Releases
Graham Holdings Company Reports First Quarter Earnings
The results for the first quarter of 2018 and 2017 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 2018:
-
a
$4.3 million gain on the Kaplan University Transaction (after-tax impact of$1.8 million , or$0.33 per share); -
$14.1 million in net losses on marketable equity securities (after-tax impact of$10.7 million , or$1.94 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).
Items included in the Company’s net income for the first quarter of 2017:
-
$1.7 million in non-operating foreign currency gains (after-tax impact of$1.1 million , or$0.19 per share); and -
$5.9 million in income tax benefits related to stock compensation ($1.06 per share).
Revenue for the first quarter of 2018 was
On
Division Results
Education
Education division revenue totaled
As a result of the KU Transaction that closed on
A summary of Kaplan’s operating results is as follows:
Three Months Ended | |||||||||||
March 31 | |||||||||||
(in thousands) | 2018 | 2017 | % Change | ||||||||
Revenue | |||||||||||
Kaplan international | $ | 183,582 | $ | 164,562 | 12 | ||||||
Higher education | 99,830 | 111,111 | (10 | ) | |||||||
Test preparation | 59,151 | 64,568 | (8 | ) | |||||||
Professional (U.S.) | 33,356 | 33,199 | — | ||||||||
Kaplan corporate and other | 285 | 14 | — | ||||||||
Intersegment elimination | (705 | ) | (557 | ) | — | ||||||
$ | 375,499 | $ | 372,897 | 1 | |||||||
Operating Income (Loss) | |||||||||||
Kaplan international | $ | 20,404 | $ | 7,707 | — | ||||||
Higher education | 1,355 | 2,446 | (45 | ) | |||||||
Test preparation | 521 | (2,864 | ) | — | |||||||
Professional (U.S.) | 9,315 | 10,158 | (8 | ) | |||||||
Kaplan corporate and other | (7,746 | ) | (6,943 | ) | (12 | ) | |||||
Amortization of intangible assets | (1,149 | ) | (1,120 | ) | (3 | ) | |||||
Intersegment elimination | — | 53 | — | ||||||||
$ | 22,700 | $ | 9,437 | — | |||||||
Prior to the KU Transaction closing on
In the first quarter of 2018, Higher Education revenue was down 10% and
operating results declined, due largely to the sale of KU on
Kaplan Test Preparation (KTP) includes Kaplan’s standardized test
preparation programs. KTP revenue declined 8% for the first quarter of
2018 due to the disposition of Dev Bootcamp, which made up the majority
of KTP's new economy skills training programs, and soft enrollments in
certain preparation programs. In comparison to 2017, KTP operating
results improved in the first quarter of 2018, due mostly to decreased
losses from the new economy skills training programs. Operating losses
for the new economy skills training programs were
Kaplan Professional (U.S.) includes the domestic professional and other continuing education businesses. In the first quarter of 2018, Kaplan Professional (U.S.) revenue was even with the first quarter of 2017, while operating results declined 8%, due to increased spending on sales and technology.
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 increased 19% to
Manufacturing
Manufacturing includes four businesses: Dekko, a manufacturer of
electrical workspace solutions, architectural lighting and electrical
components and assemblies;
Manufacturing revenues and operating income increased in the first quarter of 2018 due primarily to the Hoover acquisition.
Healthcare
SocialCode
SocialCode is a provider of marketing solutions on social, mobile and
video platforms. SocialCode revenue increased 6% in the first quarter of
2018 due to growth in digital advertising service revenues. SocialCode
reported operating losses of
Other Businesses
Other businesses include Slate and Foreign Policy, which publish online and print magazines and websites; and two investment stage businesses, Panoply and CyberVista. Losses from each of these businesses in the first quarter of 2018 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 (Losses) of Affiliates
At March 31, 2018, the Company held interests in a number of home health
and hospice joint ventures, and interests in several other affiliates.
In the second half of 2017, the Company acquired approximately 11% of
Net Interest Expense and Related Balances
The Company incurred net interest expense of
Non-operating Pension and Postretirement Benefit Income, net
In the first quarter of 2018, the Company adopted new accounting guidance that changes the income statement classification of net periodic pension and postretirement pension cost. Under the new guidance, service cost is included in operating income, while the other components (including expected return on assets) are included in non-operating income. The new guidance was required to be applied retrospectively, with prior period financial information revised to reflect the reclassification. From a segment reporting perspective, this change had a significant impact on Corporate office reporting, with minimal impact on the television broadcasting and Kaplan corporate reporting.
The Company recorded net non-operating pension and postretirement
benefit income of
Loss on
In the first quarter of 2018, the Company adopted new guidance that
requires changes in the fair value of marketable equity securities to be
included in non-operating income (expense) on a prospective basis.
Overall, the Company recognized
Other Non-Operating Income (Expense)
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 2018 was
24.0%. The Tax Cuts and Jobs Act was enacted in
The Company's effective tax rate for the first three months of 2017 was
11.4%. This low effective tax rate is due to a
Earnings Per Share
The calculation of diluted earnings per share for the first quarter of
2018 was based on 5,472,643 weighted average shares outstanding,
compared to 5,568,903 for the first quarter of 2017. At March 31, 2018,
there were 5,373,325 shares outstanding. On
Adoption of Revenue Recognition Standard
On
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) | 2018 | 2017 | Change | ||||||||
Operating revenues | $ | 659,436 | $ | 582,717 | 13 | ||||||
Operating expenses | 590,196 | 550,976 | 7 | ||||||||
Depreciation of property, plant and equipment | 14,642 | 14,652 | — | ||||||||
Amortization of intangible assets | 10,384 | 6,836 | 52 | ||||||||
Operating income | 44,214 | 10,253 | — | ||||||||
Equity in earnings of affiliates, net | 2,579 | 649 | — | ||||||||
Interest income | 1,372 | 1,363 | 1 | ||||||||
Interest expense | (8,071 | ) | (8,129 | ) | (1 | ) | |||||
Non-operating pension and postretirement benefit income, net | 21,386 | 18,801 | 14 | ||||||||
Loss on marketable equity securities, net | (14,102 | ) | — | — | |||||||
Other income, net | 9,187 | 849 | — | ||||||||
Income before income taxes | 56,565 | 23,786 | — | ||||||||
Provision for income taxes | 13,600 | 2,700 | — | ||||||||
Net income | 42,965 | 21,086 | — | ||||||||
Net income attributable to noncontrolling interests | (74 | ) | — | — | |||||||
Net Income Attributable to Graham Holdings Company Common Stockholders | $ | 42,891 | $ | 21,086 | — | ||||||
Per Share Information Attributable to Graham Holdings Company Common Stockholders | |||||||||||
Basic net income per common share | $ | 7.84 | $ | 3.77 | — | ||||||
Basic average number of common shares outstanding | 5,436 | 5,535 | |||||||||
Diluted net income per common share | $ | 7.78 | $ | 3.75 | — | ||||||
Diluted average number of common shares outstanding | 5,473 | 5,569 | |||||||||
GRAHAM HOLDINGS COMPANY | |||||||||||
BUSINESS DIVISION INFORMATION |
|||||||||||
(Unaudited) | |||||||||||
Three Months Ended | |||||||||||
March 31 | % | ||||||||||
(in thousands) | 2018 | 2017 | Change | ||||||||
Operating Revenues | |||||||||||
Education | $ | 375,499 | $ | 372,897 | 1 | ||||||
Television broadcasting | 108,802 | 91,496 | 19 | ||||||||
Manufacturing | 117,406 | 61,898 | 90 | ||||||||
Healthcare | 37,621 | 36,899 | 2 | ||||||||
SocialCode | 13,299 | 12,574 | 6 | ||||||||
Other businesses | 6,833 | 6,953 | (2 | ) | |||||||
Corporate office | — | — | — | ||||||||
Intersegment elimination | (24 | ) | — | — | |||||||
$ | 659,436 | $ | 582,717 | 13 | |||||||
Operating Expenses | |||||||||||
Education | $ | 352,799 | $ | 363,460 | (3 | ) | |||||
Television broadcasting | 68,260 | 65,013 | 5 | ||||||||
Manufacturing | 108,778 | 58,233 | 87 | ||||||||
Healthcare | 39,012 | 37,825 | 3 | ||||||||
SocialCode | 17,080 | 17,082 | — | ||||||||
Other businesses | 15,375 | 15,748 | (2 | ) | |||||||
Corporate office | 13,942 | 15,103 | (8 | ) | |||||||
Intersegment elimination | (24 | ) | — | — | |||||||
$ | 615,222 | $ | 572,464 | 7 | |||||||
Operating Income (Loss) | |||||||||||
Education | $ | 22,700 | $ | 9,437 | — | ||||||
Television broadcasting | 40,542 | 26,483 | 53 | ||||||||
Manufacturing | 8,628 | 3,665 | — | ||||||||
Healthcare | (1,391 | ) | (926 | ) | (50 | ) | |||||
SocialCode | (3,781 | ) | (4,508 | ) | 16 | ||||||
Other businesses | (8,542 | ) | (8,795 | ) | 3 | ||||||
Corporate office | (13,942 | ) | (15,103 | ) | 8 | ||||||
$ | 44,214 | $ | 10,253 | — | |||||||
Depreciation | |||||||||||
Education | $ | 7,606 | $ | 8,584 | (11 | ) | |||||
Television broadcasting | 3,071 | 2,594 | 18 | ||||||||
Manufacturing | 2,451 | 1,508 | 63 | ||||||||
Healthcare | 653 | 1,069 | (39 | ) | |||||||
SocialCode | 233 | 246 | (5 | ) | |||||||
Other businesses | 375 | 361 | 4 | ||||||||
Corporate office | 253 | 290 | (13 | ) | |||||||
$ | 14,642 | $ | 14,652 | — | |||||||
Amortization of Intangible Assets | |||||||||||
Education | $ | 1,149 | $ | 1,120 | 3 | ||||||
Television broadcasting | 1,408 | 902 | 56 | ||||||||
Manufacturing | 5,936 | 3,077 | 93 | ||||||||
Healthcare | 1,808 | 1,654 | 9 | ||||||||
SocialCode | 83 | 83 | — | ||||||||
Other businesses | — | — | — | ||||||||
Corporate office | — | — | — | ||||||||
$ | 10,384 | $ | 6,836 | 52 | |||||||
Pension Expense | |||||||||||
Education | $ | 2,664 | $ | 2,706 | (2 | ) | |||||
Television broadcasting | 493 | 493 | — | ||||||||
Manufacturing | 17 | 25 | (32 | ) | |||||||
Healthcare | 122 | 166 | (27 | ) | |||||||
SocialCode | 156 | 154 | 1 | ||||||||
Other businesses | 116 | 138 | (16 | ) | |||||||
Corporate office | 1,372 | 1,232 | 11 | ||||||||
$ | 4,940 | $ | 4,914 | 1 | |||||||
GRAHAM HOLDINGS COMPANY | |||||||||||
EDUCATION DIVISION INFORMATION |
|||||||||||
(Unaudited) | |||||||||||
Three Months Ended | |||||||||||
March 31 | % | ||||||||||
(in thousands) | 2018 | 2017 | Change | ||||||||
Operating Revenues | |||||||||||
Kaplan international | $ | 183,582 | $ | 164,562 | 12 | ||||||
Higher education | 99,830 | 111,111 | (10 | ) | |||||||
Test preparation | 59,151 | 64,568 | (8 | ) | |||||||
Professional (U.S.) | 33,356 | 33,199 | — | ||||||||
Kaplan corporate and other | 285 | 14 | — | ||||||||
Intersegment elimination | (705 | ) | (557 | ) | — | ||||||
$ | 375,499 | $ | 372,897 | 1 | |||||||
Operating Expenses | |||||||||||
Kaplan international | $ | 163,178 | $ | 156,855 | 4 | ||||||
Higher education | 98,475 | 108,665 | (9 | ) | |||||||
Test preparation | 58,630 | 67,432 | (13 | ) | |||||||
Professional (U.S.) | 24,041 | 23,041 | 4 | ||||||||
Kaplan corporate and other | 8,031 | 6,957 | 15 | ||||||||
Amortization of intangible assets | 1,149 | 1,120 | 3 | ||||||||
Intersegment elimination | (705 | ) | (610 | ) | — | ||||||
$ | 352,799 | $ | 363,460 | (3 | ) | ||||||
Operating Income (Loss) | |||||||||||
Kaplan international | $ | 20,404 | $ | 7,707 | — | ||||||
Higher education | 1,355 | 2,446 | (45 | ) | |||||||
Test preparation | 521 | (2,864 | ) | — | |||||||
Professional (U.S.) | 9,315 | 10,158 | (8 | ) | |||||||
Kaplan corporate and other | (7,746 | ) | (6,943 | ) | (12 | ) | |||||
Amortization of intangible assets | (1,149 | ) | (1,120 | ) | (3 | ) | |||||
Intersegment elimination | — | 53 | — | ||||||||
$ | 22,700 | $ | 9,437 | — | |||||||
Depreciation | |||||||||||
Kaplan international | $ | 3,974 | $ | 3,682 | 8 | ||||||
Higher education | 1,858 | 2,648 | (30 | ) | |||||||
Test preparation | 978 | 1,341 | (27 | ) | |||||||
Professional (U.S.) | 642 | 783 | (18 | ) | |||||||
Kaplan corporate and other | 154 | 130 | 18 | ||||||||
$ | 7,606 | $ | 8,584 | (11 | ) | ||||||
Pension Expense | |||||||||||
Kaplan international | $ | 83 | $ | 87 | (5 | ) | |||||
Higher education | 1,406 | 1,742 | (19 | ) | |||||||
Test preparation | 729 | 911 | (20 | ) | |||||||
Professional (U.S.) | 290 | 302 | (4 | ) | |||||||
Kaplan corporate and other | 156 | (336 | ) | — | |||||||
$ | 2,664 | $ | 2,706 | (2 | ) | ||||||
NON-GAAP FINANCIAL INFORMATION
(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 | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
(in thousands, except per share amounts) |
Income |
Income |
Net |
Income |
Income |
Net |
||||||||||||||||||
Amounts attributable to Graham Holdings Company Common Stockholders | ||||||||||||||||||||||||
As reported | $ | 56,565 | $ | 13,600 | $ | 42,965 | $ | 23,786 | $ | 2,700 | $ | 21,086 | ||||||||||||
Attributable to noncontrolling interests | (74 | ) | — | |||||||||||||||||||||
Attributable to Graham Holdings Company Stockholders | 42,891 | 21,086 | ||||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Gain on Kaplan University Transaction | (4,315 | ) | (2,472 | ) | (1,843 | ) | — | — | — | |||||||||||||||
Net loss recognized on marketable equity securities | 14,102 | 3,384 | 10,718 | — | — | — | ||||||||||||||||||
Foreign currency gain | (177 | ) | (42 | ) | (135 | ) | (1,728 | ) | (639 | ) | (1,089 | ) | ||||||||||||
Tax benefit related to stock compensation | — | 1,810 | (1,810 | ) | — | 5,933 | (5,933 | ) | ||||||||||||||||
Net Income, adjusted (non-GAAP) | $ | 49,821 | $ | 14,064 | ||||||||||||||||||||
Per share information attributable to Graham Holdings Company Common Stockholders | ||||||||||||||||||||||||
Diluted income per common share, as reported | $ | 7.78 | $ | 3.75 | ||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Gain on Kaplan University Transaction | (0.33 | ) | — | |||||||||||||||||||||
Net loss recognized on marketable equity securities | 1.94 | — | ||||||||||||||||||||||
Foreign currency gain | (0.02 | ) | (0.19 | ) | ||||||||||||||||||||
Tax benefit related to stock compensation | (0.33 | ) | (1.06 | ) | ||||||||||||||||||||
Diluted income per common share, adjusted (non-GAAP) | $ | 9.04 | $ | 2.50 | ||||||||||||||||||||
The adjusted diluted per share amounts may not compute due to rounding. | ||||||||||||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180502005373/en/
Source:
Graham Holdings Company
Wallace R. Cooney, 703-345-6470