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8-K
GRAHAM HOLDINGS CO filed this Form 8-K on 02/23/2018
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The 2017 non-operating income, net, included $3.3 million in foreign currency gains ($3.3 million in foreign currency losses in the fourth quarter) and other items. The 2016 non-operating expense, net, included $39.9 million in foreign currency losses ($6.6 million in foreign currency losses in the fourth quarter); $29.4 million in cost method investment write-downs ($14.2 million in the fourth quarter); and $1.8 million in net losses on the sales of marketable securities ($8.0 million loss in the fourth quarter), partially offset by a $34.1 million gain on the sale of land; an $18.9 million gain on the sale of a business; a $3.2 million gain on the Residential joint venture transaction and other items.
Net Interest Expense and Related Balances
The Company incurred net interest expense of $27.3 million in 2017, compared to $32.3 million in 2016; net interest expense totaled $4.9 million and $9.8 million for the fourth quarters of 2017 and 2016, respectively. At December 31, 2017, the Company had $493.3 million in borrowings outstanding at an average interest rate of 6.3%, and cash, marketable securities and other investments of $964.7 millionAt December 31, 2016, the Company had $491.8 million in borrowings outstanding at an average interest rate of 6.3%, and cash, marketable securities and other investments of $1,119.1 million.
(Benefit from) Provision for Income Taxes
The Company is reporting an income tax benefit of $119.7 million for 2017, which was significantly impacted by the enactment of the Tax Cuts and Jobs Act in December 2017. Overall, the Company recorded a $177.5 million net deferred tax benefit in the fourth quarter of 2017 as a result of enactment of this legislation, due largely to the revaluation of the Company’s U.S. deferred tax assets and liabilities to the lower federal tax rate and a significant reduction in the amount of deferred taxes previously provided on undistributed earnings of investments in non-U.S. subsidiaries. In the first quarter of 2017, the Company recorded a $5.9 million income tax benefit related to the vesting of restricted stock awards in connection with the adoption of a new accounting standard that requires all excess income tax benefits and deficiencies from stock compensation to be recorded as discrete items in the provision for income taxes. Excluding the effect of these items, the effective tax rate for 2017 was 34.9%.
The Company’s effective tax rate for 2016 was 32.4%. In the third quarter of 2016, a net nonrecurring $8.3 million deferred tax benefit related to Kaplan’s international operations was recorded. In the second quarter of 2016, the Company benefited from a favorable $5.6 million out of period deferred tax adjustment related to the KHE goodwill impairment recorded in the third quarter of 2015. Excluding the effect of these items, the effective tax rate in 2016 was 37.9%.
Earnings Per Share
The calculation of diluted earnings per share for 2017 and the fourth quarter of 2017 was based on 5,552,163 and 5,508,530 weighted average shares, respectively, compared to 5,588,733 and 5,555,510 weighted average shares, respectively, for 2016 and the fourth quarter of 2016. At December 31, 2017, there were 5,504,494 shares outstanding. On November 9, 2017, the Board of Directors authorized the Company to acquire up to 500,000 shares of Class B common stock; the Company has remaining authorization for 472,678 shares as of December 31, 2017.
Forward-Looking Statements
This report 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.



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