Releases
Graham Holdings Company Reports Third Quarter Earnings
The novel coronavirus (COVID-19) pandemic and measures taken to prevent its spread, such as travel restrictions, shelter in place orders and mandatory closures, significantly impacted the Company’s results for the first nine months of 2020, largely from reduced demand for the Company’s products and services. This significant adverse impact is expected to continue for the remainder of 2020 and into 2021. The Company’s management has taken a variety of measures to reduce costs and capital expenditures. The Company cannot predict the severity or duration of the pandemic, the extent to which demand for the Company’s products and services will be adversely affected or the degree to which financial and operating results will be negatively impacted.
The results for the third quarter of 2020 and 2019 were also affected by a number of items as described in the following paragraphs. Including these items, income before income taxes was
Items included in the Company’s income before income taxes for the third quarter of 2020:
$1.9 million in long-lived asset impairment charges at the education division;$1.9 million in restructuring charges at education division;$2.8 million in accelerated depreciation at other businesses;- a
$1.2 million reduction to operating expenses from property, plant and equipment gains in connection with the spectrum repacking mandate of theFCC ; $7.0 million in expenses related to a non-operating Separation Incentive Program at the education division;$59.4 million in net gains on marketable equity securities;- a non-operating gain of
$1.6 million from the write-up of a cost method investment; and $2.3 million in non-operating foreign currency losses.
Items included in the Company’s income before income taxes for the third quarter of 2019:
- a
$20.4 million provision recorded atKaplan International related to a Value Added Tax (VAT) receivable atUK Pathways; - a
$1.1 million reduction to operating expenses from property, plant and equipment gains in connection with the spectrum repacking mandate of theFCC ; $17.4 million in net gains on marketable equity securities;- non-operating gain of
$3.7 million from write-ups of cost method investments; and $0.7 million in non-operating foreign currency gains.
Revenue for the third quarter of 2020 was
For the first nine months of 2020, the Company reported net income attributable to common shares of
Items included in the Company’s income before income taxes for the nine months of 2020:
$27.6 million in goodwill and other long-lived asset impairment charges;$12.1 million in restructuring charges at the education division;$5.7 million in accelerated depreciation at other businesses;- a
$2.5 million reduction to operating expenses from property, plant and equipment gains in connection with the spectrum repacking mandate of theFCC ; $11.6 million in expenses related to non-operating Separation Incentive Programs at the education division and other businesses;$1.1 million in net losses on marketable equity securities;- non-operating gain, net, of
$3.3 million from write-ups, sales and impairments of cost and equity method investments; and $0.9 million in non-operating foreign currency gains.
Items included in the Company’s income before income taxes for the nine months of 2019:
- a
$17.1 million provision recorded atKaplan International related to a VAT receivable atUK Pathways; - a
$10.7 million reduction to operating expenses from property, plant and equipment gains in connection with the spectrum repacking mandate of theFCC ; $6.6 million in expenses related to a non-operating Separation Incentive Program at the education division;$49.3 million in net gains on marketable equity securities;$29.0 million gain from the sale of Gimlet Media;- non-operating gain of
$5.1 million from the write-ups of cost method investments; and $1.3 million in non-operating foreign currency gains.
Revenue for the first nine months of 2020 was
Division Results
Education
The COVID-19 pandemic adversely impacted Kaplan’s operating results in the third quarter and first nine months of 2020. The impact began in February and continued through the third quarter of 2020.
Kaplan serves a significant number of students who travel to other countries to study a second language, prepare for licensure, or pursue a higher education degree. Government-imposed travel restrictions and school closures arising from COVID-19 had a negative impact on the ability of international students to travel and attend Kaplan’s programs, particularly Kaplan International’s Language programs. In addition, most licensing bodies and administrators of standardized exams postponed or canceled scheduled examinations due to COVID-19, resulting in a significant number of students deciding to defer their studies. In these instances, Kaplan extended the life of its courses to be responsive to the changes in study needs of its students. These program modifications resulted in longer revenue recognition periods, affecting the timing of revenue recognition at Kaplan’s Test Preparation and Professional education divisions. Overall, this is expected to continue to adversely impact Kaplan's revenues and operating results through the remainder of 2020 and into 2021, particularly at Kaplan International Languages. KHE did not experience any significant disruption in its service delivery and Purdue Global has experienced an increase in program demand in the first nine months of 2020.
To help mitigate the negative revenue impact arising from the COVID-19 disruption, and to re-align its program offerings to better pursue opportunities arising from the disruption, Kaplan management developed and implemented a number of initiatives across its businesses, including: employee salary and work-hour reductions; temporary furlough and other employee reductions; reduced discretionary spending; facility restructuring; and reduced capital expenditures. Importantly, Kaplan also accelerated development and promotion of various online programs and solutions, rapidly transitioned most of its classroom-based programs online and addressed the individual needs of its students and partners, substantially reducing the disruption from COVID-19.
The facility restructuring plan undertaken by Kaplan was developed to align classroom and office space at International Languages and Higher Education with future business requirements, and was premised on the decision at
In
Education division revenue totaled
For the first nine months of 2020, education division revenue totaled
A summary of Kaplan’s operating results is as follows:
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
(in thousands) |
|
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
||||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Kaplan international |
|
$ |
123,768 |
|
|
$ |
178,169 |
|
|
(31 |
) |
|
$ |
488,096 |
|
|
$ |
552,505 |
|
|
(12 |
) |
Higher education |
|
83,841 |
|
|
78,712 |
|
|
7 |
|
|
243,831 |
|
|
237,780 |
|
|
3 |
|
||||
Test preparation |
|
59,737 |
|
|
64,710 |
|
|
(8 |
) |
|
153,687 |
|
|
191,533 |
|
|
(20 |
) |
||||
Professional ( |
|
32,831 |
|
|
33,820 |
|
|
(3 |
) |
|
99,954 |
|
|
110,181 |
|
|
(9 |
) |
||||
Kaplan corporate and other |
|
3,194 |
|
|
2,450 |
|
|
30 |
|
|
9,438 |
|
|
7,121 |
|
|
33 |
|
||||
Intersegment elimination |
|
(904 |
) |
|
(542 |
) |
|
— |
|
|
(2,986 |
) |
|
(1,584 |
) |
|
— |
|
||||
|
|
$ |
302,467 |
|
|
$ |
357,319 |
|
|
(15 |
) |
|
$ |
992,020 |
|
|
$ |
1,097,536 |
|
|
(10 |
) |
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Kaplan international |
|
$ |
(13,759 |
) |
|
$ |
(14,226 |
) |
|
3 |
|
|
$ |
21,256 |
|
|
$ |
35,596 |
|
|
(40 |
) |
Higher education |
|
6,853 |
|
|
5,177 |
|
|
32 |
|
|
21,883 |
|
|
9,813 |
|
|
123 |
|
||||
Test preparation |
|
13,348 |
|
|
4,959 |
|
|
— |
|
|
(376 |
) |
|
8,794 |
|
|
— |
|
||||
Professional ( |
|
5,721 |
|
|
4,939 |
|
|
16 |
|
|
13,225 |
|
|
20,943 |
|
|
(37 |
) |
||||
Kaplan corporate and other |
|
(2,579 |
) |
|
(4,067 |
) |
|
37 |
|
|
(10,971 |
) |
|
(18,824 |
) |
|
42 |
|
||||
Amortization of intangible assets |
|
(4,335 |
) |
|
(3,944 |
) |
|
(10 |
) |
|
(12,807 |
) |
|
(10,888 |
) |
|
(18 |
) |
||||
Impairment of long-lived assets |
|
(1,916 |
) |
|
— |
|
|
— |
|
|
(11,936 |
) |
|
(693 |
) |
|
— |
|
||||
Intersegment elimination |
|
— |
|
|
1 |
|
|
— |
|
|
5 |
|
|
(2 |
) |
|
— |
|
||||
|
|
$ |
3,333 |
|
|
$ |
(7,161 |
) |
|
— |
|
|
$ |
20,279 |
|
|
$ |
44,739 |
|
|
(55 |
) |
In 2017, HMRC raised assessments against Kaplan
The Higher Education division primarily includes the results of Kaplan as a service provider to higher education institutions. In the third quarter and first nine months of 2020, Higher Education revenue was up 7% and 3%, respectively, due to an increase in the Purdue University Global fee recorded and revenue from new university agreements. For the first nine months of 2020, the Company recorded a portion of the fee with Purdue Global based on an assessment of its collectability under the TOSA. Purdue Global experienced increased enrollments and higher retention rates for the first nine months of 2020, which resulted in improved Higher Education results for the third quarter and first nine months of 2020. The Company will continue to assess the collectability of the fee with Purdue Global on a quarterly basis to make a determination as to whether to record all or part of the fee in the future. For the first nine months of 2020, Kaplan Higher Education recorded
Kaplan Test Preparation (KTP) includes Kaplan’s standardized test preparation programs. KTP revenue decreased 8% and 20% for the third quarter and first nine months of 2020, respectively, due to reduced demand for KTP’s retail comprehensive test preparation programs and product-life extensions related to the postponement of various standardized test dates due to the COVID-19 pandemic. Overall, product-life extensions have resulted in lower revenue being recognized in the first nine months of 2020; however, substantially all of this will be recognized over the remainder of 2020. KTP operating results increased in the third quarter of 2020 due to savings from cost reduction and related restructuring plans implemented in 2020, and additional revenue recognized in the third quarter of 2020 due to product-life extensions made earlier in the year, offset by
Kaplan Professional (
Kaplan corporate and other represents unallocated expenses of Kaplan, Inc.’s corporate office, other minor businesses and certain shared activities. Overall, Kaplan corporate and other expenses declined in the first nine months of 2020 due to lower compensation costs.
In the third quarter of 2020, the Company approved a SIP that reduced the number of employees at Higher Education, KTP, Kaplan Professional (
Revenue at the television broadcasting division increased 16% to
Revenue at the television broadcasting division increased 3% to
The postponement of the 2020 summer
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;
Manufacturing revenues declined 4% and 11% in the third quarter and first nine months of 2020, respectively. The revenue declines are due primarily to a significant reduction in product demand at Dekko, particularly in the commercial office electrical products, hospitality, transportation and industrial sectors. In the third quarter of 2020, Hoover revenues increased due to higher wood prices, partially offset by lower product demand; while Hoover revenues declined in the first nine months of 2020 due to lower product demand, partially offset by higher wood prices. Manufacturing operating results declined in the third quarter and first nine months of 2020, due to a significant decline in Dekko results from lower revenues, partially offset by improved results at Hoover from significant gains on inventory sales and reduced operating costs.
Starting in the second half of
Healthcare
In the second quarter of 2020, GHG received
Other Businesses
Automotive
On
Revenues for the first nine months of 2020 increased due to the new
Clydes Restaurant Group (CRG)
On
In
Code3 and Decile
In
On a combined basis, Code3 and Decile revenue declined in the third quarter and first nine months of 2020, due to reduced marketing spending by advertising clients as a result of the recessionary environment from the COVID-19 pandemic. In the second quarter of 2020, a
Megaphone
Megaphone is an investment stage business which provides podcast technology for publishers and advertisers through the Megaphone platform and
On
Other
Other businesses also include Slate and
Overall, for the first nine months of 2020, operating revenues for other businesses increased due largely to the CRG,
Corporate Office
Corporate office includes the expenses of the Company’s corporate office and certain continuing obligations related to prior business dispositions. Corporate office expenses declined in the first nine months of 2020 due primarily to lower compensation costs.
Equity in Earnings of Affiliates
At
Net Interest Expense and Related Balances
On
In connection with the auto dealership acquisition that closed 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
In the third quarter of 2020, the Company recorded
Gain (Loss) on
Overall, the Company recognized
Other Non-Operating Income
The Company recorded total other non-operating income, net, of
The Company recorded total other non-operating income, net, of
Provision for Income Taxes
The Company’s effective tax rate for the first nine months of 2020 was 29.6%.
The Company’s effective tax rate for the first nine months of 2019 was 24.7%. In the first quarter of 2019, the Company recorded income tax benefits related to stock compensation of
Earnings Per Share
The calculation of diluted earnings per share for the third quarter and first nine months of 2020 was based on 5,071,998 and 5,191,556 weighted average shares outstanding, compared to 5,328,855 and 5,327,865 for the third quarter and first nine months of 2019. At
Forward-Looking Statements
All public statements made by the Company and its representatives that are not statements of historical fact, including certain statements in this press release, in the Company’s Annual Report on Form 10-K and in the Company’s 2019 Annual Report to Stockholders, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the duration and severity of the COVID-19 pandemic and its effects on the Company’s operations, financial results, liquidity and cash flows. Other forward-looking statements include comments about expectations related to acquisitions or dispositions or related business activities, including the TOSA, the Company’s business strategies and objectives, anticipated results of license renewal applications, the prospects for growth in the Company’s various business operations and the Company’s future financial performance. As with any projection or forecast, forward-looking statements are subject to various risks and uncertainties, including the risks and uncertainties described in Item 1A of the Company’s Annual Report on Form 10-K, that could cause actual results or events to differ materially from those anticipated in such statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by or on behalf of the Company. The Company assumes no obligation to update any forward-looking statement after the date on which such statement is made, even if new information subsequently becomes available.
|
|||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||
(Unaudited) |
|||||||||||
|
|
|
|||||||||
|
Three Months Ended |
|
|
||||||||
|
|
|
% |
||||||||
(in thousands, except per share amounts) |
2020 |
|
2019 |
|
Change |
||||||
Operating revenues |
$ |
716,982 |
|
|
$ |
738,820 |
|
(3 |
) |
||
Operating expenses |
642,191 |
|
|
693,257 |
|
(7 |
) |
||||
Depreciation of property, plant and equipment |
18,481 |
|
|
15,351 |
|
20 |
|
||||
Amortization of intangible assets |
14,150 |
|
|
13,572 |
|
4 |
|
||||
Impairment of long-lived assets |
1,916 |
|
|
372 |
|
— |
|
||||
Operating income |
40,244 |
|
|
16,268 |
|
— |
|
||||
Equity in earnings of affiliates, net |
4,092 |
|
|
4,683 |
|
(13 |
) |
||||
Interest income |
890 |
|
|
1,474 |
|
(40 |
) |
||||
Interest expense |
(7,247 |
) |
|
(6,776 |
) |
7 |
|
||||
Non-operating pension and postretirement benefit income, net |
10,489 |
|
|
19,556 |
|
(46 |
) |
||||
Gain on marketable equity securities, net |
59,364 |
|
|
17,404 |
|
— |
|
||||
Other income, net |
222 |
|
|
5,556 |
|
(96 |
) |
||||
Income before income taxes |
108,054 |
|
|
58,165 |
|
86 |
|
||||
Provision for income taxes |
30,000 |
|
|
15,200 |
|
97 |
|
||||
Net income |
78,054 |
|
|
42,965 |
|
82 |
|
||||
Net (income) loss attributable to noncontrolling interests |
(439 |
) |
|
180 |
|
— |
|
||||
Net Income Attributable to Graham Holdings Company Common Stockholders |
$ |
77,615 |
|
|
$ |
43,145 |
|
80 |
|
||
Per Share Information Attributable to Graham Holdings Company Common Stockholders |
|
|
|
|
|||||||
Basic net income per common share |
$ |
15.25 |
|
|
$ |
8.12 |
|
88 |
|
||
Basic average number of common shares outstanding |
5,060 |
|
|
5,285 |
|
|
|||||
Diluted net income per common share |
$ |
15.22 |
|
|
$ |
8.05 |
|
89 |
|
||
Diluted average number of common shares outstanding |
5,072 |
|
|
5,329 |
|
|
|||||
|
|||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||
(Unaudited) |
|||||||||||
|
|
|
|||||||||
|
Nine Months Ended |
|
|
||||||||
|
|
|
% |
||||||||
(in thousands, except per share amounts) |
2020 |
|
2019 |
|
Change |
||||||
Operating revenues |
$ |
2,102,110 |
|
|
$ |
2,168,621 |
|
(3 |
) |
||
Operating expenses |
1,917,336 |
|
|
1,971,052 |
|
(3 |
) |
||||
Depreciation of property, plant and equipment |
58,098 |
|
|
42,758 |
|
36 |
|
||||
Amortization of intangible assets |
42,642 |
|
|
39,512 |
|
8 |
|
||||
Impairment of goodwill and other long-lived assets |
29,828 |
|
|
1,065 |
|
— |
|
||||
Operating income |
54,206 |
|
|
114,234 |
|
(53 |
) |
||||
Equity in earnings of affiliates, net |
3,727 |
|
|
7,829 |
|
(52 |
) |
||||
Interest income |
2,995 |
|
|
4,753 |
|
(37 |
) |
||||
Interest expense |
(22,302 |
) |
|
(22,587 |
) |
(1 |
) |
||||
Non-operating pension and postretirement benefit income, net |
41,028 |
|
|
51,737 |
|
(21 |
) |
||||
(Loss) gain on marketable equity securities, net |
(1,139 |
) |
|
49,261 |
|
— |
|
||||
Other income, net |
11,010 |
|
|
36,135 |
|
(70 |
) |
||||
Income before income taxes |
89,525 |
|
|
241,362 |
|
(63 |
) |
||||
Provision for income taxes |
26,500 |
|
|
59,500 |
|
(55 |
) |
||||
Net income |
63,025 |
|
|
181,862 |
|
(65 |
) |
||||
Net loss attributable to noncontrolling interests |
199 |
|
|
112 |
|
78 |
|
||||
Net Income Attributable to Graham Holdings Company Common Stockholders |
$ |
63,224 |
|
|
$ |
181,974 |
|
(65 |
) |
||
Per Share Information Attributable to Graham Holdings Company Common Stockholders |
|
|
|
|
|||||||
Basic net income per common share |
$ |
12.15 |
|
|
$ |
34.24 |
|
(65 |
) |
||
Basic average number of common shares outstanding |
5,176 |
|
|
5,285 |
|
|
|||||
Diluted net income per common share |
$ |
12.11 |
|
|
$ |
33.96 |
|
(64 |
) |
||
Diluted average number of common shares outstanding |
5,192 |
|
|
5,328 |
|
|
|||||
|
||||||||||||||||||||||
BUSINESS DIVISION INFORMATION |
||||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||||
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
||||||||||||||
|
|
|
|
% |
|
|
|
% |
||||||||||||||
(in thousands) |
|
2020 |
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
||||||||||
Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Education |
|
$ |
302,467 |
|
|
$ |
357,319 |
|
|
(15 |
) |
|
$ |
992,020 |
|
|
$ |
1,097,536 |
|
|
(10 |
) |
Television broadcasting |
|
133,828 |
|
|
115,161 |
|
|
16 |
|
|
350,038 |
|
|
340,012 |
|
|
3 |
|
||||
Manufacturing |
|
106,690 |
|
|
111,676 |
|
|
(4 |
) |
|
303,387 |
|
|
341,706 |
|
|
(11 |
) |
||||
Healthcare |
|
51,426 |
|
|
40,688 |
|
|
26 |
|
|
146,601 |
|
|
119,057 |
|
|
23 |
|
||||
Other businesses |
|
123,096 |
|
|
114,200 |
|
|
8 |
|
|
311,241 |
|
|
270,618 |
|
|
15 |
|
||||
Corporate office |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||
Intersegment elimination |
|
(525 |
) |
|
(224 |
) |
|
— |
|
|
(1,177 |
) |
|
(308 |
) |
|
— |
|
||||
|
|
$ |
716,982 |
|
|
$ |
738,820 |
|
|
(3 |
) |
|
$ |
2,102,110 |
|
|
$ |
2,168,621 |
|
|
(3 |
) |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Education |
|
$ |
299,134 |
|
|
$ |
364,480 |
|
|
(18 |
) |
|
$ |
971,741 |
|
|
$ |
1,052,797 |
|
|
(8 |
) |
Television broadcasting |
|
81,083 |
|
|
78,348 |
|
|
3 |
|
|
237,890 |
|
|
223,165 |
|
|
7 |
|
||||
Manufacturing |
|
101,839 |
|
|
104,831 |
|
|
(3 |
) |
|
293,517 |
|
|
326,895 |
|
|
(10 |
) |
||||
Healthcare |
|
43,284 |
|
|
39,480 |
|
|
10 |
|
|
126,472 |
|
|
112,922 |
|
|
12 |
|
||||
Other businesses |
|
139,184 |
|
|
123,607 |
|
|
13 |
|
|
385,130 |
|
|
299,424 |
|
|
29 |
|
||||
Corporate office |
|
12,739 |
|
|
12,030 |
|
|
6 |
|
|
34,331 |
|
|
39,492 |
|
|
(13 |
) |
||||
Intersegment elimination |
|
(525 |
) |
|
(224 |
) |
|
— |
|
|
(1,177 |
) |
|
(308 |
) |
|
— |
|
||||
|
|
$ |
676,738 |
|
|
$ |
722,552 |
|
|
(6 |
) |
|
$ |
2,047,904 |
|
|
$ |
2,054,387 |
|
|
0 |
|
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Education |
|
$ |
3,333 |
|
|
$ |
(7,161 |
) |
|
— |
|
|
$ |
20,279 |
|
|
$ |
44,739 |
|
|
(55 |
) |
Television broadcasting |
|
52,745 |
|
|
36,813 |
|
|
43 |
|
|
112,148 |
|
|
116,847 |
|
|
(4 |
) |
||||
Manufacturing |
|
4,851 |
|
|
6,845 |
|
|
(29 |
) |
|
9,870 |
|
|
14,811 |
|
|
(33 |
) |
||||
Healthcare |
|
8,142 |
|
|
1,208 |
|
|
— |
|
|
20,129 |
|
|
6,135 |
|
|
— |
|
||||
Other businesses |
|
(16,088 |
) |
|
(9,407 |
) |
|
(71 |
) |
|
(73,889 |
) |
|
(28,806 |
) |
|
— |
|
||||
Corporate office |
|
(12,739 |
) |
|
(12,030 |
) |
|
(6 |
) |
|
(34,331 |
) |
|
(39,492 |
) |
|
13 |
|
||||
|
|
$ |
40,244 |
|
|
$ |
16,268 |
|
|
— |
|
|
$ |
54,206 |
|
|
$ |
114,234 |
|
|
(53 |
) |
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Education |
|
$ |
6,822 |
|
|
$ |
6,258 |
|
|
9 |
|
|
$ |
24,475 |
|
|
$ |
18,596 |
|
|
32 |
|
Television broadcasting |
|
3,399 |
|
|
3,307 |
|
|
3 |
|
|
10,188 |
|
|
9,839 |
|
|
4 |
|
||||
Manufacturing |
|
2,557 |
|
|
2,671 |
|
|
(4 |
) |
|
7,610 |
|
|
7,488 |
|
|
2 |
|
||||
Healthcare |
|
318 |
|
|
566 |
|
|
(44 |
) |
|
1,351 |
|
|
1,783 |
|
|
(24 |
) |
||||
Other businesses |
|
5,208 |
|
|
2,330 |
|
|
— |
|
|
13,946 |
|
|
4,351 |
|
|
— |
|
||||
Corporate office |
|
177 |
|
|
219 |
|
|
(19 |
) |
|
528 |
|
|
701 |
|
|
(25 |
) |
||||
|
|
$ |
18,481 |
|
|
$ |
15,351 |
|
|
20 |
|
|
$ |
58,098 |
|
|
$ |
42,758 |
|
|
36 |
|
Amortization of Intangible Assets and Impairment of |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Education |
|
$ |
6,251 |
|
|
$ |
3,944 |
|
|
58 |
|
|
$ |
24,743 |
|
|
$ |
11,581 |
|
|
— |
|
Television broadcasting |
|
1,360 |
|
|
1,408 |
|
|
(3 |
) |
|
4,081 |
|
|
4,224 |
|
|
(3 |
) |
||||
Manufacturing |
|
6,987 |
|
|
6,522 |
|
|
7 |
|
|
21,112 |
|
|
19,580 |
|
|
8 |
|
||||
Healthcare |
|
823 |
|
|
1,914 |
|
|
(57 |
) |
|
3,440 |
|
|
4,722 |
|
|
(27 |
) |
||||
Other businesses |
|
645 |
|
|
156 |
|
|
— |
|
|
19,094 |
|
|
470 |
|
|
— |
|
||||
Corporate office |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||
|
|
$ |
16,066 |
|
|
$ |
13,944 |
|
|
15 |
|
|
$ |
72,470 |
|
|
$ |
40,577 |
|
|
79 |
|
Pension Expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Education |
|
$ |
2,350 |
|
|
$ |
2,603 |
|
|
(10 |
) |
|
$ |
7,527 |
|
|
$ |
7,789 |
|
|
(3 |
) |
Television broadcasting |
|
817 |
|
|
762 |
|
|
7 |
|
|
2,449 |
|
|
2,273 |
|
|
8 |
|
||||
Manufacturing |
|
318 |
|
|
20 |
|
|
— |
|
|
1,107 |
|
|
60 |
|
|
— |
|
||||
Healthcare |
|
136 |
|
|
123 |
|
|
11 |
|
|
407 |
|
|
369 |
|
|
10 |
|
||||
Other businesses |
|
410 |
|
|
434 |
|
|
(6 |
) |
|
1,276 |
|
|
1,235 |
|
|
3 |
|
||||
Corporate office |
|
1,426 |
|
|
1,200 |
|
|
19 |
|
|
4,278 |
|
|
3,600 |
|
|
19 |
|
||||
|
|
$ |
5,457 |
|
|
$ |
5,142 |
|
|
6 |
|
|
$ |
17,044 |
|
|
$ |
15,326 |
|
|
11 |
|
|
||||||||||||||||||||||
EDUCATION DIVISION INFORMATION |
||||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
||||||||||||||
|
|
|
|
% |
|
|
|
% |
||||||||||||||
(in thousands) |
|
2020 |
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
||||||||||
Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Kaplan international |
|
$ |
123,768 |
|
|
$ |
178,169 |
|
|
(31 |
) |
|
$ |
488,096 |
|
|
$ |
552,505 |
|
|
(12 |
) |
Higher education |
|
83,841 |
|
|
78,712 |
|
|
7 |
|
|
243,831 |
|
|
237,780 |
|
|
3 |
|
||||
Test preparation |
|
59,737 |
|
|
64,710 |
|
|
(8 |
) |
|
153,687 |
|
|
191,533 |
|
|
(20 |
) |
||||
Professional ( |
|
32,831 |
|
|
33,820 |
|
|
(3 |
) |
|
99,954 |
|
|
110,181 |
|
|
(9 |
) |
||||
Kaplan corporate and other |
|
3,194 |
|
|
2,450 |
|
|
30 |
|
|
9,438 |
|
|
7,121 |
|
|
33 |
|
||||
Intersegment elimination |
|
(904 |
) |
|
(542 |
) |
|
— |
|
|
(2,986 |
) |
|
(1,584 |
) |
|
— |
|
||||
|
|
$ |
302,467 |
|
|
$ |
357,319 |
|
|
(15 |
) |
|
$ |
992,020 |
|
|
$ |
1,097,536 |
|
|
(10 |
) |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Kaplan international |
|
$ |
137,527 |
|
|
$ |
192,395 |
|
|
(29 |
) |
|
$ |
466,840 |
|
|
$ |
516,909 |
|
|
(10 |
) |
Higher education |
|
76,988 |
|
|
73,535 |
|
|
5 |
|
|
221,948 |
|
|
227,967 |
|
|
(3 |
) |
||||
Test preparation |
|
46,389 |
|
|
59,751 |
|
|
(22 |
) |
|
154,063 |
|
|
182,739 |
|
|
(16 |
) |
||||
Professional ( |
|
27,110 |
|
|
28,881 |
|
|
(6 |
) |
|
86,729 |
|
|
89,238 |
|
|
(3 |
) |
||||
Kaplan corporate and other |
|
5,773 |
|
|
6,517 |
|
|
(11 |
) |
|
20,409 |
|
|
25,945 |
|
|
(21 |
) |
||||
Amortization of intangible assets |
|
4,335 |
|
|
3,944 |
|
|
10 |
|
|
12,807 |
|
|
10,888 |
|
|
18 |
|
||||
Impairment of long-lived assets |
|
1,916 |
|
|
— |
|
|
— |
|
|
11,936 |
|
|
693 |
|
|
— |
|
||||
Intersegment elimination |
|
(904 |
) |
|
(543 |
) |
|
— |
|
|
(2,991 |
) |
|
(1,582 |
) |
|
— |
|
||||
|
|
$ |
299,134 |
|
|
$ |
364,480 |
|
|
(18 |
) |
|
$ |
971,741 |
|
|
$ |
1,052,797 |
|
|
(8 |
) |
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Kaplan international |
|
$ |
(13,759 |
) |
|
$ |
(14,226 |
) |
|
3 |
|
|
$ |
21,256 |
|
|
$ |
35,596 |
|
|
(40 |
) |
Higher education |
|
6,853 |
|
|
5,177 |
|
|
32 |
|
|
21,883 |
|
|
9,813 |
|
|
123 |
|
||||
Test preparation |
|
13,348 |
|
|
4,959 |
|
|
— |
|
|
(376 |
) |
|
8,794 |
|
|
— |
|
||||
Professional ( |
|
5,721 |
|
|
4,939 |
|
|
16 |
|
|
13,225 |
|
|
20,943 |
|
|
(37 |
) |
||||
Kaplan corporate and other |
|
(2,579 |
) |
|
(4,067 |
) |
|
37 |
|
|
(10,971 |
) |
|
(18,824 |
) |
|
42 |
|
||||
Amortization of intangible assets |
|
(4,335 |
) |
|
(3,944 |
) |
|
(10 |
) |
|
(12,807 |
) |
|
(10,888 |
) |
|
(18 |
) |
||||
Impairment of long-lived assets |
|
(1,916 |
) |
|
— |
|
|
— |
|
|
(11,936 |
) |
|
(693 |
) |
|
— |
|
||||
Intersegment elimination |
|
— |
|
|
1 |
|
|
— |
|
|
5 |
|
|
(2 |
) |
|
— |
|
||||
|
|
$ |
3,333 |
|
|
$ |
(7,161 |
) |
|
— |
|
|
$ |
20,279 |
|
|
$ |
44,739 |
|
|
(55 |
) |
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Kaplan international |
|
$ |
4,585 |
|
|
$ |
3,600 |
|
|
27 |
|
|
$ |
14,782 |
|
|
$ |
11,198 |
|
|
32 |
|
Higher education |
|
682 |
|
|
840 |
|
|
(19 |
) |
|
2,237 |
|
|
2,066 |
|
|
8 |
|
||||
Test preparation |
|
335 |
|
|
774 |
|
|
(57 |
) |
|
3,768 |
|
|
2,358 |
|
|
60 |
|
||||
Professional ( |
|
1,119 |
|
|
978 |
|
|
14 |
|
|
3,397 |
|
|
2,802 |
|
|
21 |
|
||||
Kaplan corporate and other |
|
101 |
|
|
66 |
|
|
53 |
|
|
291 |
|
|
172 |
|
|
69 |
|
||||
|
|
$ |
6,822 |
|
|
$ |
6,258 |
|
|
9 |
|
|
$ |
24,475 |
|
|
$ |
18,596 |
|
|
32 |
|
Pension Expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Kaplan international |
|
$ |
102 |
|
|
$ |
114 |
|
|
(11 |
) |
|
$ |
334 |
|
|
$ |
341 |
|
|
(2 |
) |
Higher education |
|
973 |
|
|
1,136 |
|
|
(14 |
) |
|
3,113 |
|
|
3,401 |
|
|
(8 |
) |
||||
Test preparation |
|
748 |
|
|
847 |
|
|
(12 |
) |
|
2,394 |
|
|
2,534 |
|
|
(6 |
) |
||||
Professional ( |
|
238 |
|
|
340 |
|
|
(30 |
) |
|
761 |
|
|
1,017 |
|
|
(25 |
) |
||||
Kaplan corporate and other |
|
289 |
|
|
166 |
|
|
74 |
|
|
925 |
|
|
496 |
|
|
86 |
|
||||
|
|
$ |
2,350 |
|
|
$ |
2,603 |
|
|
(10 |
) |
|
$ |
7,527 |
|
|
$ |
7,789 |
|
|
(3 |
) |
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.
The Company has provided this non-GAAP information on a pre-income tax basis in order to facilitate a meaningful period-to-period comparison of income in light of the difference in applicable income tax rates for the third quarter and first nine months of 2020 and the third quarter and first nine months of 2019.
Income before income taxes, 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 |
|
Nine Months Ended |
|||||||||||||
(in thousands) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||||
Income before income taxes, as reported |
$ |
108,054 |
|
|
$ |
58,165 |
|
|
$ |
89,525 |
|
|
$ |
241,362 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|||||||||
Provision related to a VAT receivable |
— |
|
|
20,412 |
|
|
— |
|
|
17,132 |
|
|||||
|
1,916 |
|
|
— |
|
|
27,591 |
|
|
— |
|
|||||
Restructuring charges at the education division |
1,872 |
|
|
— |
|
|
12,083 |
|
|
— |
|
|||||
Accelerated depreciation at other businesses |
2,847 |
|
|
— |
|
|
5,694 |
|
|
— |
|
|||||
Reduction to operating expenses in connection with the broadcast spectrum repacking |
(1,175 |
) |
|
(1,129 |
) |
|
(2,540 |
) |
|
(10,748 |
) |
|||||
Charges related to non-operating Separation Incentive Program |
6,981 |
|
|
— |
|
|
11,564 |
|
|
6,607 |
|
|||||
Net (gains) losses on marketable equity securities |
(59,364 |
) |
|
(17,404 |
) |
|
1,139 |
|
|
(49,261 |
) |
|||||
Gain on sale of Gimlet Media |
— |
|
|
— |
|
|
— |
|
|
(28,994 |
) |
|||||
Non-operating gains, net, from write-ups, sales and impairments of cost and equity method investments |
(1,639 |
) |
|
(3,669 |
) |
|
(3,260 |
) |
|
(5,080 |
) |
|||||
Foreign currency loss (gain) |
2,343 |
|
|
(661 |
) |
|
(877 |
) |
|
(1,284 |
) |
|||||
Income before income taxes, adjusted (non-GAAP) |
$ |
61,835 |
|
|
$ |
55,714 |
|
|
$ |
140,919 |
|
|
$ |
169,734 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20201104005057/en/
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Source: