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SEC Filings

10-Q
GRAHAM HOLDINGS CO filed this Form 10-Q on 11/01/2017
Entire Document
 


Acquisition-related costs of $3.5 million related to these 2017 acquisitions were expensed as incurred. The aggregate purchase price of the 2017 and 2016 acquisitions was allocated as follows (2017 on a preliminary basis):
 
 
Purchase Price Allocation
 
 
As of
(in thousands)
 
September 30, 2017
December 31, 2016
Accounts receivable
 
$
12,502

$
8,538

Inventory
 
25,253

878

Other current assets
 
593

1,420

Property, plant and equipment
 
30,961

3,940

Goodwill
 
143,433

184,118

Indefinite-lived intangible assets
 
41,600

53,110

Amortized intangible assets
 
158,907

28,267

Pension and other postretirement benefits liabilities
 
(59,116
)

Other liabilities
 
(10,822
)
(21,892
)
Deferred income taxes
 
(34,875
)
(11,009
)
Redeemable noncontrolling interest
 
(3,666
)

Aggregate purchase price, net of cash acquired
 
$
304,770

$
247,370

The 2017 fair values recorded were based upon preliminary valuations and the estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period (up to one year from the acquisition date). The recording of deferred tax assets or liabilities, working capital and the final amount of residual goodwill and other intangibles are not yet finalized. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded due to these acquisitions is attributable to the assembled workforces of the acquired companies and expected synergies. The Company expects to deduct $11.0 million and $22.2 million of goodwill for income tax purposes for the acquisitions completed in 2017 and 2016, respectively.
The acquired companies were consolidated into the Company’s financial statements starting on their respective acquisition dates. The Company’s Condensed Consolidated Statements of Operations include aggregate revenues and operating income for the companies acquired in 2017 of $64.9 million and $4.0 million, respectively, for the third quarter of 2017, and aggregate revenues and operating income of $133.8 million and $3.8 million, respectively, for the first nine months of 2017. The following unaudited pro forma financial information presents the Company’s results as if the 2017 acquisitions had occurred at the beginning of 2016. The unaudited pro forma information also includes the 2016 acquisitions as if they occurred at the beginning of 2015:
 
Three Months Ended 
 September 30
 
Nine Months Ended 
 September 30
(in thousands)
2017
 
2016
 
2017
 
2016
Operating revenues
$
657,225

 
$
696,767

 
$
1,979,784

 
$
2,058,571

Net income
24,735

 
36,250

 
96,065

 
137,967

These pro forma results were based on estimates and assumptions, which the Company believes are reasonable, and include the historical results of operations of the acquired companies and adjustments for depreciation and amortization of identified assets and the effect of pre-acquisition transaction related expenses incurred by the Company and the acquired entities. The pro forma information does not include efficiencies, cost reductions and synergies expected to result from the acquisitions. They are not the results that would have been realized had these entities been part of the Company during the periods presented and are not necessarily indicative of the Company’s consolidated results of operations in future periods.
Sale of Businesses. In February 2017, GHG completed the sale of Celtic Healthcare of Maryland.
In January 2016, Kaplan completed the sale of Colloquy, which was included in Kaplan Corporate and Other.
Other. In June 2016, Residential and a Michigan hospital formed a joint venture to provide home health services to patients in western Michigan. In connection with this transaction, Residential contributed its western Michigan home health operations to the joint venture and then sold 60% of the newly formed venture to its Michigan hospital partner. Although Residential manages the operations of the joint venture, Residential holds a 40% interest in the joint venture, so the operating results of the joint venture are not consolidated and the pro rata operating results are included in the Company’s equity in earnings of affiliates.

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