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SEC Filings

10-Q
GRAHAM HOLDINGS CO filed this Form 10-Q on 05/03/2017
Entire Document
 


SocialCode is a provider of marketing solutions on social, mobile and video platforms. SocialCode revenues increased 18% in the first quarter of 2017, due to continued growth in digital advertising service revenues. SocialCode reported operating losses of $4.5 million for the first quarter of 2017, compared to $3.0 million in the first quarter of 2016.
Other businesses also 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 2017 adversely affected operating results.
Corporate Office
Corporate office includes the expenses of the Company’s corporate office, the pension credit for the Company’s traditional defined benefit plan and certain continuing obligations related to prior business dispositions. The total pension credit for the Company’s traditional defined benefit plan was $18.5 million and $16.0 million in the first three months of 2017 and 2016, respectively.
Without the pension credit, corporate office expenses declined slightly in the first three months of 2017.
Equity in Earnings of Affiliates
At March 31, 2017, the Company held interests in a number of home health and hospice joint ventures, and interests in several other affiliates. The Company recorded equity in earnings of affiliates of $0.6 million for the first quarter of 2017, compared to $1.0 million for the first quarter of 2016.
Other Non-Operating Income (Expense)
The Company recorded total other non-operating income, net, of $0.8 million for the first quarter of 2017, compared to $15.1 million for the first quarter of 2016. The 2017 amounts included $1.7 million in foreign currency gains, partially offset by other items. The 2016 amounts included an $18.9 million gain on the sale of a business and a $1.8 million gain on the sale of marketable equity securities, offset by $5.4 million in foreign currency losses and other items.
Net Interest Expense and Related Balances 
The Company incurred net interest expense of $6.8 million for the first quarter of 2017, compared to $7.4 million for the first quarter of 2016. At March 31, 2017, the Company had $493.3 million in borrowings outstanding at an average interest rate of 6.3% and cash, marketable equity securities and other investments of $1,113.9 million.
Provision for Income Taxes
The Company's effective tax rate for the first three months of 2017 was 11.4%, compared to 37.0% for the first three months of 2016. The low effective tax rate in the first quarter of 2017 is due to a $5.9 million income tax benefit related to the vesting of restricted stock awards. In the first quarter of 2017, the Company adopted 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 this $5.9 million benefit, the overall income tax rate in the first quarter of 2017 was 36.3%.
Earnings Per Share
The calculation of diluted earnings per share for the first quarter of 2017 was based on 5,568,903 weighted average shares outstanding, compared to 5,651,655 for the first quarter of 2016. At March 31, 2017, there were 5,590,529 shares outstanding. On May 14, 2015, the Board of Directors authorized the Company to acquire up to 500,000 shares of its Class B common stock; the Company has remaining authorization for 223,526 shares as of March 31, 2017.
Kaplan University Transaction
On April 27, 2017, certain Kaplan subsidiaries entered into a Contribution and Transfer Agreement (Transfer Agreement) to contribute the institutional assets and operations of Kaplan University (KU) to a new, nonprofit, public-benefit corporation (New University) affiliated with Purdue University (Purdue) in exchange for a Transition and Operations Support Agreement (TOSA) to provide key non-academic operations support to New University for an initial term of 30 years with a buy-out option after six years.
Subject to the terms and conditions of the Transfer Agreement, KU, which specializes in online education and is accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools (HLC), will transfer certain assets of its Title IV-authorized and accredited academic institution to New University. New

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