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10-K
GRAHAM HOLDINGS CO filed this Form 10-K on 02/23/2018
Entire Document
 


includes cost of $0.2 million reported in discontinued operations for 2015. The curtailment gain of $2.2 million related to the Cable ONE spin-off is also included in discontinued operations for 2015. The curtailment gain of $1.1 million related to the sale of the KHE Campuses business is included in other income (expense), net for 2015.
The costs for the Company’s defined benefit pension plans are actuarially determined. Below are the key assumptions utilized to determine periodic cost:
 
Pension Plans
 
SERP
 
Year Ended December 31
 
Year Ended December 31
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Discount rate (1)
4.1%
 
4.3%
 
4.4%/4.0%
 
4.1%
 
4.3%
 
4.4%/4.0%
Expected return on plan assets
6.25%
 
6.5%
 
6.5%
 
 
 
Rate of compensation increase
Age graded
(5.0%–1.0%)
 
4.0%
 
4.0%
 
Age graded
(5.0%–1.0%)
 
4.0%
 
4.0%
____________
(1)
As a result of the spin-off of Cable ONE and the sale of the KHE Campuses business, the Company remeasured the accumulated and projected benefit obligation of the pension plan as of July 1, 2015 and September 3, 2015, respectively. As a result of the spin-off of Cable ONE, the accumulated and projected benefit obligation of the SERP was remeasured as of July 1, 2015. The remeasurement changed the discount rate from 4.0% for the first six months to 4.4% for the second half of 2015.
Accumulated other comprehensive income (AOCI) includes the following components of unrecognized net periodic cost for the defined benefit plans:
 
Pension Plans
 
SERP
 
As of December 31
 
As of December 31
(in thousands)
2017
 
2016
 
2017
 
2016
Unrecognized actuarial (gain) loss
$
(461,779
)
 
$
(285,304
)
 
$
27,225

 
$
24,958

Unrecognized prior service cost
270

 
365

 
320

 
775

Gross Amount
(461,509
)
 
(284,939
)
 
27,545

 
25,733

Deferred tax liability (asset)
124,607

 
113,976

 
(7,437
)
 
(10,293
)
Net Amount
$
(336,902
)
 
$
(170,963
)
 
$
20,108

 
$
15,440

During 2018, the Company expects to recognize the following amortization components of net periodic cost for the defined benefit plans:
 
2018
(in thousands)
Pension Plans
 
SERP
Actuarial (gain) loss recognition
$
(4,236
)
 
$
2,217

Prior service cost recognition
$
148

 
$
311

Defined Benefit Plan Assets.  The Company’s defined benefit pension obligations are funded by a portfolio made up of a U.S. stock index fund, a relatively small number of stocks and high-quality fixed-income securities that are held by a third-party trustee. The assets of the Company’s pension plans were allocated as follows:
 
As of December 31
 
2017
 
2016
U.S. equities
53
%
 
53
%
U.S. stock index fund
30
%
 
30
%
U.S. fixed income
11
%
 
11
%
International equities
6
%
 
6
%
 
100
%
 
100
%
The Company manages approximately 45% of the pension assets internally, of which the majority is invested in a U.S. stock index fund with the remaining investments in Berkshire Hathaway stock and short-term fixed-income securities. The remaining 55% of plan assets are managed by two investment companies. The goal of the investment managers is to produce moderate long-term growth in the value of these assets, while protecting them against large decreases in value. Both investment managers may invest in a combination of equity and fixed-income securities and cash. The managers are not permitted to invest in securities of the Company or in alternative investments. The investment managers cannot invest more than 20% of the assets at the time of purchase in the stock of Berkshire Hathaway or more than 10% of the assets in the securities of any other single issuer, except for obligations of the U.S. Government, without receiving prior approval from the Plan administrator. As of December 31, 2017, the investment managers can invest no more than 23% of the assets they manage in specified international exchanges, at the time the investment is made, and no less than 10% of the assets could be invested in fixed-income securities.

106