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Investor Relations

SEC Filings

10-Q
GRAHAM HOLDINGS CO filed this Form 10-Q on 08/02/2017
Entire Document
 


The total cost arising from the Company’s Supplemental Executive Retirement Plan (SERP) consists of the following components:
  
Three Months Ended June 30
 
Six Months Ended June 30
(in thousands)
2017
 
2016
 
2017
 
2016
Service cost
$
215

 
$
246

 
$
429

 
$
492

Interest cost
1,058

 
1,096

 
2,116

 
2,192

Amortization of prior service cost
114

 
114

 
228

 
228

Recognized actuarial loss
443

 
665

 
887

 
1,330

Net Periodic Cost
$
1,830

 
$
2,121

 
$
3,660

 
$
4,242

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 plan were allocated as follows:
  
As of
  
June 30,
2017
 
December 31,
2016
  
 
U.S. equities
52
%
 
53
%
U.S. stock index fund
31
%
 
30
%
U.S. fixed income
10
%
 
11
%
International equities
7
%
 
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 for the investments 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 June 30, 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.
In determining the expected rate of return on plan assets, the Company considers the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. In addition, the Company may consult with and consider the input of financial and other professionals in developing appropriate return benchmarks.
The Company evaluated its defined benefit pension plan asset portfolio for the existence of significant concentrations (defined as greater than 10% of plan assets) of credit risk as of June 30, 2017. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country and individual fund. At June 30, 2017 and December 31, 2016, the pension plan held investments in one common stock and one U.S. stock index fund that exceeded 10% of total plan assets. These investments were valued at $1,008.9 million and $978.8 million at June 30, 2017 and December 31, 2016, respectively, or approximately 47% and 48%, respectively, of total plan assets.
Other Postretirement Plans. The total cost arising from the Company’s other postretirement plans consists of the following components:
  
Three Months Ended June 30
 
Six Months Ended June 30
(in thousands)
2017
 
2016
 
2017
 
2016
Service cost
$
257

 
$
347

 
$
514

 
$
693

Interest cost
194

 
307

 
389

 
615

Amortization of prior service credit
(37
)
 
(84
)
 
(74
)
 
(168
)
Recognized actuarial gain
(972
)
 
(376
)
 
(1,945
)
 
(751
)
Net Periodic (Benefit) Cost
$
(558
)
 
$
194

 
$
(1,116
)
 
$
389


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