Securities, net
Overall, the Company recognized $7.8 million and $31.9 million
in net gains on marketable equity securities in the second quarter
and first six months of 2019, respectively, compared to $2.6
million and $16.7 million in net losses on marketable equity
securities in the second quarter and first six months of 2018,
respectively.
Other Non-Operating
Income
The Company recorded total other non-operating income, net, of
$1.2 million for the second quarter of 2019, compared to $2.3
million for the second quarter of 2018. The 2019 amounts included
$0.1 million in foreign currency gains and other items. The 2018
amounts included a $1.4 million contingent consideration gain
related to the sale of a business; a $2.5 million gain on sale of
land and other items; partially offset by $2.3 million in foreign
currency losses.
The Company recorded total other non-operating income, net, of
$30.6 million for the first six months of 2019, compared to $11.5
million for the first six months of 2018. The 2019 amounts included
a $29.0 million gain on the sale of the Company’s interest in
Gimlet Media; $0.6 million in foreign currency gains and other
items. The 2018 amounts included a $7.2 million gain on sales of
businesses and related contingent consideration; a $2.8 million
gain on sale of a cost method investment; a $2.5 million gain on
sale of land and other items; offset by $2.1 million in foreign
currency losses.
Provision for Income
Taxes
The Company’s effective tax rate for the first six months of
2019 and 2018 was 24.2% and 24.9%, respectively.
In the first quarter of 2019 and 2018, the Company recorded
income tax benefits related to stock compensation of $1.7 million
and $1.8 million, respectively.
Earnings Per Share
The calculation of diluted earnings per share for the second
quarter and first six months of 2019 was based on 5,328,252 and
5,327,369 weighted average shares outstanding, compared to
5,362,277 and 5,417,162 for the second quarter and first six months
of 2018. At June 30, 2019, there were 5,314,930 shares outstanding.
On November 9, 2017, the Board of Directors authorized the Company
to acquire up to 500,000 shares of its Class B common stock; the
Company has remaining authorization for 273,655 shares as of June
30, 2019.
Forward-Looking
Statements
This press release contains certain forward-looking statements
that are based largely on the Company’s current expectations.
Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results and achievements to
differ materially from those expressed in the forward-looking
statements. For more information about these forward-looking
statements and related risks, please refer to the section titled
“Forward-Looking Statements” in Part I of the Company’s Annual
Report on Form 10-K.
GRAHAM HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended
June 30
%
(in thousands, except per share
amounts)
2019
2018
Change
Operating revenues
$
737,602
$
672,677
10
Operating expenses
652,182
582,033
12
Depreciation of property, plant and
equipment
13,884
13,619
2
Amortization of intangible assets
12,880
11,399
13
Impairment of long-lived assets
693
—
—
Operating income
57,963
65,626
(12
)
Equity in earnings of affiliates, net
1,467
931
58
Interest income
1,579
1,901
(17
)
Interest expense
(8,386
)
(17,165
)
(51
)
Debt extinguishment costs
—
(11,378
)
—
Non-operating pension and postretirement
benefit income, net
12,253
23,041
(47
)
Gain (loss) on marketable equity
securities, net
7,791
(2,554
)
—
Other income, net
1,228
2,333
(47
)
Income before income taxes
73,895
62,735
18
Provision for income taxes
16,700
16,100
4
Net income
57,195
46,635
23
Net income attributable to
noncontrolling interests
(114
)
(69
)
65
Net Income Attributable to Graham
Holdings Company Common Stockholders
$
57,081
$
46,566
23
Per Share Information Attributable to
Graham Holdings Company Common Stockholders
Basic net income per common share
$
10.74
$
8.69
24
Basic average number of common shares
outstanding
5,285
5,325
Diluted net income per common share
$
10.65
$
8.63
23
Diluted average number of common shares
outstanding
5,329
5,362
GRAHAM HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Six Months Ended
June 30
%
(in thousands, except per share
amounts)
2019
2018
Change
Operating revenues
$
1,429,801
$
1,332,113
7
Operating expenses
1,277,795
1,172,229
9
Depreciation of property, plant and
equipment
27,407
28,261
(3
)
Amortization of intangible assets
25,940
21,783
19
Impairment of long-lived assets
693
—
—
Operating income
97,966
109,840
(11
)
Equity in earnings of affiliates, net
3,146
3,510
(10
)
Interest income
3,279
3,273
—
Interest expense
(15,811
)
(25,236
)
(37
)
Debt extinguishment costs
—
(11,378
)
—
Non-operating pension and postretirement
benefit income, net
32,181
44,427
(28
)
Gain (loss) on marketable equity
securities, net
31,857
(16,656
)
—
Other income, net
30,579
11,520
—
Income before income taxes
183,197
119,300
54
Provision for income taxes
44,300
29,700
49
Net income
138,897
89,600
55
Net income attributable to
noncontrolling interests
(68
)
(143
)
(52
)
Net Income Attributable to Graham
Holdings Company Common Stockholders
$
138,829
$
89,457
55
Per Share Information Attributable to
Graham Holdings Company Common Stockholders
Basic net income per common share
$
26.12
$
16.52
58
Basic average number of common shares
outstanding
5,285
5,380
Diluted net income per common share
$
25.91
$
16.40
58
Diluted average number of common shares
outstanding
5,328
5,417
GRAHAM HOLDINGS COMPANY
BUSINESS DIVISION INFORMATION
(Unaudited)
Three Months Ended
Six Months Ended
June 30
%
June 30
%
(in thousands)
2019
2018
Change
2019
2018
Change
Operating Revenues
Education
$
367,763
$
370,005
(1
)
$
740,217
$
745,504
(1
)
Television broadcasting
116,628
114,086
2
224,851
222,888
1
Manufacturing
114,873
126,462
(9
)
230,030
243,868
(6
)
Healthcare
40,641
38,208
6
78,369
75,829
3
SocialCode
16,382
14,770
11
29,829
28,069
6
Other businesses
81,359
9,167
—
126,589
16,000
—
Corporate office
—
—
—
—
—
—
Intersegment elimination
(44
)
(21
)
—
(84
)
(45
)
—
$
737,602
$
672,677
10
$
1,429,801
$
1,332,113
7
Operating Expenses
Education
$
341,458
$
332,451
3
$
688,317
$
685,250
0
Television broadcasting
72,134
72,968
(1
)
144,817
141,228
3
Manufacturing
110,181
117,797
(6
)
222,064
226,575
(2
)
Healthcare
38,043
37,444
2
73,442
76,456
(4
)
SocialCode
17,357
16,512
5
34,822
33,592
4
Other businesses
87,272
17,144
—
140,995
32,519
—
Corporate office
13,238
12,756
4
27,462
26,698
3
Intersegment elimination
(44
)
(21
)
—
(84
)
(45
)
—
$
679,639
$
607,051
12
$
1,331,835
$
1,222,273
9
Operating Income (Loss)
Education
$
26,305
$
37,554
(30
)
$
51,900
$
60,254
(14
)
Television broadcasting
44,494
41,118
8
80,034
81,660
(2
)
Manufacturing
4,692
8,665
(46
)
7,966
17,293
(54
)
Healthcare
2,598
764
—
4,927
(627
)
—
SocialCode
(975
)
(1,742
)
44
(4,993
)
(5,523
)
10
Other businesses
(5,913
)
(7,977
)
26
(14,406
)
(16,519
)
13
Corporate office
(13,238
)
(12,756
)
(4
)
(27,462
)
(26,698
)
(3
)
$
57,963
$
65,626
(12
)
$
97,966
$
109,840
(11
)
Depreciation
Education
$
6,137
$
6,839
(10
)
$
12,338
$
14,445
(15
)
Television broadcasting
3,293
2,974
11
6,532
6,045
8
Manufacturing
2,384
2,331
2
4,817
4,782
1
Healthcare
607
647
(6
)
1,217
1,300
(6
)
SocialCode
384
200
92
536
433
24
Other businesses
837
375
—
1,485
750
98
Corporate office
242
253
(4
)
482
506
(5
)
$
13,884
$
13,619
2
$
27,407
$
28,261
(3
)
Amortization of Intangible Assets and
Impairment of Long-Lived Assets
Education
$
4,070
$
1,663
—
$
7,637
$
2,812
—
Television broadcasting
1,408
1,408
—
2,816
2,816
—
Manufacturing
6,528
5,935
10
13,058
11,871
10
Healthcare
1,410
1,809
(22
)
2,808
3,617
(22
)
SocialCode
157
584
(73
)
314
667
(53
)
Other businesses
—
—
—
—
—
—
Corporate office
—
—
—
—
—
—
$
13,573
$
11,399
19
$
26,633
$
21,783
22
Pension Expense
Education
$
2,522
$
1,878
34
$
5,186
$
4,542
14
Television broadcasting
780
601
30
1,511
1,094
38
Manufacturing
15
19
(21
)
40
36
11
Healthcare
63
165
(62
)
246
287
(14
)
SocialCode
191
205
(7
)
439
361
22
Other businesses
161
154
5
362
270
34
Corporate office
1,231
1,295
(5
)
2,400
2,667
(10
)
$
4,963
$
4,317
15
$
10,184
$
9,257
10
GRAHAM HOLDINGS COMPANY
EDUCATION DIVISION
INFORMATION
(Unaudited)
Three Months Ended
Six Months Ended
June 30
%
June 30
%
(in thousands)
2019
2018
Change
2019
2018
Change
Operating Revenues
Kaplan international
$
188,580
$
184,303
2
$
374,336
$
367,885
2
Higher education
76,288
85,981
(11
)
159,068
185,811
(14
)
Test preparation
65,673
68,604
(4
)
126,823
127,755
(1
)
Professional (U.S.)
35,147
31,057
13
76,361
64,413
19
Kaplan corporate and other
2,369
442
—
4,671
727
—
Intersegment elimination
(294
)
(382
)
—
(1,042
)
(1,087
)
—
$
367,763
$
370,005
(1
)
$
740,217
$
745,504
(1
)
Operating Expenses
Kaplan international
$
163,043
$
160,116
2
$
324,514
$
323,294
0
Higher education
73,567
74,762
(2
)
154,432
173,237
(11
)
Test preparation
61,384
62,484
(2
)
122,988
121,114
2
Professional (U.S.)
30,402
26,277
16
60,357
50,318
20
Kaplan corporate and other
9,289
7,542
23
19,428
15,573
25
Amortization of intangible assets
3,377
1,663
—
6,944
2,812
—
Impairment of long-lived assets
693
—
—
693
—
—
Intersegment elimination
(297
)
(393
)
—
(1,039
)
(1,098
)
—
$
341,458
$
332,451
3
$
688,317
$
685,250
0
Operating Income (Loss)
Kaplan international
$
25,537
$
24,187
6
$
49,822
$
44,591
12
Higher education
2,721
11,219
(76
)
4,636
12,574
(63
)
Test preparation
4,289
6,120
(30
)
3,835
6,641
(42
)
Professional (U.S.)
4,745
4,780
(1
)
16,004
14,095
14
Kaplan corporate and other
(6,920
)
(7,100
)
3
(14,757
)
(14,846
)
1
Amortization of intangible assets
(3,377
)
(1,663
)
—
(6,944
)
(2,812
)
—
Impairment of long-lived assets
(693
)
—
—
(693
)
—
—
Intersegment elimination
3
11
—
(3
)
11
—
$
26,305
$
37,554
(30
)
$
51,900
$
60,254
(14
)
Depreciation
Kaplan international
$
3,716
$
3,764
(1
)
$
7,598
$
7,738
(2
)
Higher education
629
1,274
(51
)
1,226
3,132
(61
)
Test preparation
779
973
(20
)
1,584
1,951
(19
)
Professional (U.S.)
959
670
43
1,824
1,312
39
Kaplan corporate and other
54
158
(66
)
106
312
(66
)
$
6,137
$
6,839
(10
)
$
12,338
$
14,445
(15
)
Pension Expense
Kaplan international
$
110
$
84
31
$
227
$
167
36
Higher education
1,102
804
37
2,265
2,210
2
Test preparation
821
729
13
1,687
1,458
16
Professional (U.S.)
329
290
13
677
580
17
Kaplan corporate and other
160
(29
)
—
330
127
—
$
2,522
$
1,878
34
$
5,186
$
4,542
14
NON-GAAP FINANCIAL INFORMATION
GRAHAM HOLDINGS COMPANY
(Unaudited)
In addition to the results reported in accordance with
accounting principles generally accepted in the United States
(GAAP) included in this press release, the Company has provided
information regarding net income, excluding certain items described
below, reconciled to the most directly comparable GAAP measures.
Management believes that these non-GAAP measures, when read in
conjunction with the Company’s GAAP financials, provide useful
information to investors by offering:
- the ability to make meaningful period-to-period comparisons of
the Company’s ongoing results;
- the ability to identify trends in the Company’s underlying
business; and
- a better understanding of how management plans and measures the
Company’s underlying business.
Net income, excluding certain items, should not be considered
substitutes or alternatives to computations calculated in
accordance with and required by GAAP. These non-GAAP financial
measures should be read only in conjunction with financial
information presented on a GAAP basis. The following table
reconciles the non-GAAP financial measures to the most directly
comparable GAAP measures:
Three Months Ended June
30
2019
2018
(in thousands, except per share
amounts)
Income before income
taxes
Income Taxes
Net Income
Income before income taxes
Income Taxes
Net Income
Amounts attributable to Graham Holdings
Company Common Stockholders
As reported
$
73,895
$
16,700
$
57,195
$
62,735
$
16,100
$
46,635
Attributable to noncontrolling
interests
(114
)
(69
)
Attributable to Graham Holdings Company
Stockholders
57,081
46,566
Adjustments:
Reduction to operating expenses in
connection with the broadcast spectrum repacking
(7,831
)
(1,801
)
(6,030
)
(755
)
(174
)
(581
)
Interest expense related to the settlement
of a mandatorily redeemable noncontrolling interest
—
—
—
6,169
—
6,169
Debt extinguishment costs
—
—
—
11,378
2,731
8,647
Charges related to non-operating
Separation Incentive Program at the education division
6,607
1,520
5,087
—
—
—
Net (gains) losses on marketable equity
securities
(7,790
)
(1,947
)
(5,843
)
2,554
613
1,941
Foreign currency (gain) loss
(109
)
(27
)
(82
)
2,266
544
1,722
Net Income, adjusted (non-GAAP)
$
50,213
$
64,464
Per share information attributable to
Graham Holdings Company Common Stockholders
Diluted income per common share, as
reported
$
10.65
$
8.63
Adjustments:
Reduction to operating expenses in
connection with the broadcast spectrum repacking
(1.13
)
(0.11
)
Interest expense related to the settlement
of a mandatorily redeemable noncontrolling interest
—
1.14
Debt extinguishment costs
—
1.60
Charges related to non-operating
Separation Incentive Program at the education division
0.95
—
Net (gains) losses on marketable equity
securities
(1.09
)
0.36
Foreign currency (gain) loss
(0.02
)
0.32
Diluted income per common share, adjusted
(non-GAAP)
$
9.36
$
11.94
The adjusted diluted per share amounts may
not compute due to rounding.
Six Months Ended June
30
2019
2018
(in thousands, except per share
amounts)
Income before income
taxes
Income Taxes
Net Income
Income before income taxes
Income Taxes
Net Income
Amounts attributable to Graham Holdings
Company Common Stockholders
As reported
$
183,197
$
44,300
$
138,897
$
119,300
$
29,700
$
89,600
Attributable to noncontrolling
interests
(68
)
(143
)
Attributable to Graham Holdings Company
Stockholders
$
138,829
$
89,457
Adjustments:
Reduction to operating expenses in
connection with the broadcast spectrum repacking
(9,619
)
(2,212
)
(7,407
)
(1,062
)
(245
)
(817
)
Interest expense related to the settlement
of a mandatorily redeemable noncontrolling interest
—
—
—
6,169
—
6,169
Debt extinguishment costs
—
—
—
11,378
2,731
8,647
Charges related to non-operating
Separation Incentive Program at the education division
6,607
1,520
5,087
—
—
—
Net gains on marketable equity
securities
(31,857
)
(7,964
)
(23,893
)
16,656
3,997
12,659
Gain on sale of Gimlet media
(28,994
)
(7,248
)
(21,746
)
—
—
—
Gain on Kaplan University Transaction
—
—
—
(4,315
)
(2,472
)
(1,843
)
Foreign currency (gain) loss
(623
)
(156
)
(467
)
2,089
502
1,587
Tax benefit related to stock
compensation
—
1,700
(1,700
)
—
1,810
(1,810
)
Net Income, adjusted (non-GAAP)
$
88,703
$
114,049
Per share information attributable to
Graham Holdings Company Common Stockholders
Diluted income per common share, as
reported
$
25.91
$
16.40
Adjustments:
Reduction to operating expenses in
connection with the broadcast spectrum repacking
(1.38
)
(0.15
)
Interest expense related to the settlement
of a mandatorily redeemable noncontrolling interest
—
1.14
Debt extinguishment costs
—
1.60
Charges related to non-operating
Separation Incentive Program at the education division
0.95
—
Net gains on marketable equity
securities
(4.46
)
2.30
Gain on sale of Gimlet media
(4.06
)
—
Gain on Kaplan University Transaction
—
(0.33
)
Foreign currency (gain) loss
(0.09
)
0.30
Tax benefit related to stock
compensation
(0.32
)
(0.33
)
Diluted income per common share, adjusted
(non-GAAP)
$
16.55
$
20.93
The adjusted diluted per share amounts may
not compute due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190731005140/en/
Wallace R. Cooney (703) 345-6470
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