Releases
Graham Holdings Company Reports First Quarter Earnings
The results for the first 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
Items included in the Company’s net income for the first quarter of 2019:
- a
$1.8 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$1.4 million , or$0.26 per share); $24.1 million in net gains on marketable equity securities (after-tax impact of$18.0 million , or$3.37 per share);$29.0 million gain from the sale of Gimlet Media (after-tax impact of$21.7 million , or$4.06 per share);$0.5 million in non-operating foreign currency gains (after-tax impact of$0.4 million , or$0.07 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 first quarter of 2018:
- a
$0.3 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$0.2 million , or$0.04 per share); $14.1 million in net losses on marketable equity securities (after-tax impact of$10.7 million , or$1.94 per share);- non-operating gain, net, of
$4.4 million from sales of a cost method investment and a business (after-tax impact of$3.6 million , or$0.65 per share); - a
$4.3 million gain on the Kaplan University Transaction (after-tax impact of$1.8 million , or$0.33 per share); $0.2 million in non-operating foreign currency gains (after-tax impact of$0.1 million , or$0.02 per share); and$1.8 million in income tax benefits related to stock compensation ($0.33 per share).
Revenue for the first quarter of 2019 was
Division Results
Education
Education division revenue totaled
A summary of Kaplan’s operating results is as follows:
Three Months Ended | |||||||||||||||
March 31 | |||||||||||||||
(in thousands) | 2019 | 2018 | % Change | ||||||||||||
Revenue | |||||||||||||||
Kaplan international | $ | 185,756 | $ | 183,582 | 1 | ||||||||||
Higher education | 82,780 | 99,830 | (17 | ) | |||||||||||
Test preparation | 61,150 | 59,151 | 3 | ||||||||||||
Professional (U.S.) | 41,214 | 33,356 | 24 | ||||||||||||
Kaplan corporate and other | 2,302 | 285 | — | ||||||||||||
Intersegment elimination | (748 | ) | (705 | ) | — | ||||||||||
$ | 372,454 | $ | 375,499 | (1 | ) | ||||||||||
Operating Income (Loss) | |||||||||||||||
Kaplan international | $ | 24,285 | $ | 20,404 | 19 | ||||||||||
Higher education | 1,915 | 1,355 | 41 | ||||||||||||
Test preparation | (454 | ) | 521 | — | |||||||||||
Professional (U.S.) | 11,259 | 9,315 | 21 | ||||||||||||
Kaplan corporate and other | (7,837 | ) | (7,746 | ) | (1 | ) | |||||||||
Amortization of intangible assets | (3,567 | ) | (1,149 | ) | — | ||||||||||
Intersegment elimination | (6 | ) | — | — | |||||||||||
$ | 25,595 | $ | 22,700 | 13 | |||||||||||
Prior to the KU Transaction closing on
Kaplan Test Preparation (KTP) includes Kaplan’s standardized test preparation programs. In
Kaplan Professional (U.S.) includes the domestic professional and other continuing education businesses. In the first quarter of 2019, Kaplan Professional (U.S.) revenue was up 24% due mostly to the
Kaplan corporate and other represents unallocated expenses of Kaplan, Inc.’s corporate office, other minor businesses and certain shared activities.
Revenue at the television broadcasting division decreased 1% to
In the first quarter of 2019 and 2018, the television broadcasting division recorded
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
Manufacturing revenues declined 2% in the first quarter of 2019 due to a decline at Hoover from lower wood prices. Manufacturing operating income declined in the first quarter of 2019 due largely to increased labor and other operating costs at Hoover and Dekko, along with gains on inventory sales at Hoover in the first quarter of 2018.
Healthcare
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
Other Businesses
On
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 quarter of 2019. Losses from each of these five businesses in the first three months of 2019 adversely affected operating results.
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
Net Interest Expense and Related Balances
In connection with the auto dealership acquisition that closed on
On
The Company incurred net interest expense of
At
Non-operating Pension and Postretirement Benefit Income, net
The Company recorded net non-operating pension and postretirement benefit income of
Gain (Loss) on
Overall, the Company recognized
Other Non-Operating Income
The Company recorded total other non-operating income, net, of
Provision for Income Taxes
The Company’s effective tax rate for the first three months of 2019 and 2018 was 25.3% and 24.0%, respectively. In the first quarter of 2019 and 2018, the Company recorded income tax benefits related to stock compensation of
Earnings Per Share
The calculation of diluted earnings per share for the first quarter of 2019 was based on 5,326,448 weighted average shares outstanding, compared to 5,472,643 for the first quarter of 2018. At
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 | |||||||||||||||
March 31 | % | ||||||||||||||
(in thousands, except per share amounts) | 2019 | 2018 | Change | ||||||||||||
Operating revenues | $ | 692,199 | $ | 659,436 | 5 | ||||||||||
Operating expenses | 625,613 | 590,196 | 6 | ||||||||||||
Depreciation of property, plant and equipment | 13,523 | 14,642 | (8 | ) | |||||||||||
Amortization of intangible assets | 13,060 | 10,384 | 26 | ||||||||||||
Operating income | 40,003 | 44,214 | (10 | ) | |||||||||||
Equity in earnings of affiliates, net | 1,679 | 2,579 | (35 | ) | |||||||||||
Interest income | 1,700 | 1,372 | 24 | ||||||||||||
Interest expense | (7,425 | ) | (8,071 | ) | (8 | ) | |||||||||
Non-operating pension and postretirement benefit income, net | 19,928 | 21,386 | (7 | ) | |||||||||||
Gain (loss) on marketable equity securities, net | 24,066 | (14,102 | ) | — | |||||||||||
Other income, net | 29,351 | 9,187 | — | ||||||||||||
Income before income taxes | 109,302 | 56,565 | 93 | ||||||||||||
Provision for income taxes | 27,600 | 13,600 | — | ||||||||||||
Net income | 81,702 | 42,965 | 90 | ||||||||||||
Net loss (income) attributable to noncontrolling interests | 46 | (74 | ) | — | |||||||||||
Net Income Attributable to Graham Holdings Company Common Stockholders | $ | 81,748 | $ | 42,891 | 91 | ||||||||||
Per Share Information Attributable to Graham Holdings Company Common Stockholders | |||||||||||||||
Basic net income per common share | $ | 15.38 | $ | 7.84 | 96 | ||||||||||
Basic average number of common shares outstanding | 5,284 | 5,436 | |||||||||||||
Diluted net income per common share | $ | 15.26 | $ | 7.78 | 96 | ||||||||||
Diluted average number of common shares outstanding | 5,326 | 5,473 | |||||||||||||
GRAHAM HOLDINGS COMPANY | |||||||||||||||
BUSINESS DIVISION INFORMATION | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | |||||||||||||||
March 31 | % | ||||||||||||||
(in thousands) | 2019 | 2018 | Change | ||||||||||||
Operating Revenues | |||||||||||||||
Education | $ | 372,454 | $ | 375,499 | (1 | ) | |||||||||
Television broadcasting | 108,223 | 108,802 | (1 | ) | |||||||||||
Manufacturing | 115,157 | 117,406 | (2 | ) | |||||||||||
Healthcare | 37,728 | 37,621 | 0 | ||||||||||||
SocialCode | 13,447 | 13,299 | 1 | ||||||||||||
Other businesses | 45,230 | 6,833 | — | ||||||||||||
Corporate office | — | — | — | ||||||||||||
Intersegment elimination | (40 | ) | (24 | ) | — | ||||||||||
$ | 692,199 | $ | 659,436 | 5 | |||||||||||
Operating Expenses | |||||||||||||||
Education | $ | 346,859 | $ | 352,799 | (2 | ) | |||||||||
Television broadcasting | 72,683 | 68,260 | 6 | ||||||||||||
Manufacturing | 111,883 | 108,778 | 3 | ||||||||||||
Healthcare | 35,399 | 39,012 | (9 | ) | |||||||||||
SocialCode | 17,465 | 17,080 | 2 | ||||||||||||
Other businesses | 53,723 | 15,375 | — | ||||||||||||
Corporate office | 14,224 | 13,942 | 2 | ||||||||||||
Intersegment elimination | (40 | ) | (24 | ) | — | ||||||||||
$ | 652,196 | $ | 615,222 | 6 | |||||||||||
Operating Income (Loss) | |||||||||||||||
Education | $ | 25,595 | $ | 22,700 | 13 | ||||||||||
Television broadcasting | 35,540 | 40,542 | (12 | ) | |||||||||||
Manufacturing | 3,274 | 8,628 | (62 | ) | |||||||||||
Healthcare | 2,329 | (1,391 | ) | — | |||||||||||
SocialCode | (4,018 | ) | (3,781 | ) | (6 | ) | |||||||||
Other businesses | (8,493 | ) | (8,542 | ) | 1 | ||||||||||
Corporate office | (14,224 | ) | (13,942 | ) | (2 | ) | |||||||||
$ | 40,003 | $ | 44,214 | (10 | ) | ||||||||||
Depreciation | |||||||||||||||
Education | $ | 6,201 | $ | 7,606 | (18 | ) | |||||||||
Television broadcasting | 3,239 | 3,071 | 5 | ||||||||||||
Manufacturing | 2,433 | 2,451 | (1 | ) | |||||||||||
Healthcare | 610 | 653 | (7 | ) | |||||||||||
SocialCode | 152 | 233 | (35 | ) | |||||||||||
Other businesses | 648 | 375 | 73 | ||||||||||||
Corporate office | 240 | 253 | (5 | ) | |||||||||||
$ | 13,523 | $ | 14,642 | (8 | ) | ||||||||||
Amortization of Intangible Assets | |||||||||||||||
Education | $ | 3,567 | $ | 1,149 | — | ||||||||||
Television broadcasting | 1,408 | 1,408 | — | ||||||||||||
Manufacturing | 6,530 | 5,936 | 10 | ||||||||||||
Healthcare | 1,398 | 1,808 | (23 | ) | |||||||||||
SocialCode | 157 | 83 | 89 | ||||||||||||
Other businesses | — | — | — | ||||||||||||
Corporate office | — | — | — | ||||||||||||
$ | 13,060 | $ | 10,384 | 26 | |||||||||||
Pension Expense | |||||||||||||||
Education | $ | 2,664 | $ | 2,664 | — | ||||||||||
Television broadcasting | 731 | 493 | 48 | ||||||||||||
Manufacturing | 25 | 17 | 47 | ||||||||||||
Healthcare | 183 | 122 | 50 | ||||||||||||
SocialCode | 248 | 156 | 59 | ||||||||||||
Other businesses | 201 | 116 | 73 | ||||||||||||
Corporate office | 1,169 | 1,372 | (15 | ) | |||||||||||
$ | 5,221 | $ | 4,940 | 6 | |||||||||||
GRAHAM HOLDINGS COMPANY | |||||||||||||||
EDUCATION DIVISION INFORMATION | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | |||||||||||||||
March 31 | % | ||||||||||||||
(in thousands) | 2019 | 2018 | Change | ||||||||||||
Operating Revenues | |||||||||||||||
Kaplan international | $ | 185,756 | $ | 183,582 | 1 | ||||||||||
Higher education | 82,780 | 99,830 | (17 | ) | |||||||||||
Test preparation | 61,150 | 59,151 | 3 | ||||||||||||
Professional (U.S.) | 41,214 | 33,356 | 24 | ||||||||||||
Kaplan corporate and other | 2,302 | 285 | — | ||||||||||||
Intersegment elimination | (748 | ) | (705 | ) | — | ||||||||||
$ | 372,454 | $ | 375,499 | (1 | ) | ||||||||||
Operating Expenses | |||||||||||||||
Kaplan international | $ | 161,471 | $ | 163,178 | (1 | ) | |||||||||
Higher education | 80,865 | 98,475 | (18 | ) | |||||||||||
Test preparation | 61,604 | 58,630 | 5 | ||||||||||||
Professional (U.S.) | 29,955 | 24,041 | 25 | ||||||||||||
Kaplan corporate and other | 10,139 | 8,031 | 26 | ||||||||||||
Amortization of intangible assets | 3,567 | 1,149 | — | ||||||||||||
Intersegment elimination | (742 | ) | (705 | ) | — | ||||||||||
$ | 346,859 | $ | 352,799 | (2 | ) | ||||||||||
Operating Income (Loss) | |||||||||||||||
Kaplan international | $ | 24,285 | $ | 20,404 | 19 | ||||||||||
Higher education | 1,915 | 1,355 | 41 | ||||||||||||
Test preparation | (454 | ) | 521 | — | |||||||||||
Professional (U.S.) | 11,259 | 9,315 | 21 | ||||||||||||
Kaplan corporate and other | (7,837 | ) | (7,746 | ) | (1 | ) | |||||||||
Amortization of intangible assets | (3,567 | ) | (1,149 | ) | — | ||||||||||
Intersegment elimination | (6 | ) | — | — | |||||||||||
$ | 25,595 | $ | 22,700 | 13 | |||||||||||
Depreciation | |||||||||||||||
Kaplan international | $ | 3,882 | $ | 3,974 | (2 | ) | |||||||||
Higher education | 597 | 1,858 | (68 | ) | |||||||||||
Test preparation | 805 | 978 | (18 | ) | |||||||||||
Professional (U.S.) | 865 | 642 | 35 | ||||||||||||
Kaplan corporate and other | 52 | 154 | (66 | ) | |||||||||||
$ | 6,201 | $ | 7,606 | (18 | ) | ||||||||||
Pension Expense | |||||||||||||||
Kaplan international | $ | 117 | $ | 83 | 41 | ||||||||||
Higher education | 1,163 | 1,406 | (17 | ) | |||||||||||
Test preparation | 866 | 729 | 19 | ||||||||||||
Professional (U.S.) | 348 | 290 | 20 | ||||||||||||
Kaplan corporate and other | 170 | 156 | 9 | ||||||||||||
$ | 2,664 | $ | 2,664 | — | |||||||||||
NON-GAAP FINANCIAL INFORMATION |
GRAHAM HOLDINGS COMPANY |
(Unaudited) |
In addition to the results reported in accordance with accounting principles generally accepted in
- 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 March 31 | |||||||||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||||||
(in thousands, except per share amounts) |
Income |
Income |
Net |
Income |
Income |
Net |
|||||||||||||||||||||||||
Amounts attributable to Graham Holdings Company Common Stockholders | |||||||||||||||||||||||||||||||
As reported | $ | 109,302 | $ | 27,600 | $ | 81,702 | $ | 56,565 | $ | 13,600 | $ | 42,965 | |||||||||||||||||||
Attributable to noncontrolling interests | 46 | (74 | ) | ||||||||||||||||||||||||||||
Attributable to Graham Holdings Company Stockholders | 81,748 | 42,891 | |||||||||||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||
Reduction to operating expenses in connection with the broadcast spectrum repacking | (1,788 | ) | (411 | ) | (1,377 | ) | (307 | ) | (71 | ) | (236 | ) | |||||||||||||||||||
Net (gains) losses on marketable equity securities | (24,066 | ) | (6,016 | ) | (18,050 | ) | 14,102 | 3,384 | 10,718 | ||||||||||||||||||||||
Gain on sale of Gimlet Media | (28,994 | ) | (7,248 | ) | (21,746 | ) | — | — | — | ||||||||||||||||||||||
Non-operating gain from sales of a cost method investment and a business | — | — | — | (4,437 | ) | (860 | ) | (3,577 | ) | ||||||||||||||||||||||
Gain on Kaplan University Transaction | — | — | — | (4,315 | ) | (2,472 | ) | (1,843 | ) | ||||||||||||||||||||||
Foreign currency gain | (514 | ) | (129 | ) | (385 | ) | (177 | ) | (42 | ) | (135 | ) | |||||||||||||||||||
Tax benefit related to stock compensation | — | 1,700 | (1,700 | ) | — | 1,810 | (1,810 | ) | |||||||||||||||||||||||
Net Income, adjusted (non-GAAP) | $ | 38,490 | $ | 46,008 | |||||||||||||||||||||||||||
Per share information attributable to Graham Holdings Company Common Stockholders | |||||||||||||||||||||||||||||||
Diluted income per common share, as reported | $ | 15.26 | $ | 7.78 | |||||||||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||
Reduction to operating expenses in connection with the broadcast spectrum repacking | (0.26 | ) | (0.04 | ) | |||||||||||||||||||||||||||
Net (gains) losses on marketable equity securities | (3.37 | ) | 1.94 | ||||||||||||||||||||||||||||
Gain on sale of Gimlet Media | (4.06 | ) | — | ||||||||||||||||||||||||||||
Non-operating gain from sales of a cost method investment and a business | — | (0.65 | ) | ||||||||||||||||||||||||||||
Gain on Kaplan University Transaction | — | (0.33 | ) | ||||||||||||||||||||||||||||
Foreign currency gain | (0.07 | ) | (0.02 | ) | |||||||||||||||||||||||||||
Tax benefit related to stock compensation | (0.32 | ) | (0.33 | ) | |||||||||||||||||||||||||||
Diluted income per common share, adjusted (non-GAAP) | $ | 7.18 | $ | 8.35 | |||||||||||||||||||||||||||
The adjusted diluted per share amounts may not compute due to rounding. | |||||||||||||||||||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190501005266/en/
Source:
Wallace R. Cooney
(703) 345-6470